If your small business has found success, you’re probably asking yourself – what’s next? You’re always going to be limited with a single location. If the demand for your products/service is scalable (it could exist and succeed regardless of the location), the what’s next might just be franchising.
It’s an exciting concept – fast growth with investments from partners you can trust to help you succeed. But you also have to take a step back. You can’t always physically be in all the locations anymore. You are trusting other people to handle day to day management of their location. You aren’t just selling a product anymore – you are selling a business concept.
Before you jump into this life-changing decision, here is what you need to know about franchising your business:
- Understanding the Legal Requirements
You know from opening a business that there are important legal steps and precedents to go through before you can open your doors. The same is true with franchising. To sell a franchise in the United states, you must register a Franchise Disclosure Document with the Federal Trade Commission.
This is a comprehensive document that will take some to complete- including information about your financials, your management team, and operating manual. Depending on your state there may be unique and additional paperwork you have fill out. The important takeaway here is to be prepared for the process to take awhile.
- Defining Your Model
No two franchises are laid-out exactly the same way. Before you begin pitching to investors, you need to have a clear understanding of your unique model. Some of these are financial decisions – what is the fee for franchise partners? What royalty percentage do they get to keep? What net worth would you require of a franchisee?
But there are other considerations too – what marketing are you offering from the main business for the franchise locations? What size territory will each location be in charge of? What exactly does training look like?
You need to have a solid answer for each of these – and understand how they affect your profitability.
- How to Pick Franchise Partners
It might seem exciting if ANYONE wants to open a franchise of your business. It’s great someone is excited about your company! But you need to remember person will be representing your band. You want to choose franchisees who will care about your success as much as you do.
Be wary of partnering someone based on enthusiasm alone. You want someone who understands the challenges and hard-work it takes to make a new franchise take off. Carefully look at their past experience – what could they bring to the table that is an assett to your business? Do they seem like someone who “gets” your concept and what makes you special in the market? Take your time, and choose people you can believe in.
- Always Protect The Brand
Your franchisees are not you. There are likely some freedoms you have given them in how to run their daily operations. But before you open one of these locations, you need to have a recognized brand in place. How will a customer know this franchise is a part of your larger brand?
This question is bigger than using certain colors, language and signage. You need to determine what about your experience feels like your brand, and how you can transfer this feeling to locations that could be hundreds of miles apart and with a different team.
Franchising is exciting. You are no longer a lone business owner once you have franchise locations. You are the head of a team of many partners and managers who believes in something – your brand’s mission. If this article sounds like something both doable and rewarding – it might be time to take that leap.