Is your business possible to franchise? Franchising may be a good option if you have a successful business that is open to the possibility of a national or regional marketing system. These qualifiers will help you determine if your business is eligible to be franchised.
Assess yourself first as a potential franchisor. Franchising goes beyond the sale of products or services. You will also serve as a mentor and coach to your franchisees. A franchisee will pay an initial fee to start their business, and you’ll then receive royalties for the lifetime of the franchise.
Remember to give your franchisees the freedom to manage their own businesses. Also, allow them to act as independent business owners and not employees. It is crucial that you clearly define the Franchisee relationship in your original contract, the Franchise Disclosure document, and any communications to franchisees.
If you don’t have a local market for your product/service, franchising is not an option. Need is the basis of marketability, and competition is what determines it. It is possible to franchise a business if it has a unique method of running it and a unique model.
Here, demand is the driving force. It is just as important as originality. The unique product or service you offer must be wanted by not only the people who are interested in buying franchises from your company, but also the people who will purchase products and services from franchisees. If your product/service is new and not available widely, but is highly sought-after, you will first need to determine where your products/services would be sold based on your current customers.
If your product/service is not new, market research firms can help you create reports about the different types of consumers in each region. You can also conduct your own research online. The government can provide market research data as well as demographic information. U.S. Department of Commerce’s Bureau of Economic Analysis and U.S. Department of Labor’s Bureau of Labor Statistics have conducted extensive research on consumer behavior in regional areas. These government websites allow you to search for “consumer behavior” You can secure your unique product or service by using a trademark for a product or service mark for services. This will allow the public to connect your product with the trademark. Register your mark as soon possible before any franchise agreements are offered or reached. Make sure that you are not the only one who has rights to your mark. You can do so for less than $600 by contacting one of many trademark search firms or by visiting online at http://www.uspto.gov.
Prepare a detailed business plan before you start your franchising plans. This will allow you to compare the financial expenses each franchisee will need to get started and the potential revenue from sales, royalties, or fees. You should include costs specific to franchising such as salaries, benefits, training, sales staff, head office employees and trainers; rent, office equipment and car allowances. Add the costs of finding franchisees, including advertising, travel to show franchises, preparation of brochures and videos, entertaining, and entertainment. Add a reasonable amount to cover ongoing legal, accounting, advertising, and startup costs.
You should be very conservative about the income and timing you expect from your franchisees. Once you have established the mix of franchise fees and royalties that will bring in income, you can then determine how much product or service sales will pay. Instead of relying on past performance, estimate when these revenues will be paid.