How to set up a franchise?
The first question to ask is whether your business is suitable as a franchise. Beyond having a good sales history and business profitability, there are several other factors that must be considered in the first step of becoming a franchisor:
Know your company well.
Most franchise concepts offer something familiar, but with a unique touch that makes them different. The concept has to be focused on both end consumers and potential franchisees.
You must have the clear expectation that with more franchisees, larger economies of scale will be created, which will increase profits for each sale. In addition, the company has to be something that can be structured and replicated, it is not something that needs your personal touch to succeed.
Ask yourself 2 questions. First ask yourself if the franchise is marketable, would you buy it yourself. Secondly, ask yourself if it is able to be cloned or replicated. If there is a possibility that the same concept can succeed in other geographical areas.
Check your financial data.
As expected, most franchises that have achieved success have a business that is already profitable. So, your goal is to try to replicate that success in other places. In fact, before starting to franchise the company it is important that you have tested the "cloning of success" with your own units in other locations.
Know the market.
To know how to franchise a company is critical. Do not blindly trust the feeling that your business is a concept that can work successfully under the franchise model. Try to obtain information and conduct market studies.
The objective will be to confirm that there is a strong demand from consumers beyond their hometown and that they can move dynamically in other markets.
Prepare for change.
Becoming a franchisor means that you are going to carry out totally different activities from those that you undertake as the business owner. That way, you stop selling hamburgers or doing hair removal treatments, and sell franchises and take care of the support and training of your franchisees.
The question is whether you feel comfortable as a trainer and director of your product and service rather than as a manager of one or more establishments. It is the change of perspective necessary for the development of the company as a franchise.
In addition, you must relinquish part of the control you have maintained so far on how to execute your business concept. Franchisees will execute it exactly as you have taught them to do it, but you will not do it directly. Nor will it be there every day to control it on foot of establishment.
Evaluate other alternatives.
Of course before diving into the franchise, it is prudent that you consider other options. For example:
- Slower growth expectations.
- The search for financing through financial or investment entities.
- Allow new partners access to capital.
All of them are other alternatives that may be more interesting for you. The "how to franchise my business" may not be as important as "should I franchise my business?"
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