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Five Questions to Ask Before You Franchise Your Small Business

Published on Jun 25, 2009

Summary

When is it time to franchise your small business? We list five questions that will help you decide whether franchising makes sense.
franchise your small businessLast month, I wrote a post helping small business owners who were considering whether or not to buy into an existing franchise.  Today, I'd like to address this issue from an alternate angle, namely, "When is it time to franchise your small business?" The inspiration for this post comes courtesy of Jacqueline Taylor at the Houston Chronicle, who wrote "Before You Franchise, Research" in response to a question posed from a local sandwich shop owner who asked, "How hard is it to franchise a business?" Courtesy of Taylor's article, below are five questions you should ask yourself before deciding whether to become a franchisor:
  1. Do you prefer the business or operations end of your company? To succeed as a franchise, a business requires at least one team member who can commit to focusing solely on the business end of franchise development and take themselves out of everyday operations.  Think about this question.  If you love nothing more than working in your shop and seeing your customers each day, it can be a surprisingly difficult transition to move completely behind the scenes.
  2. Can your idea be duplicated? There is a fine line between a business that stands out and a business that cannot be duplicated.If you feel that your business cannot be effectively reproduced, it can be difficult to stand by the quality of ensuing franchises.  Anything less than the quality you exhibit in your own shop could, at minimum lead to an unsuccessful franchise or at maximum cause damage to your brand.
  3. Can you afford it? Top franchise consultants, detailed by Taylor, estimate business owners will spend between $50-200K before seeing any franchise royalties.  As rewarding a journey as starting a franchise can be, be prepared for a journey that may go on for some time before you find your treasure.
  4. Can your business support franchisees? Are you confident that your business idea can support multiple locations and franchises?  Similar to the answer provided in question 2, franchises that do not perform and shutter can be as damaging to your brand as franchises that do not perform well.
  5. Do you understand the legal requirements? Starting a business can be complicated.  Launching a franchise is extremely intricate.  Prepare to hire a lawyer who specializes in franchise agreements and to spend hours pouring over paperwork to ensure nothing falls between the cracks.
All this being said, a franchise delivers equal opportunity along with its challenges.  Business owners who are successful at becoming franchisors add to their income by receiving a piece of each ensuing location that develops.  There is also the personal reward of experiencing a business you created from the ground up grow to expand, potentially, to the world over. As with any other business plan, the key is to ask yourself the tough questions designed to define your success in advance.