It is a believed that only large companies who have employees in huge numbers are suited for franchising their business. That is not true, as an even small business can create a franchise as one of their business strategies for growth. Many small business owners are thinking of innovative ways for growing their business and offering franchises to other small business owners.
Read below to learn more about whether this is a viable option for you as an entrepreneur.
How does franchising work
In simple terms, franchising means opening new outlets by selling the right of your business to people who are interested in your business and want to capitalize on the brand you have created. The franchise is the one who buys the right and pays a certain amount of money to use the name and also to get trained on the franchisor’s business. The franchise is also required to spend royalty money which depends on the sale. That royalty fee covers services like marketing, sales, consulting, etc.
Determining if your business can become a franchise
Many big companies have adopted this strategy of franchising and have proven fruitful for them. It has enabled them to grow and reach markets that they could earlier not be able to reach. But what is needed is that they should know what success criteria to follow to use the same and repeat the success. If the success of your company is due to the quality, consistency and brand value, then franchising is the perfect strategy to grow your business. Here are some of the characteristics your company should possess to become a candidate for franchising.
Replicate the model: The success story of your company is dependant on the business model you follow. It should also have a process which is proven and has to fulfill the requirements of the franchise. The business process has to be robust and pass the test of time. A business plan has to be in place else the franchise will be unmanageable.
Sales: The approach taken for the sale of the product or the service has to be precise. The communication with the franchise has to be clear, and there has to be consistency in the quality as well as the service that your business offers.
Brand value: For a franchise to even approach you, there has to be a brand value for your business. The business should be something that they would like to be linked as it is reputed, respected and makes for a wise investment. Also, the brand should be able to complete in different locations. The product or service that the franchisor offers should be of high quality and affordable. The product that the franchisor provides should be accessible, likable, and should be priced right.
Before you decide on franchising, you should have a support system in place who can help in training and also enable the franchise to duplicate the business model. You should also have strategies that will have overcome the challenges in markets as the franchise has to provide insight into how to resolve these issues.
Ways franchise can help in business growth.
Invest in the already existing franchise:
The most significant advantage of investing in an already existing franchise is that you are risking low as you are spending less. If you have the business acumen to bring a struggling business back, there are financial gains by doing so. Through your leadership, you can devise new strategies that can rebuild the company. Also, you will know what mistakes the previous owner has made and got a chance to rectify them. Income, expense, sales, etc. of the earlier years can all be studied, and you can determine action plans on how to resurrect.
Become a master franchise: A master franchise is a local representative for the franchisor and will have act as a support to the other franchises in your region. You will also be providing all the training and will be the single point of contact for all the local franchises. The compensation for becoming a master franchise is that you will get a part of the royalty that is obtained from that area. A master franchise will also have the added responsibility of creating more sales and commissions apart from overseeing the recruitment activities.