Should You Franchise Your Business?
Phil Town, author of “Rule #1,” and I answered several viewer questions on franchising, adjusting prices, and advertising on MSNBC’s Your Business.
While you can watch the whole clip, here is the answer about franchising and what you should be aware of:
Q. I’m interested in franchising, what are some of the steps to do that?
- Franchising can sound like a dream come true with hundreds of franchisees paying your for the concept you pioneered but first you must have a profitable business in a couple locations to prove it works and scales well. Having a single location that is successful is great, but it isn’t really proof that your system works. Even after opening a second location in the same town, it is not proof that you could open one say in Des Moines, IA or Nashville, TN and meet with that same success. That’s because your exisiting customers in your original trade area are making you successful.
- Second, you must have developed a surefire, can’t miss, foolproof system. Again, its not enough that you and your crew can make it work. Could you fire your crew and train a new one using your written policies and procedures and get the same or better results? That’s the challenge – that complete strangers could understand and make your system work – and be profitable within the year.
- Third, you must have stringent standards who you’ll accept and who you won’t. Otherwise you might just take a check from whoever has the available funds, not who “gets” your concept. That could lead to your brand being defined by low standards which could affect future sales. Believe me, I understand how appealing it would be for someone to hand over a big pile of money but you have to take the long view. If your support center has to constantly hand-hold your franchisees to get them to comply with your systems, it will be hard to gain traction in a crowded market.
- Fourth, remember the key to successfully franchising is multi-unit operators, not a bunch of one-offs. That way they learn with each of their own locations about what works and what doesn’t and minimize mistakes with each location. They also have more skin in the game and are more likely to be committed to their own, and by extension your, business success.
Your takeaway: franchising is not as easy as it may first seem.
Any other pointers readers have for someone considering franchising their concept successfully?
Bob Phibbs is the Retail Doctor® and author of The Retail Doctor’s Guide to Growing Your Business (Wiley.) Phibbs has helped hundreds of businesses in every major industry, including hospitality, manufacturing, service, restaurant and retail. Find out more about him at www.retaildoc.com