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It is questionable who was the first to implement the franchising model. According to this report from the International Franchise Association, it is generally believed that the first franchisor in the United States was the Singer Sewing Machine Company in 1851. The same report also claims that others attribute Martha Matilda Harper – who built a network of beauty salons – to a retail component. – to be the first franchisor. Then of course there's the McDonald's story with Ray Kroc's involvement, which many probably consider to be one of the first forays into food service franchising.
Why do I mention all this?
As I have seen in the twenty or so years that I have been involved in franchising (on the franchisor, franchisee and consultant sides of the industry), this shows that franchising was and is a viable business expansion model with a long history of success. Over the decades, franchising has evolved from a novel idea for business growth to a sophisticated, regulated way of doing business that benefits both the franchisor and its franchisees. Since that first handshake deal, savvy entrepreneurs have developed best practices and trainable systems to help people – from corporate refugees buying a single franchise unit to highly capitalized, large multi-territory owners – build sustainable businesses.
Franchising is often viewed as a vast and growing industry in its own right, and its principles are applied by countless other industries and business models, from restaurants to automotive services, beauty salons and retail stores to all types of B2C and B2B services. Even dentists and dermatologists (and numerous other healthcare fields) are reaping the benefits of franchising their business models.
Related: Franchising isn't for everyone. Explore these lucrative alternatives to expand your business.
Application of the franchise model
The word “franchise” is derived from the French word franc, which means free. But don't be fooled into thinking that franchising is free or even inexpensive. It is a significant commitment that a business owner should examine thoroughly, starting with self-examination. For example, you will want to ask yourself:
- Do I have sufficient human and financial resources to expand through franchising? (As mentioned above, franchising is not a “free” effort for the aspiring franchisor. You will need to develop legal franchise documents and an operations manual at a minimum; business planning and marketing tools are also critical. So you will need the capital and human resources of your business current company, but do so without overwhelming yourself.)
- Can I handle risks when it affects both my finances and other people's capital?
- Am I cooperative and interested in building long-term relationships with franchisees (as opposed to employees)?
- Do I have strong leadership skills and a team that inspires trust?
After you've analyzed yourself as a business owner and potential franchisor, it's time to do the same analysis with your business to determine if it is actually franchisable:
- Do you have a single unit or multiple units in operation and is/are they profitable?
- Do you have a product, service or system that can be duplicated in other markets with appropriate training and guidance?
- Are all of your systems set up to be quickly learned by someone who may or may not have experience in your industry?
- Can you demonstrate to investors who become your franchisees that they can build a solid business following your plan?
- Will your franchise provide a solid ROI for both the franchisor and the franchisee?
You may not even have all the answers to these questions, and that's okay. Now is the time to talk to franchise specialists who have helped businesses like yours realize the benefits of franchising and who can help you determine if you're ready for the next step.
Find the right path
A fact that sometimes gets lost in the equation is that once you move from business owner to franchisor, your day-to-day business tasks shift, requiring a different mindset. They no longer foster dogs; They start other businesses to care for dogs – or train their employees to change tires or make sandwiches. Her company now focuses on selling franchises and supporting franchisees.
It's also important to know that before committing to you, potential franchisees want assurance that your concept can be spread to other communities where your brand is not known and that it will still attract enough customers to to make it profitable.
Let's say you have a pizza concept. People are raving about your pizza, and several customers have asked you if you plan to franchise your concept. While it's always flattering when people want to copy what you have in their neighborhood, there's more to it than that. Anyone who owns a pizzeria will tell you that they have the tastiest pizza in the world.
To create a successful franchise brand, you need a product that people crave, but also something that sets you apart from the competition. You need detailed recipes, proven systems, well-documented procedures, a well-formulated (and trademarked!) brand, a solid marketing plan, and an established supply chain. Proprietary products and operational tools are also helpful.
Ultimately, you need to offer potential franchisees benefits that are better than, or at least equivalent to, those offered by your competitors and that they could not easily develop.
Get the help you need
Of course, as an entrepreneur, you don't have to carry out this franchise preparation alone. Franchise consultants can help you create manuals, training materials and marketing plans, while franchise lawyers and accountants can prepare necessary legal documents and financial audits. However, keep in mind that franchising is a specialized field. Therefore, you need people who understand the unique structures, laws, and practices of franchising. This is not the time to save money by hiring a personal contact who has just worked as a sole proprietor or for a company with limited franchising experience.
However, all the professional advice and guidance in the world will do you no good if you don't have the spark that will ignite your business into a hot concept that a franchise seller can sell. You also need to be patient and not rush into the first person who shows interest. After you have built your franchise model and started offering franchises (legally), selecting the franchisee becomes one of the most important tasks. There's a reason why even some of the most established franchise systems have a high rejection to acceptance ratio when it comes to selecting franchisees to join their brands.
One of the tenets of franchising is consistency, not just within a single store but throughout the system. When ordering from McDonald's, consumers in Portland, Oregon want the same hamburger and fries as they do in Portland, Maine. They also have certain expectations, such as that the toilets are clean and the service is friendly. This is why hotel chains are so popular with savvy travelers: Travelers don't want any surprises when it comes to where they stay away from home.
Final thoughts
Another consideration when evaluating the possibility of franchising a business is the popular interview question we've probably all been asked: Where do you see yourself in five years? Or to put it another way: What appetite do you have for both risk and growth? How fast do you want to grow? Do you want to grow into a regional, national or even international chain?
Setting your goals is key. And the timing of your franchising efforts is equally important. There's something to be said for taking your time and waiting until everything is perfect before franchising. The problem with this approach, however, is that by the time you're ready to launch, your competition may already have dozens – or hundreds – of units open. While being first to market has its advantages, it's still a juggling act because you don't want to make a single attempt and end up misfiring. While it's possible to tweak your system as you grow, you don't want to confuse customers (and franchisees) by constantly changing the core elements that bring people specifically to you.
Deciding when is the right time to franchise your concept can be overwhelming unless you take the time to do your due diligence and do a little soul searching. Whether you are passionate about your product or service and want others to benefit from it, or you are looking to franchising as a retirement savings tool, franchising will be a career and life-changing decision for you and your business. But the best part is that you'll be following in the footsteps of some giants of entrepreneurship.
Create your very own Auto Publish News/Blog Site and Earn Passive Income in Just 4 Easy Steps
