Steps to Successfully Franchising Your Business

Almost every entrepreneur is a would-be franchise mogul. I cannot think of a person who would not want to sit in control of a multi-billion dollar empire of restaurants, convenience stores, or a chain of hotels or motels. Moving from simply dreaming about being rich to actually bringing a franchise company to the market requires forethought and planning.

The very first step a would-be franchisor must take is to examine their own financial performance. A franchisor will need to have a track record of profitability before they can expand and expect anyone else to invest in them. A Franchisor with a growing business may want to expand by using the franchise business format.

In addition to having a demonstrable record of success, the personal history of the founder and board of directors will go a long way to selling investors on the franchise business. The franchise disclosure document (FDD) can be used as a sales tool, as the franchisor describes their business history as well as how many generations, if any, the business has been family owned and operated. Investors love a good business success story such about how you took over the business from your father whose father started the business 100 years ago with just one restaurant or one truck etc. Think about who you would rather partner with, someone who has just been in business for a year or two or a family business that can demonstrate decades of experience and success? Who you are and your reputation for service and honesty are keys to franchising your profitable business.

The next thing to think about before a franchisor offers their business to franchise investors is to ask themselves the question, “Is this business something that I can teach others to do?” While certain industrial-type businesses, like a heavy equipment machine shop operator may be profitable, the franchisor might be required to teach a potential investor for many years to do the specialized job like you want it done. Franchising lends itself to reproduction and mass marketing and successful franchisees usually do not need much more than an entrepreneurial spirit and good work ethic to succeed. You must have a completely developed franchisee training program before you can start to offer franchises.

On the flip side of specialization, is that a franchise business could be “too replicable” and make it difficult to protect and enforce the company patents and trademarks. A particular food recipe could be easily duplicated and leave you without a competitive advantage. Also manual labour-related businesses like cleaning services are easy to start and require almost no specialized training, so why would someone want to pay a franchise fee when they just need to buy a broom and a mop?

One of the final consideration is if a franchisor can offer financing or location services to a potential investor. Access to capital and competitive real estate services can only help a franchisee to decide in the favour of investing with you.