Franchise Assessment: How do I know if I can franchise my brand?
Assessing your brand for franchising potential
I’ve spent the last 20 years in franchising and have learned a ton of hard lessons along the way.
My goal with this blog today is to help you assess if franchising is right for you. Consider using this checklist of questions if you’re contemplating franchising your concept!
A Conversation with a Fellow Entrepreneur
About 8 years ago, I sat across the table from a beautiful, successful woman who had asked to “pick my brain”. We had been introduced by a common friend who knew both of our stories and hoped that I could help.
The woman across from me let me know that her company's trademark was in jeopardy and asked for advice around the issue. After successfully navigating this large issue, our conversation quickly turned to franchising (that tends to happen if you hang around me too long)!
After describing her brand, she asked if it was franchisable (we may have made up that word!). She had one location (a brick and mortar) fully up and running with strong profitability. She had just opened a second location and was getting it going, but it was so new that there were not strong financials or longevity of KPI’s (Key Performance Indicators) to assess the success.
Her trademark was in question, but NOW she had a plan to resolve that issue.
The Tough Realities of Franchising
I let her know that franchising is HARD.
I let her know that it takes lots of $$$.
I let her know that it takes lots of time.
I let her know that you have to be open to feedback (and not the kind type).
I let her know that she would be getting OUT of the business she was in and getting INTO the business of franchising.
We talked through each of these challenges and then I suggested 2 things.
Come to a conference with me called the Springboard Conference that was happening 2 weeks later – and dive feet first into franchising. This conference is meant for pre-emerging and emerging brands and it would be a great way to see if she thought she might be ready to franchise.
And secondly, I suggested that she give it at least another year or two to prove her concept, by getting the second location operational and cash-flowing, and even opening a third location for further proof of concept.
Critical Questions to Consider:
I had more hard questions for her.
Are you ready to go from making money in your current concept to spending upwards of 1 Million or more to get your franchise concept fully functioning?
Are you ready to have someone else run your brick-and-mortar locations while you run the franchise system?
Are you ready to work really hard for a while, sometimes for little return, building the infrastructure needed to support multiple franchises?
Is this the right time in your life – looking at your work-life balance and taking any family needs into consideration?
These are hard questions for sure…even for the highest achieving individuals. Those of us who are entrepreneurs or visionaries know that we must spend money to make money. We are often risk tolerant and sometimes irrationally positive. We don’t always count the cost correctly.
Honestly, even with my irrational positivity…I oftentimes find myself trying to talk founders out of franchising.
Indicators of Franchise Readiness
With all of that being said, franchising is a great growth strategy and a significant step for any business owner. The importance of ensuring your brand is ready for this leap cannot be overstated. I’ve taken the time to list out the things you need to be thinking about if you are considering franchising your business.
Established and Successful Business Model: You should have a proven and successful business model that can be replicated in different locations. This is why I suggested a 3rd location to my new friend - so that she could prove the concept fully! It goes to the credibility of your brand.
Your business should have a track record of profitability and stability, demonstrating that it can generate consistent revenue and attract customers.
Strong Brand Identity and Recognition: Your brand should have a well-defined identity and a unique value proposition that resonates with customers. It's essential to have built a recognizable and trusted brand in your existing market. Is your culture one that others want to be a part of? Do you have a strong mission and purpose?
Documented Systems and Processes: To franchise your brand, you need to have clearly defined and documented systems, processes, and operating procedures. These resources will serve as the foundation for training and guiding franchisees in replicating your business model. The operations manual is one of the first resources that you will create, but don’t let this scare you if you are not the writing type. There are supplier vendor partners that can help with all of this!
Scalability: Your business should have the potential to be scaled up through multiple locations. Assess if your concept can be adapted to different markets and if there is sufficient demand for your products or services in other areas.
Financial Stability: Remember that hard question that I asked my friend? Franchising requires a significant investment of time, money, and resources. Ensure that your business has a strong financial foundation and can support the costs associated with franchising, such as marketing, legal fees, training, and ongoing support for franchisees.
Legal and Regulatory Compliance: Familiarize yourself with the franchise laws and regulations in your country or region. Ensure that you comply with all legal requirements and have the necessary documentation, such as a franchise disclosure document (FDD), to provide to potential franchisees.
Support Infrastructure: You should have a support infrastructure in place to assist franchisees. This includes providing training programs, operational support, marketing assistance, and ongoing communication channels to address their needs and concerns. I completely underestimated the amount of support that franchisees would need when I first started franchising. It came back to bite our brand in a big way. Happy to tell the story if you are interested.
Passion for Sharing and Collaboration: Franchising involves working closely with franchisees and sharing your knowledge and expertise. Assess if you have a genuine passion for helping others succeed and if you are willing to collaborate and support your franchisees. This is KEY. Franchising requires engagement from corporate and from the franchisees. The best franchises are highly collaborative with high franchise satisfaction.
Get the professionals involved: Before making the decision to franchise, it's advisable to consult with professionals such as franchise attorneys, business consultants, financial advisors, and executive coaches (that’s ME!) who can provide guidance based on your specific circumstances and help you assess the readiness of your brand for franchising.
Remember my fellow entrepreneur?
As for my friend, she made the hard decision to hold off on franchising.
She is smart, savvy, very relational, community-minded…and did I say smart?
She went on to prove the concept by opening her third location. All three are thriving. She went back to school, earned her MBA, and assumed a leadership role in our city WHILE growing her 3 location business and raising 2 children.
She amazes me.
Considering franchising is a big step and not for the faint of heart.
And…if she decides one day that she wants to embark on the journey to franchising, she will be well prepared with a proven concept and established system for replication…and I will be here for it!
Looking Ahead
Now…the question is yours.
Is franchising right for you?
A friend of mine, David Barr, who is a phenomenal success - owning and operating multiple businesses over the years and investing in so many others, recently led a group of about 500 individuals at the Emerging Franchisor Bootcamp at the International Franchise Association (IFA) Convention and shared this quote:
“Franchising is the licensing of a business model that produces predictable cash flows to an average franchisee, with average intelligence, with average work ethic on an average day.”
If you have a concept that you believe is ready and you wish to explore, I’m happy to start the discussion. It was a life changing experience for me and my family and I would love to help!
Shine Lesson Learned: Count the cost before franchising.
Blessings upon blessings,
Shannon
