You have been in business for several years, revenues have been steady and are now starting to increase. You feel that with the right resources your business can be a national success. When should you seriously consider franchising your business and what are some of the issues you should consider before starting?
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Christopher C's answer was a pretty darned good starting place. I would add that it's important to set expectations for required investment; time expected until positive cash flow; expectations for annual cash flow and profitability, and so on. (Some franchises don't pencil out for owner/operators to make a living unless they own multiple units, for example.) If you cannot describe your own prototype business's financials in pretty specific terms, then you don't have a complete business proposition for the prospective franchisees.
Never Do not make the Banks rich
Great question, the discussion of when to franchise a business is something that we deal with on a daily basis speaking with small to medium sized businesses. There are several key elements to a business that must be in place for s successful franchise expansion program to be developed. 1. There should be a successful, proven operating model that has proven the profitability and ROI of the franchise concept. Franchising is a process of duplication, if the system doesn't work well to begin with, it won't work any better when franchised. 2. Unique point of difference - it is important to have a differentiating factor to the business model, good franchises are able to deliver a compelling value proposition to potential investors. 3. Be able to answer the question, "why shouldn't I just do this on my own?" What systems, processes, marketing and support can you offer to a franchisee that would justify a franchise fee, royalty and payments to you for being part of your franchise? 4. Being a Franchisor means being a great coach. Be ready to deliver substance, consistent support and do some babysitting, franchisees will need and expect a significant amount of support and guidance, be ready to deliver or the franchise organization will suffer. 5. Your business should have a documented system, one that you have taught to employees, managers and other staff. Good franchises have GREAT Systems and processes in place. This delivers consistency and brand equity. For more information on how to franchise your business, visit the corporate site
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