How Do You Know If Your Business Could Make A Good Franchise?

If you have found yourself wondering if franchising is the best growth strategy to expand your business, you are not alone. Many American entrepreneurs are investigating the steps to franchising as a means to scale their operations.

Let’s cover this topic with this two-fold approach:

  1. Is your business a strong candidate for franchising?
  2. If it is, what are some of the most important questions to ask yourself?

Is Your Business A Strong Fit for Franchising?

The answer to these questions hinges upon the viability of your overall business. Franchising can be a powerful expansion tool when you do the work to understand the ins and outs, follow the right steps and partner with the best advisors you can find. Take your current business model and apply it to these criteria:

  • Is your business successful, scalable, and protectable?
    This is the legitimacy question for your business. If there isn’t potential for your business to grow, it will not gain traction with any potential franchisees. Protectable simply means that your business model it’s legally safeguarded from intellectual theft and piracy, common problems these days. It involves having a trademarked name, patent protections if applicable, control over Internet domain names, etc
  • Can you build a franchise system?
    The operative term is SYSTEM. Once you start franchising, you must approach your business like a district or regional manager, not a sole proprietor. Regardless of whether you’re one year or 10 years into your franchise program, you will be managing processes and infrastructure that likely didn’t exist when you were a single proprietor, such as people or teams for franchise development, training, marketing and more. It can be challenging work because you’re responsible for several layers of complexity and managing people with a different skill set.
  • What does the financial model look like? Will your franchise be financially accessible to your ideal candidate?
    Franchising consumes a lot of financial resources. As the franchisor, you will spend money to build a legally and financially sound platform, create franchise documents, invest in your brand assets, and more. The franchisee can face significant upfront costs to launch their location(s) – anywhere from $10,000 to more than $1 million although the average is between $50K and $100K. The franchisee may also need to self-fund their operation for a period of time until they break-even. That’s why the return on investment is one of the most critical factors for the franchisee candidate. Franchise costs do not culminate with launch costs either. It is likely that franchisees will also pay the franchisor recurring expenses like franchise fees that typically range from 4 to 8 percent of revenue. The opportunities in franchising make it worth it for all parties involved, and franchise failure rates are much lower than regular small businesses, but you must be educated and prudent.

How Do You Make Franchising Work?

Wise and careful implementation of a franchise business involves three critical components:

  • Possessing a franchise mindset
    Building and growing a franchise system starts with already having a profitable business to franchise. Also important is having the ability to train OTHERS – your franchisees – how to follow the “recipe” and operate their unit(s) in exactly the same way you did. If you can’t get new franchisees excited about your brand, or train them to follow the operations manual to a “T”, you may struggle, or have to hire someone who can take on these roles.
  • Being fully aware of your personal/professional goals as well as the strengths/weaknesses of your business
    Rule number one: Know Thy Self. You can’t go far without this wisdom. As it pertains to your company, you must acknowledge your shortcomings and know how to work around them while being attentive to your staff. You must also know your market in terms of its capacity for growth so you can set growth goals i.e. how many new franchise units do you want to launch in a year.
  • Calculating the costs of your franchises and knowing how to manage them.
    As we said earlier, budgeting and finance are crucial. You need to be able to forecast your revenues and expenditures for multiple locations on a monthly, annual, and even five-year basis. The more hands-on you are, the better. Here’s another pro tip: be humble enough to admit you need a good accountant (or two) for your franchise system, not to mention a franchise attorney and marketing/branding support. is an agnostic, one-stop global resource for all things franchise development. If you are interested in learning more about how to franchise your business as a means to scale and expand, you will find experts, advisors, tools, and resources to set you on the best path.