When Is The Right Time For A Small Business To Franchise?

March 23, 2018
When is the right time for a small business to franchise?

The main goal of any business, whether small or large, is to maximize profits. One way to do this is by franchising. But when is the right time for a small business to franchise? If your business can easily be replicated, has strong enough sales in your local market and has established a known brand name, franchising is feasible, and a way to outpace the competition. Conversely, franchising is not a viable option if profits are slim or nonexistent.


You will also need sufficient capital for creating training programs, marketing materials, etc. for the franchisee. In fact, one of the biggest mistakes a franchisor can make is being undercapitalized, as they will be incapable of adequately supporting a network, particularly in the beginning of the franchise. This results in not only the franchise losing money, but damage to your brand.


The following three tips will help you assess if now is the right time to franchise:


No. 1: Your business model is solid and enticing. Your business needs to be working, i.e. your business model proven, if you’re thinking about franchising. It is imperative that you are credible to sell a franchise, in other words it has to be attractive to any potential franchisee(s). If you’ve had unsolicited franchise offers, you are on the right track already and are quite attractive.


No. 2: The business can easily be replicated. This is the key to franchising. If your business would be difficult to replicate, franchising is not yet feasible. For example, if your business only thrives because it’s in a unique location. You need to be able to easily educate a potential franchisee about your business model. Think 7-Eleven. The international convenience store chain is renowned yet simple, as people know what to expect when shopping there. This business model has always worked extremely well for 7-Eleven, which is one of the largest franchises in the world.


No. 3: You are dedicated to ensuring the franchise succeeds. To be a successful franchisor, you must establish and maintain a strong relationship with the franchisee, helping them to succeed along the way. Create a training program, help the franchise staff its operation with quality people, share your successful business strategy, and interact frequently.

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