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Monday, May 27, 2024

What to Know Before Franchising Your Business?

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What makes franchising such a great idea from the standpoint of a franchisor? First of all, you get to grow your business with less work to do. How much you will help them with training and assistance is your choice.

Remember that a franchise’s value depends on several issues, one of which is the renown of your business. The more franchises you have, the bigger the renown. In other words, the situation appears paradoxical, seeing how the more you sell, the more valuable you have. This creates an endless loop of growing value for your business, which is a notion that you can’t underestimate.

At the same time, franchising takes work. For instance, are you legally liable for malpractice in your brand’s name? How hard is it to find the right franchisee? What are the costs that you will face as a franchisor? Only after answering all of these questions will you be able to tell precisely where you stand and figure out if this is a good idea.

Here’s a brief list of all the considerations you need to make before franchising your business.

  1. Screening franchisees

Whether or not your franchise will be successful depends on two things – the market and the franchisee. The first part of this issue is quite tricky to unfold for several reasons. First, even though you can make some requirements (1 franchise per 100,000 citizens, etc.), this is not that reliable. The truth is that you’re not in the field, meaning you can only take someone’s word for it. In this case, we’re talking about the word of your franchisee.

This makes the importance of being able to tell if they’re a reliable partner even higher.

You can start with a background check. Some agencies and platforms are even specializing in background checks for franchisees. For instance, you’ll be able to see their credit history, criminal record, and more. It will give you an insight into that one piece of their biography so that you can know what they would try to hide.

Besides this, you need to converse with your franchisor and try to allow your intuition to reveal that which regular data cannot. Try to figure out what they are like as a person. For a great business partner (in a way, the franchisor and franchisee are partners), you need to share a vision; it’s not enough just for your interests to align. Try checking out if the two of you can see eye to eye. Remember, however, that you also need to make sure that they check all your other (mandatory) boxes. You can’t give them the franchise just because you like them.

  1. Make your business marketable.

One of the first tasks required for successful franchising is to try and make your franchise marketable enough. This will open up a whole new world of possibilities.

Previously we’ve talked about choosing the right franchisee for your business, which may make some potential franchisors ask – will I have the privilege to select, to begin with? Well, this depends on your franchise’s appeal and marketability. Picking one franchisee from 20 offers is better than picking one of the two. The latter is more accessible, but your hands are tied with a smaller franchisee pool. You either refuse them and don’t sell your franchise, or you make a compromise that you don’t feel good about.

First, to make your franchise marketable, you must establish your presence within a specific industry. This is what some franchisors need to pay more attention to when focusing on regional recognition instead. You see, franchises are regional, and you can’t sell two franchises in the same neighborhood. This is why doing well locally only carries a little weight as being recognized within the industry.

Also, when buying a franchise, franchisees will try to compare you to others within the industry. This is how they’ll come to perceive and evaluate your worth. Invest in digital marketing (especially SEO) and become competitive for some of the top keywords in your respective industry. Connect with some renowned specialists in your field and ask for their endorsement.

  1. Protect your business

Another thing you need to do is protect your brand. The best way to do so is to be picky about who you will sell your franchise to (something we’ve already covered). At the same time, it’s vital to remember the importance of providing guidance and assistance to your franchisees. For their staff to live up to your standards, you need to train them properly. For their products to live up to your quality standards, you need to connect them with your suppliers.

Your first step in providing your business with the legal protection it needs would be to protect the IP. The trademark, copyright, pattern, etc., ensure that you own what you’re selling to the franchisee.

One more thing you can do to protect your brand is to ensure that you have the proper franchise agreement. You can put whatever you want here. While some courts may value verbal agreements, putting everything in writing, having a lawyer compose/look over it and ensuring that people read it all ensures your safety.

Also, try to keep around a good PR team. A franchise is simple; however, the difference between a branch and a franchise is sometimes more apparent to a regular customer. This is why you must take the necessary steps to provide your brand with additional protection in your audience’s eyes.

  1. Hands-off approach

This part will seem quite hard, but you need to let franchisees work independently from you. Remember, the IP is yours, but the executive power needs to be theirs. Technically, you have the right to refuse to renew their contract, but this is something that you really shouldn’t abuse. Once the word gets out that you’re too meddling, people will be interested in something other than your franchise. In other words, this advice can be interpreted as – protecting your business from yourself.

Remember that past the selection (vetting) process, you should only work a little around your franchises. Sure, there’s always something to do, but if you wanted to run something directly, you should have started a branch.

The critical thing is that you remember what the franchise is – it is an independent business that pays you for using your intellectual property. In some cases, this doesn’t even mean using your brand name. One of the most prominent and best-renowned examples is Hungry Jack’s. This is the franchise of Burger King that’s prohibited from working under that name in Australia, seeing as how trademarks are recognized nationwide, and there’s already a business under that name on the continent.

To make the long story short, you sell the franchise and let people run it as they see fit. This is why being picky is so essential – it’s the last major decision you should make regarding that particular franchise.

  1. Additional tricks

Duplication of outlets is okay. At least, this is the case when it comes to factoring. Just think about it, if you insist on different standards, people will estimate that you’re unsure. Also, they might assume that you still need to prove your business model works, which makes you experiment in quest for a better business model. These are the rumors you need to release as soon as possible.

Remember that a franchise’s success can often be determined by comparing it to the success of another franchise. The same thing goes with the vigilance of a franchisee or their loyalty. The only way to make these comparisons adequate is to keep records of everything. Nowadays, this documentation can be kept in digital format, which makes it easily accessible and inexpensive for storage.

Lastly, it would be best if you planned for longevity and profitability in the long run. Sure, you might feel like you need to sell to make a profit this year, but is this worth destroying the legacy of your business by rushing to sell to the first bidder? Remember that business is rarely an exact science, but one thing remains true – rushing and relying on intuition alone seldom make wise business decisions. Therefore, you need to find more permanent solutions.

In conclusion

The last thing you must remember is that choosing a capable franchisee solves all your troubles. This is something that you’ll only be able to see once you sell to one competent and one incompetent franchisee at the same time. Still, there’s not much room for fear.

A lot of times, when a franchise doesn’t work out, you won’t be damaged much. The franchisee will deal with the losses while you get the money for the franchise. Sure, the value of the business might not grow, but it doesn’t have to diminish, either. Countless franchises from brands even as big and proven as McDonald’s failed, but this didn’t drive the brand name into the ground. While it is always better to play safe, taking a risk now and then doesn’t have to be a bad call.

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