At OnePoint Franchise Accounting, we frequently partner with franchise consultants to advise new and emerging brands as they begin the process of franchising their successful business. But how do you know that your business is ready for franchising?
The business owners we work with have business concepts that span several industries including:
- Food service
- Home repair
- Health services
- Pet boarding
But your industry doesn’t have to be a limiting factor when considering whether or not to franchise. You could be a candidate for franchising if:
- You offer a product or service with broad appeal AND
- Your business model can be replicated across markets.
And while spreading the success of your business to additional markets with more partners at the helm may sound exciting, there is a bit more to franchising than that. Just because your business could theoretically be franchised, doesn’t mean you’re ready for that major step.
In this article, we’re sharing three overlooked considerations new and emerging brands need to make before franchising their concept.
The P&Ls Make Sense
This may sound obvious, but the financial success of your current locations may diminish once the concept is franchised. Sure, you’re seeing great P&Ls within your current model, but do the margins still make sense after you factor in the royalty and marketing fees you’d require of a franchisee?
When you’re evaluating whether your business is ready for franchising, it’s important to look beyond your current financial statements. Consider what the commitment would be from a potential franchisee:
- The upfront investment you’d ask of a franchisee.
- The long-term financial commitment you’d require from them.
- The anticipated operating time until profitability.
You’re going to have a hard time selling your concept to potential partners if the ROI isn’t strong or fast enough. A new brand that’s unproven in the marketplace will compound this challenge. More established concepts have the benefit of broad brand awareness and more clearly identified risks.
You Can Make a Large Financial Commitment
One of the biggest misconceptions about franchising a new brand is that once you flip the franchise switch “on”, you’ll be evaluating new markets and signing up partners in short order.
Unfortunately, once the decision has been made to franchise a concept, there is still a significant amount of time and money that must be committed before you can start selling your business.
The formalization of your systems and approach can be a huge undertaking. It will require a large commitment of time, money and focus from the company owner.
You’ll want to have all these manuals in place to ensure the success and consistency of your concept across units. The FTC franchise rules also require these documents.
Tasks like preparing your franchise disclosure document, multi-development agreement, etc. can be massive undertakings. Be prepared to spend a considerable amount of time and money to franchise your business
You’re Ready to Support Franchisees
Ok, the financials make sense and you’re prepared to transition your business to a franchise model. There’s still one often overlooked commitment you need to be prepared for.
The franchisees of all franchises, but especially those of a young brand, require ongoing support from their franchisor.
Be prepared to provide that support when you launch your business into this next chapter. To do that, you’ll need to invest the necessary time and money to build sustainable systems of support. It’s important that any models you build now can accommodate your brand’s continued growth.
Ensure the success of your brand with a support infrastructure for the inevitable questions and challenges that will arise. Franchises with hands-on franchisors willing to facilitate this support have higher success rates.
Ready for Franchising? We can help.
After evaluating the three areas above, you might be more ready than ever to start the process of franchising your business. OnePoint Franchise Accounting is always here to help you save time and money with our specialized bookkeeping services.