Are you franchising your brand now? Are you considering franchising as a means to grow your business? Franchising can be an excellent expansion vehicle for certain brands; it can also be inappropriate for others. Find out more in this section.
You must have an established brand and an operating model that is both compelling and can be duplicated at scale.
The brand, products, and services must be attractive to customers, operationally viable, scalable, and financially-compelling.
Never franchise too early in your brand/business growth cycle.
Fine-tuning an immature business is difficult. It is, therefore, exponentially more challenging to “tweak” your operating business model and brand while simultaneously working with franchised partners. Not only will you confuse your franchisees, but you run the risk of backlash against continuous change efforts.
You will need many support services to ensure the success of your franchisees and to maintain the integrity of your brand.
Numerous support services should be in place prior to the commencement of your franchise effort. These services will add to your administrative expenses. Better franchisors provide all, or at least most of the following: operational field consultations, training systems and training team assistance, purchasing and procurement, marketing (particularly digital), technological platform assistance (including software and apps that add value to both the customer experience and overall operations), financial guidance, real estate guidance, prototype construction plans and project management assistance, etc.
The more complex the business, the more unlikely it is that franchising will be a good fit.
If the complexity of your business is vast, relying upon others to execute flawlessly could be risky. Ask yourself if the operating model is easily transferable in terms of the skill-sets required to operate well.
You will give up a degree of control and must be psychologically willing to do so. As you scale upwards, you are bringing on-board independent franchisees that will interpret your operating guidelines every day. You are not 100% in control, no matter how tightly-structured your franchise agreement may be. Do you have the psychological and physical stamina and mindset to lead a business that includes large multiples of franchisee partners, each with their own personalities and set of issues?
Your capital investment and ROI must be enticing.
Only franchise models with highly-favorable ROI’s (returns on investment) will resonate with smart investor/operators. If you have not yet fully worked through your economics, and are still not assured of compelling returns on the required investment, then franchising may hamper your expansion and damage your brand. Conversely, what if the economics are so strong? If that is the case, you may conclude that your returns are at such a favorable level that it may not be necessary, or even desirable, to franchise. Do the math!
Exercise Careful Judgment.
Many other decisions surrounding franchising must be made, such as defining geographical expansion areas, investor criteria, operator experience, single-unit franchises or multi-unit development approaches, royalty rates, franchise fees, marketing fund designs and mandates, and much, much more. Importantly, there are many legal issues (federal and state) to be considered in franchising, and franchising is regulated by numerous laws. So, once you have addressed all of the above issues, and if you still believe that franchising is right for you, be certain that you have capable and enlightened professionals to guide you in the critical, strategic, decision-making that will impact the future of all aspects of your business.
We've developed franchise systems for both public and privately-held companies -- scaling to hundreds of franchised units and hundreds-of-millions of dollars in system-wide revenues. We understand best practices, risks, rewards, and essential strategies to successfully launch franchising.