Five things to consider before franchising your business

Red pencil and questionnaire

Are you wondering how to franchise a business? Are you wondering if franchising your business is the right decision for you? Then here are five things you should consider!

  1. Do you have a proven concept?

    You are asking people to invest in your concept, so you better have proven it. If you have an “idea” you want to franchise, go prove it first. Do the business that you want to franchise, for at least a year, before you try to franchise it.
  2. Can your business model sustain a royalty?

    Some businesses operate on low margins, and that’s ok! If you have a business that does $500K in revenue a year, and you bring 10% ($50,000) to the bottom line, and it doesn’t take up all your time, then a lot of people consider that a good business. However, if you were to franchise it, a franchisee doing the exact same numbers, but having to pay a 5% royalty back to corporate, would only be making 5%, or $25,000, to the bottom line. That’s not nearly as attractive.
  3. Is your business scaleable?

    Even if you have a proven, high margin concept, you still might not want to franchise. If there is something unique about you or it, it is still not fit for franchising. If you have a successful surf shop, which requires proximity to the ocean to succeed, you might be better served opening a couple of corporate stores. The same would apply to a ski and snowboard store, a boat cleaning business, or any other business that relies on proximity to the ocean, snow, desert, etc. Additionally, if it took you years to master your craft, or if you feel like you got lucky that your business model works, it probably isn’t right for franchising.
  4. Are you ready for a career change?

    Think about what you do today. Maybe you run a retail business, help people travel, provide a cleaning service, or work on motorcycles. Whatever it is, if you are considering franchising, you will no longer do what you do today; you will be a franchisor. When you become a franchisor, your current job becomes secondary to running your franchise, or you may have to completely quit what you are doing today. Even if you have a profitable, scaleable business model, and extra capital available to franchise, if what you do today is your “dream job”, don’t screw it up by becoming a franchisor.
  5. Are you prepared to make the investment?

    Becoming a franchisor is not cheap, and it is not a do-it-yourself project. Becoming a franchisor requires investment in legal fees, consulting fees, technology development, marketing and advertising collateral, and lead generation. Typically, you are going to need at least $200-$300K to start your franchise, including working capital.

Is it time to find out?

If you are ready to find out if your business is right for franchising, check out what it takes to do a feasibility study, check out the book How and Why to Franchise Your Business, or book a call with one of our experts today!







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