Franchising your business? Here is what you need to ask

By Disha Kathuria|12th Aug 2016
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We have all heard of the word ‘franchise’. But do we know what it really means? Before we begin to talk about the questions you need to ask while franchising your business, it’s pertinent to first understand the term and its functions.

A quick Google search will tell you that a franchise is “an authorisation granted by a government or company to an individual or group enabling them to carry out specified commercial activities acting as an agent for a company's products. Robert Gappa, Founder and CEO of Management 2000, says, “Franchising is a strategic alliance between groups of people who have specific relationships and responsibilities with a common goal to dominate markets, i.e., to get and keep more customers than their competitors.” (As stated in franchising.com)

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Image : shutterstock

It is important to note certain facts when it comes to franchising. Remember that other franchisees and company-operated units are not your competition. They are your supporters. You also never buy a franchise. You simply invest your brand name, operating system and ongoing support to it. You must not have the mentality of an independent owner but of one belonging to a bigger team held together by a common goal.

Now that we have probed into the meaning of a franchise, let’s get down to understanding the questions that need to be asked when you wish to franchise your business venture.

Is my business mature enough to succeed as a franchise?


That’s the first question  you need to ask yourself. It’s right to take the plunge only when all needles point towards a loud YES.

Am I willing to give up my entrepreneurial independence?


According to Terry Powell, CEO of franchise business coaching company The Entrepreneur's Source, “Once you decide to become a franchiser, your business and what you do as an individual entrepreneur can change forever." He further adds, "Many entrepreneurs aren't well-suited [to be franchisers] — their unique abilities are in building companies and bringing visions to reality, not about managing operations.” (As stated in Business News Daily)

Franchising is a collective operation. If parting with your entrepreneurial independence makes you uncomfortable, wait until you equip yourself with that feeling.

How can I avoid common rookie mistakes?

Franchising isn’t simple duplication and multiplication. It’s a new way of working. Like any new venture, there are mistakes waiting to be made, unless of course you have done your homework and consulted those who have been there and done that.

Can my business model be replicated?


You can’t open a franchise simply because you want to and think you can. Place your decision firmly on the practical side of things and first understand if your business truly possesses the ability to be replicated.

Am I prepared to provide support to my franchisees?


Starting a franchise goes beyond the initial training that you’ll offer to the manager(s) of your franchise. You must be constantly available to offer the support they need before coming into their own.

What per cent of the chain should I offer?


If you are starting out, you’d like to take things slow. The percentage can offer can go up or be reduced further depending on how the franchise fares in the first few months or even the first year.

How much of a franchise royalty percentage should I collect?


While the business model is your brainchild, franchising is about sharing the legwork. If you can come up with a figure that justifies your hard work and keeps in consideration the work that future employees of the franchise will put in, you’ll be able to display the integrity of an honest and respecting businessman.

How can I attract potential franchisees?


Business runs on word-of-mouth faster than any other method. In order to attract potential franchisees, you should create an image of yourself and your product in the market. You must also be clear of your plans for the next five years which should be inclusive of the franchisees’ employees as well. In short, it’ll take genuine passion and disciplined integrity to get what you truly desire.

How many franchise locations should I open at first?


Calculate the time you are prepared to invest in them, the effort that it will require and the funds you have to support your plans. Once this holy trinity of expectations is in place, you’ll know the number of locations you can look forward to franchise out.

Other important questions that will require your due diligence before stepping into your new role are:

What basic legal considerations do I need to be aware of?

What is a Franchise Disclosure Document and why must I have one?

How should I screen prospective franchisees?

What should the business experience of the franchise managers be?

Franchising is a great way to expand the reach and the potential of your business. It pays to be flexible and open to ideas that may not originate from you but have the ability to make your franchise go places. In the end, the question that matters the most is whether you are ready to let your product become bigger than you? Your answer will be your definitive fate.

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