13 Jun Should I franchise my business?
Yes. No. Maybe. It all depends on what type of industry you’re in and what you are hoping to achieve. While most businesses can be franchised – the question is, should they?
Franchising can be a great option for some businesses and a waste of time and money for others. If you research ‘what makes a successful franchise’ you’ll be given a list of criteria which includes:
- a niche product or service
- a profitable track record
- an established brand
- ability to be replicated in a number of locations
- long term market potential
- leadership and vision
While the above criteria are important, they are not essential in all situations. For example 20% of business franchise in Australia start off as such from their first day of trading. Therefore, they are yet to establish a profitable track record or establish their brand, or indeed have proof of their ability to be replicated – and yet many of them go on to become household names – think Leonard’s Chicken or Jamaica Blue.
So deciding whether or not to go ahead with the decision is not simply a matter of looking at a list and ticking it off. You have to assess how committed you are to building your business. If you’re looking at franchise opportunities as a quick way to solve a problem in your current business, think again. While it can be a very successful way to grow and expand a business, it’s not a panacea for a fledgling business.
What this move does, however, is enable you to leverage all of the hard work, sweat and tears that you have poured into your business. It allows you to grow and expand using capital from the sale. It also means that the new units are owned and operated by a person who has a vested interest in making the business as successful as possible.
Here’s an example of how to start a franchise can propel a business to a whole new level.
A well-known patisserie in Sydney started off as an independent business. In the 1980’s interest rates were up around 18% and their business was at risk of folding. At that point they decided to franchise and they offered the first opportunities to the managers that had been managing their shops. Now that the managers were owners they decided that if they opened a little earlier and closed a little later, then they would capture the market of workers who were commuting to and from work. Within 3 months the profits were up by 20-30% illustrating what a difference it can make when the franchisee has an interest in making the business success.
Imagine if you applied the same model to your business?