Can you franchise your business? If you have a thriving business that is receptive to a regional or national marketing system, then franchising may be the right choice. To help you determine if your business could be a franchise, consider some of the qualifiers below.
First, evaluate yourself as a potential franchisor. Franchising is more than the business of selling services or products. He will also be a mentor, coach, and perpetual supporter of his franchisees. He will also collect an initial fee to get the franchise up and running and then receive royalties for the life of the franchise.
Always remember to allow your individual franchisees the flexibility to run their own businesses and always allow them to act as independent business owners, not employees. It is important that you carefully establish the guidelines for the relationship with the franchisee in the original agreement, the franchise disclosure document and all communications with franchisees.
Do not consider franchising your business unless you have an identified local market for your product or service. Marketability is established by need, and need is determined by competition. If you have a unique way of operating a business and you have a unique business model, you may be able to franchise it.
Demand is the essential force here. It is as central as the singularity. Your unique product or service should be desired not only by business people who want to buy franchises from you, but also by the people who will buy products or services from those franchisees. If your product or service is relatively new and is not widely offered by anyone else, but it is in demand, you must first determine where your products or services would be sold, based on requests from your existing customers.
If your product or service is not new, you can hire market research companies to create reports on the types of consumers in various regions. You can also conduct your own study on the Internet. Government agencies may also provide demographic information and market research data. The US Department of Commerce’s Bureau of Economic Analysis and the US Department of Labor’s Bureau of Labor Statistics have conducted extensive studies of regional consumer behavior. Look up “consumption habits” on these government websites. If your product or service is unique or in demand, ensure this uniqueness by using a trademark, for a product or a service mark, for services, so that the public connects your product with a particular trademark. Apply for a trademark as soon as possible, before it is offered and the first franchise agreement is reached. Determine that no other entity has already obtained the rights to your brand. You can do it for less than $600 by contacting one of the many trademark search firms or by going online at http://www.uspto.gov.
Before starting your franchise plan, prepare a comprehensive business plan so that you can see the financial expense that each new franchisee will require to get up and running; then compare that to the income you can expect to receive from fees, royalties, and sales. Include costs that are specific to the franchise, such as operating costs, such as salaries and benefits for you and front office employees, trainers, and sales staff; as well as rent, office equipment, car and travel allowances. Include the cost of finding franchises: advertising, travel to franchise shows, preparation of brochures and videos, and entertainment. Please add an appropriate amount for initial and ongoing legal, accounting and advertising fees.
Be very conservative about the time and income you need from your franchisees. You will have determined the combination of franchise fees, royalties, and product or service sales that will generate income from your franchisees. Calculate when you expect these revenues to be paid, rather than basing your predictions on how your business has performed in the past.
