Franchising as a business model spans a whole range of industries and sectors from fast food, hospitality and retail to kids activities, dog hotels, travel and pest control. In fact, there are now so many weird and wonderful franchise opportunities that it would be easy to assume that any business can be successfully franchised.
But while franchising can be a great way to expand for many brands, it’s certainly not an automatic path to success, nor is it the best and most appropriate course of action for every business. These 6 reasons are by no means exhaustive, but are some important points to keep in mind when considering whether franchising is right for you and your business.
The company cannot be easily replicated
A fundamental concept of franchising is that the franchisee acquires from the franchisor the right to operate under its brand name and sell its goods or services using the developed business model in different areas or locations. The original business concept must therefore be simple enough to be replicated and for a franchisee to be easily and quickly trained to deliver the franchise brand offerings. It is also important that the concept can be successfully translated to other locations – a business whose success depends on the specific geographic location, the demand of a niche customer in a certain area or of a product that is only available in a limited arena, probably shouldn’t be a franchisee.
The company is not financially sound
Franchising should certainly not be used as a means of saving a sinking ship. Building a franchise brand is not only a costly process and a long game, but 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.
The numbers don’t pile up
It is critical to have a realistic approach to the math of franchising a business. As mentioned above, franchising can be an expensive process in the first place. You need to know how much it will cost to replicate and set up the business model for each new franchisee, as well as training and ongoing support. If those costs are in the millions, chances are you will face huge financial hurdles in attracting franchisees, especially without a track record of success behind you.
The sector has no lifespan
For any franchisee looking to invest their hard-earned money in a franchise business, they want the confidence that it’s a business venture that won’t just be a flash in a pan. Does the offering you offer stay on track or is it something that is going out of style?
You will struggle to let go of the rule
This is a real problem for many would-be franchisors – their business is their brainchild, a concept that they have nurtured and nurtured to grow. As a franchisor, you need to be able to step back and trust that your franchisees are delivering your beloved business model. Not only that, but you also have to be able and willing to make tough decisions when things don’t quite go as planned. The right mindset is crucial and not all personality types are suitable for the franchisor role.
The company does not have enough experience behind it
As a franchisor, you (and your operational team) are the point of contact for advice and support, the sounding board for your franchisees and also the place to go if something goes wrong. Be confident that you have the experience and track record to bring that to your franchisees. If not, you will most likely end up with a disgruntled franchise network, which in turn can be stressful and incredibly damaging to your brand.
There are many factors to consider when considering whether franchising is the right course of action for you and your business – and most importantly, whether you are truly a fit for the franchisor role.