Think You’re Ready to Franchise Your Business? Here Are 8 Things You Need to Consider First

Are you ready to franchise your business? If you are reading this, you have likely created an established brand that you believe to be duplicable and ready to offer as a franchised concept. What you may not realize, however, is that the transition from business owner to franchisor has its own challenges, beyond that of simply replicating the business model.

Over my two decades in franchising, from the franchisor, franchisee and consultant perspectives, I’ve learned that the success rate of a franchised concept is directly dependent upon the strength and leadership of the franchisor.

Here, I’ll discuss some important expectations as you transition into this new role.

Honor your franchisees’ ambitions

Most franchisors come from an entrepreneurial background or are at least driven by an entrepreneurial spirit. It’s important to honor this same ambition and spirit that drives your franchisees.

A philosophical argument that used to make the rounds in franchising circles was whether franchisees could claim to be true entrepreneurs like their franchisors. The premise was that franchisors were the ones who came up with the business concept while taking all the risks. Franchisees just had to follow their systems.

In today’s environment, however, franchisees have proven themselves to be skilled entrepreneurs due to the ever-changing business landscape with fickle consumers, narrower margins, supply and staffing challenges, and more. People investing their savings and sweat equity into your system want to be considered your “partners” and not relegated to the role of a child without a seat at the table. It’s your job to honor that notion.

Related: Is My Business Ready to Franchise?

Be a relationship builder

To be a successful franchisor, you need to prove to prospective franchisees that you can deliver what you’ve promised in terms of a viable business model, but you also need to be able to sustain positive, long-term relationships that are mutually beneficial. And you need to be willing to accept that even though it’s your system, you can’t be a dictator. So, even if your model meets the necessary criteria, if you aren’t willing to create a system that is a win-win for both you and your franchisees, franchising may not be for you.

The bottom line is you must win potential franchisees’ trust in you and your concept. As you do that, there are a few other criteria you need to meet in determining your “franchisability.”

Demonstrate versatility

Proving you have a credible franchise model involves having at least one, but ideally several successful profitable locations up and running. Having operations and recognition in multiple markets, along with an experienced management team that can help franchisees be successful, can also establish credibility in the eyes of your future franchisees.

Offer a distinct differentiator

People want the familiar, but they also want it to be differentiated from what’s already out there. “Do we really need another burger concept?” is a common question among franchising insiders. And yet, there seems to be no end to new burger-centric concepts opening (and closing).

In my experience, you can still franchise a burger concept, but you need a twist on a known commodity. In the restaurant sector, for example, regional or global spices can add a different take on standard fare and feed into consumers’ tastes or preferences.

You should also take local or regional preferences into consideration. In that same vein, legal requirements will differ from state to state, and sometimes from county to county, so make sure you’re up to date on municipalities’ regulations.

Services and products may need to be tweaked so that what you’re offering is both needed and will stand out in the marketplace. Offering several revenue streams is always safer than having just one take-it-or-leave-it product.

In other words, your concept should be trend-worthy but not trendy, something that will survive all the ups and downs in the market, not just be a flash in the pan.

Ensure transferability

Does your concept operate with straightforward systems that can be readily taught to others in a way that is also unique enough not to be easily duplicated without your model? Are your recipes easy to follow? Does your technology streamline the process or complicate it? Having the latest franchise systems, operational processes, and an efficient tech stack all go a long way toward concept transferability.

Additionally, having well-documented operating procedures is essential. Your game plan must be clear and concise so that when the franchisee replicates your concept in the local market, the instructions allow them to build a solid concept.

Lastly, another must-have — and one that has been proven by having multiple locations—is the ability to adapt to various commercial footprints, locations, and geographical areas. If your concept only works on college campuses, you won’t look for franchisees in rural settings, even if they offer you a big check. Consider whether your concept has regional, national, or international potential. How you choose to expand should take these points into consideration.

Create a striking brand package

Before marketing your concept, make sure you are presenting a business that is homegrown but not homespun. Review your brand — everything from your logo to your décor to your marketing materials — through the eyes of a potential franchisee. Does it come across as professional and convey the message you want the public to embrace? Are the colors fresh and the presentation engaging? As the franchisor, you’re responsible for supplying an initial brand package, as well as ongoing support with sample marketing materials and market-tested tactics. You want to ensure you have everything regarding your brand and how to market it buttoned up and well-developed.

Related: I Was a Franchisee And Now I’m a Franchisor. Here’s My Parting Advice to New Franchisees.

Support your network

The next must-have, and perhaps the most important, is creating a solid system and team to support your franchise network. A successful franchisor employs a deep bench that can handle the demands of the original business, as well as the business of franchising. A common mistake by founders is believing they can take on the franchise responsibilities in addition to their other duties. Not only is it impractical from an efficiency standpoint, but franchising requires an entirely new set of critical skills. These include, but are not limited to, franchisee relations, managing an ad fund, training trainers and more. And in addition to marketing to consumers, you’ll need expertise in franchise lead generation or marketing to potential franchise owners.

You likely already have trusted advisors to help with accounting and legal matters, but successful franchising requires advisors or additional hires who understand the intricacies of franchising from various viewpoints: legal, operational and promotional. This is a regulated industry that requires franchise-specific expertise.

Franchise advisors who have worked with numerous systems in different industries have valuable insight to help you avoid the pitfalls that so often delay getting a franchise off the ground. They have tools available to help you determine if this is a step you’re ready for, and help you identify and shore up areas where you may be weak.

Make sure your numbers add up

In order to attract franchisees, the costs of joining your franchise system must be competitive and aligned with the current marketplace, from your franchise fee and royalties to the overall buildout and investment in the business. What you’re offering must be worth the price you’re charging. This means the franchisee who can afford the upfront and ongoing costs should see a return on their investment in a reasonable amount of time.

Consider that a franchisee will only make money after they pay a royalty to you from gross sales. Will your products or services deliver the attractive financials that owner-operators or investor groups are seeking?

A rule of thumb is that by the second or third year in business, a franchisee who is an owner-operator should expect at least 15% ROI and an area developer 20%.

And since we’re speaking about money, are you well-capitalized for this venture? While expanding your business using other people’s money is a less expensive way to grow, franchising requires an investment by the franchisor in both resources and money. A franchise consultant can give you an idea of what those costs will be before you start the process.

Final thoughts

Becoming a franchisor is a big step. You can build confidence in your concept and yourself by setting the right expectations, building fruitful, collaborative relationships, and assembling a team of experts, all while presenting an outstanding brand.

Franchising your brand is an exciting way to join forces with other entrepreneurs and franchisees with a common goal — growing your concept and introducing your brand to markets you may never have dreamed of entering on your own.