Franchising as a business model spans a range of industries and sectors, from fast food, hospitality and retail, to children’s activities, dog hotels, travel and wrestling pest control. In fact, there are so many weird and wonderful franchise opportunities out there that it would be easy to assume that any business can be successfully franchised.
But while for many brands franchising can be a great path to expansion, it’s certainly not an automatic path to success, nor the best and most appropriate course of action for every business. These 6 reasons are certainly not exhaustive, but are a few key points to keep in mind when determining if franchising is right for you and your business.
The business cannot be easily replicated
A fundamental concept of franchising is that the franchisee acquires from the franchisor the right to operate under its brand and sell its goods or services using the business model developed in different territories or locations. The original business concept must therefore be simple enough to be replicated and for a franchisee to be trained easily and quickly to be able to deliver the franchise brand offering. It is also important that the concept can be successfully translated to other places – a business whose success depends on its specific geographical location, a niche customer demand in a particular area or a product that does not is available only in a limited area probably should not be franchised.
The company is not financially healthy
Franchising should certainly not be used as a vehicle to try to save a sinking ship. Not only is building a franchise brand an expensive and time-consuming process, you can’t ask and expect others to invest in your brand and business if it doesn’t have a track record of financial success.
Numbers don’t stack
It is crucial to have a realistic approach to the mathematics of franchising a business. As stated above, franchising can be an expensive process in the first place. You need to have a clear idea of the cost of replicating the business model and setting it up for each new franchisee, as well as training and ongoing support. If that cost is in the millions, it’s likely you’ll face huge financial hurdles in attracting franchisees, especially without a track record of success behind you.
The sector has no longevity
For any franchisee looking to invest their hard-earned money in a franchise business, they will want to be sure that it is a business venture that will not just be a flash in the pan. Will what you offer hold up or is it something that might go out of style?
You will have a hard time letting go of the reins
This is a real problem for many would-be franchisors – their business is their brainchild, a concept they birthed and nurtured to grow. As a franchisor, you need to be able to step back and trust your franchisees to implement your beloved business model. Not only that, but you also need to be able and ready to make tough decisions if things don’t go your way. The right mindset is crucial and not all personality types will be suited to the franchisor role.
The company does not have enough experience behind it
As a franchisor, you (and your operations team) will be the go-to for advice and support, the sounding board for your franchisees, and also the place they go to when things go wrong. Be sure you have the experience and background to be able to provide this to your franchisees. Otherwise, you will most likely end up with an unsatisfied franchise network, which in turn can be stressful and incredibly damaging to your brand.
Many factors must be considered to determine if franchising is the right course of action for you and your business – and most importantly, if you are truly suited to the role of franchisor.