One day somebody approaches you in your store asking if he can get a franchise of your business. Then more people – some your relatives, even – are coming up to you asking if they can be your company’s franchisees too.
This gets you thinking, “What exactly does it mean to franchise my business? How do I go about it?” At this point, you may already know about franchising, or heard about other companies going this route. You may probably be aware of those whose businesses grew by leaps and bounds after accepting franchisees into their fold, or the problems some companies encountered when they opened their businesses to franchising.
Now you ask yourself, “Will franchising be good for my business?” “How do I know if my business can be franchised?” If it is, “How and where do I start?” These are some questions that would certainly cross the minds of many entrepreneurs, because the reality is that it is every business owner’s dream to grow and expand his business.
Acclaimed internationally as the single most effective way to extend a business’s reach, franchising can and really shows the entrepreneur the way to fulfill his dream. Companies that found huge success through franchising is too long to list here, but an easy way to verify is to visit a mall and look at the tenant shops. Chances are, most of what you would find are franchised businesses.
If you believe your business can be franchised, the first question to ask yourself is if you are ready to become a franchiser. Not all entrepreneurs are cut out for franchising because not everybody can foster a highly personal relationship with a virtual stranger, which is the usual situation at the start of a franchise relationship. More than a contractual relationship, the ties that bind a franchiser with a franchisee are highly personal.
This relationship is rooted in trust. If you are going into franchising, you must see if you are capable of trusting people. Franchising requires that you are willing to treat your franchisees as business partners who can take care of your business the same way you cared of it. Remember, if you cannot trust your employees whom you see all the time, how can you trust a franchisee who operates your business in the hinterlands of Mindanao? A good franchiser is willing to entrust his business with other people.
You must also ask yourself if you are open to suggestions on improving your systems. How do you react when your staff proposes a change that would simplify your workflow? You have a franchiser in you if you possess a welcoming attitude and a willingness to listen to suggestions. Franchisees come from all walks of life and a good number of them would bring their own reservoir of experience when they take part in the business. Their feedback should enhance the system and must be valued.
Another question to pose is if you are a believer in open communication. Franchise systems are established and strengthened because the franchiser and franchisees are openly communicating. If your management style is autocratic, then franchising is not for you. It’s the franchiser’s job to see to it that franchisees have direct access to him at all times.
Another area to look at is your business’s track record. A business that can be franchised is one that has been operating profitably for at least one year. If you can’t show that your business is profitable or are vague about how your franchisees are going to make money from their investment, it would be very difficult for you, if not impossible, to get people to buy your franchise.
How do you determine if your business is making money? And if you are, how do you ensure that your franchisees would profit from the same business model? You or your accountant must analyze your company’s profit and loss statements to include new expenses such as franchisee royalties that company-owned branches do not incur. Also, check if your profit margins are higher than the existing bank rates. No investor in his right mind would risk his money in an unviable franchise when he can safely put it in the bank.