When Is It Time to Franchise?

Sawan Patel April 3rd, 2019

For many startup and small business owners, franchising seems like a logical next step on the path to growth. Start selling franchises, and you’ll wind up with a massive amount of money, a recognizable brand name, and locations all over the country—right? Not necessarily.

The franchise process doesn’t guarantee success by any means, and it isn’t for everyone. Newer businesses might still have some growing to do before they’re ready to expand, while some business models simply can’t be franchised effectively. Wondering if you’re ready to become a franchisor? Here are some questions to ask of yourself and your business that will help you determine whether or not it’s time to franchise.

Is Business Booming?

It might seem obvious, but it needs to be said: if you dream of franchising, you first need to make sure the locations you currently own are performing well. Ideally, you’ll have more business than you can handle, with customers going out of their way to patronize your locations, and these locations should be profitable. That increasing demand is a good sign that you may be ready to go big.

Be sure you can identify what it is about your business that attracts new customers and creates loyal returners. Talk to employees and even current patrons to determine what makes your business special—is it the location, a unique service or good, or effective branding and marketing? That “secret sauce,” that thing that you provide better than your competitors ever could, is what sets your business apart and gives it franchise potential. As an added bonus, when you offer that unprecedented business model or unique experience that can’t be replicated except under your umbrella, you encourage potential competitors to become franchisees!

Do You Have the Necessary Resources?

While franchisees will be the ones fronting most of the build-out and operational costs to  operate a franchise location, you’ll still have some costs to cover in launching your franchise program. These include everything from creating a standardized operating handbook and marketing materials to hiring and retaining stellar legal counsel to draft a Franchise Disclosure Document and advise you on state and federal regulations. Think carefully about your access to funds. Are you able to secure investors or secure cash flow in another way? Or will you have to dip into your own reserves—and will that put your financial security at stake?

Are Franchisees Ready to Buy?

When you become a franchisor, the playing field shifts. You aren’t selling products and services to consumers anymore; to grow your franchise system, you need to make selling franchises your primary goal. Approach your brand from the perspective of a potential franchisee:

  • Is your business attractive in that it promises clear return on investment?
  • Do you have straightforward training and operating processes in place to set franchisees up for success and support them moving forward?

If the answer to both of these questions is yes, you’re likely to have interested parties lining up outside your door!

But just because people are looking to buy doesn’t mean you should sign a Franchise Agreement with just anyone. Finding the right franchisee is crucial to the success of your entire system. Not only will these people be operating under and acting as an extension of your brand, but you’ll need them to be successful in order to attract future franchisees.

Can You Take a Step Back?

Small business owners know firsthand that starting a company requires an incredible amount of time, effort, and personal commitment. While some startups see overnight success, you may have spent years working long days at your location and putting in even more time behind the scenes just to get things up and running smoothly. If you’ve built your business from the ground up, watching someone else take responsibility for operating a location under your brand name can feel a little uncomfortable.

Ask yourself whether you have the ability to give up control to some extent and allow franchisees to take ownership of their operations. Consistent brand guidelines and a solid brand image can make this process easier for both you and your franchisees. But if you see yourself making frequent trips to those franchised locations just to “check up on things,” you may need to hold off on franchising your business until you can confidently take a step back and watch your franchises blossom.

Navigate Franchise Law with Larkin Hoffman

At Larkin Hoffman, we’re dedicated to providing respected legal advice to large companies and small startups alike. With decades of experience and an impressive team of some of the leading franchise attorneys in the U.S., we can work with you on taking your business from Main Street to every street. Still deciding whether or not you’re ready to franchise? Take our Fit to Franchise assessment for some additional insight, and contact us today for a complimentary initial franchise consultation.