Can your business be franchised?

Before you can begin the franchising process, you need to determine if franchising is a viable strategy for your particular business.

There are three core criteria for franchisability: you must be able to duplicate the business; you must be able to sell the business; and you must be able to provide your franchisees with an appropriate return on investment in terms of both time and money.

To know whether this is possible, ask yourself these key questions:

Is there a wide market for my concept?

Does the market for your particular product or service exceed your current operating area? Note: you may need professional advice to see the bigger picture objectively. Don’t fall into the trap of ‘knowing’ you have a hot new concept and then acting on these convictions without testing your theory.

You have to have opened several prototypes in a variety of markets to test the validity of your convictions. It’s also important to ask yourself frankly whether or not your concept will work under other owners and in locations – in other words, can it be replicated?

Do I have a point of differentiation?

What makes your business special? Again, be careful. Your differentiator doesn’t have to be something no one has ever seen before. It just needs to have something about it that’s unique and that will attract franchisees and consumers. Most importantly, the public needs to see it as desirable.

Can my concept be duplicated?

A franchisor needs to be able to duplicate their original success in multiple regions. Some businesses simply don’t make good candidates. Will you be able to train inexperienced franchisees to run an operation like yours? Will this be relatively simple or incredibly difficult?

Remember, franchising is all about the system. Have you streamlined processes to make them easy to teach? If your success has been the result of years of perseverance and relationship-building that is not readily transferable to a new owner, franchising probably won’t suit your business. You also need to determine if your concept is very niche, or if it will flourish in a wide variety of locations.

Remember: Systems can be duplicated. Superstars cannot. What is the basis for your business’s success?

Is my concept saleable?

Will investors (ie. potential franchisees) see the value of your offering? Will they be willing to commit to it? Will you be able to offer a programme with real advantages for the potential franchise owner?

Every business must have something that sets it apart from its competitors. This can be anything from a unique recipe, to proprietary products, to innovative support services or marketing approach. In order to be ‘saleable’, a business must have credibility in the eyes of its prospective franchisees.

That credibility can come from a track record of success, strength of management, or a very popular brand. These just some of the ingredients that create credibility. Focus on the areas that can build credibility for your business – without it, no one will buy your franchise.

Can I offer franchisees a return on investment?

The franchise system works on royalties. This means that the franchise must make enough profit for franchisees to earn an adequate return on their investment after they have paid royalties. This benefits them and you as the franchisor – without those royalties, your business doesn’t make a profit either. You also need to show a good ROI to other potential franchisees if you want to sell more locations.