Should I franchise my business?

date icon 4 minutes to read date icon 16th June, 2022

When thinking of a successful franchising business, some ideas may immediately pop into your head. You may think of McDonald’s, Dunkin’, Subway, Marriott, Holiday Inn, and others. These are all examples of successful franchises. And what’s interesting about them is that these are businesses that span a variety of industries. When it comes to the question of what industries are most likely to franchise, you may think of restaurants, cafes and bars, but there are so many others. These include retail, home care, gyms, hotels and accommodation, couriering and deliveries, arts and crafts and so much more. All these have one thing in common and that is that they are all franchises that follow successful franchise models. Wondering if you should franchise your business? This article explores some of the foundational requirements for doing so to help you determine if you should franchise.

Franchising in a nutshell

What is considered a franchise? This is an operation where a business seeks to expand into different territories by selling the rights to use the parent brand name and intellectual property as part of a licensing agreement to a franchisee who then operates the exact same business, adheres to the same quality standards and does so in a different location or territory to other franchisees and the parent brand.

Why franchise your business?

For business owners wondering “should I franchise my business?” it may be worthwhile to look at some of the numerous advantages of franchising. For starters, the initial franchise fee that is paid to you by a franchisee to operate your business in a different territory is a great way of raising capital, scaling up and expanding your operations. In addition to this, the ongoing royalty payments mean another revenue stream that you can rely on. Franchisors will also benefit from quick brand expansion, experiencing growth without losing control over the main business as well as savings on operational costs. These are just some of the perks you might consider when you’re thinking of franchising your business. 

Should you franchise your business – Requirements for franchising

Before any discussion takes place about how do you franchise, business owners need to look at some of the prerequisites for franchising a business enterprise to see if the business can withstand the long-term expansion and growth. Here are some of the factors to consider when deciding if you should franchise your business.

Business credibility

One of the most important aspects of a business is its credibility, standing, and reputation in the public’s eye. A business with a strong and reliable reputation also has a strong brand. The brand is what the business is ultimately recognised by. This may mean the company’s logo, its tone of voice when communicating with customers, the levels of quality in terms of service provision or products, and more. As a business owner, you need to ask yourself whether your business is credible in the eyes of your customers and whether this credibility can be expanded on and not diluted were you to expand your operations and hand over different locations of your business to be run by franchisees.

Concept uniqueness

As mentioned above, there are numerous types of franchises in almost every industry you can think of. While retail and the food and beverage industry seem to be the most prominent, you can opt for anything from quality pet care to mobile foot clinics. If your business concept is unique, you’re likely to have a more niche target audience to address, which helps with market segmentation. But in addition to this, and perhaps more importantly, you also need to consider whether this concept can be replicated across various different places and sometimes even different countries. 

Teachability

Another important aspect to consider when considering franchising your business and whether you should actually do so is to see whether your business is, in essence, “teachable”. Since franchisees will be running their own operations under the parent brand, they need to know the ins and outs of the business so that they can replicate its success wherever they may be situated. To this end, you need to figure out if your business concept is too complex or simple enough to be taught to a franchisee, who will need to be trained over a period of between one and three months. However, bear in mind that the training period can be longer, depending on the type of franchise and the industry it is involved in.

Profitability

There are many profitable franchise businesses and they are profitable because they work on a proven business model. As a result, you will also need to consider whether your business is consistently profitable, whether it yields significant returns on investment as well as whether this model can be replicated in different markets. Remember that profit margins should be in the region of 20% if you want to see your franchisees do well – both for you and for themselves. 

Final thoughts

The future of franchising is very bright indeed. Franchising offers many opportunities for growth and the ability to earn additional income through extra sources of revenue. It also helps business owners grow and scale their currently successful business operations in such a way that assists them in making the most of varying markets through their franchisees whose reach can significantly be expanded. As a result, this means that the parent company’s reach will also be expanded, enabling the business owner to grow and thrive. Therefore, if you’re wondering if you should franchise your business, you need to tally up several factors mentioned above and determine if you are ready for an incremental expansion through the replication of your existing and successful business model.