Can Your Business Be Franchised?

Can your business be franchised? If you have a thriving business that is receptive to a regional or national system of marketing then franchising may be the right choice. To help you ascertain if your business could be franchised, assess some of the qualifiers described below.

First, evaluate yourself as a prospective franchisor. Franchising is more than the business of selling services or products. You will also be a mentor, coach, and you will be perpetually supporting your franchisees. You will also be a collecting an initial fee for the franchisee to begin business and then receiving royalties for the life of the franchise.
Always remember to permit your individual franchisees the flexibility to administer their own businesses and always allow them act as independent business owners, not employees. It is important you thoroughly set forth the guidelines of the Franchisee relationship in the original contract, the Franchise Disclosure Document, and all communications to franchisees.
Don’t 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, it is feasible you could franchise it.

Demand is the essential force here. It is just as central as uniqueness. Your unique product or service must be desired not only by the business people who wish 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 not broadly offered by anyone else but is in demand, you first must determine where your products or services would sell, based on the requests of your present customers.

If your product or service isn’t new, you can hire market research firms to create reports on the types of consumers in various regions. You can also perform your own study on the Internet. Government agencies can also provide demographic information and market research data. The U.S. Department of Commerce, Bureau of Economic Analysis, and the U.S. Department of Labor, Bureau of Labor Statistics has conducted extensive studies on regional consumer behaviors. Search for “consumer habits” on these government websites. If your product or service is unique or in demand, secure this uniqueness through the use of a trademark, for a product, or service mark, for services, so that the public connects your product with a particular trademark. Apply for a registered mark as soon as possible, before the first franchise agreement is offered and reached. Determine that no other entity has already obtained the rights of your mark. You can do so for less than $600 by contacting one of many trademark search firms or by visiting online at http://www.uspto.gov.

Before you commence your franchising plan, prepare a comprehensive business plan so you can look at the financial expenditure each new franchisee will require to get up and running; then contrast that with the revenue you can expect to receive from fees, royalties, and sales. Include costs that are specific to franchising, such as operating costs such as salaries and benefits for you and head office employees, trainers and sales staff; as well as rent, office equipment, car allowances, and travel. Include the cost of finding franchisees — ads, traveling to franchise shows, preparing brochures and videos, and entertaining. Add an adequate amount for startup and ongoing legal, accounting, and advertising fees.

Be very conservative on the timing and income you require from your franchisees. You will have determined the mixture of franchise fees, royalties, and product or service sales that will produce income from your franchisees. Estimate when you expect these revenues will paid, instead of basing your predictions on how your business worked in the past.

Article by David G Komatz