How Do I Know if my Business is Right for Franchising?

As an entrepreneur you are probably asking yourself “how do I know if my business is right for franchising?”. To answer this question you need to have the right numbers, with a founder mindset, and a scalable business. If your business is growing, with good cash flow, there is an opportunity for franchising. If you are thinking about franchising your business and you want to know if you’re ready, as well as what stage your business needs to be at to franchise, Franchise Administration can assist.

Theoretically, any well-established business with proven systems can be franchised. However, just because you can do something, that does not necessarily mean you should. A business must have certain characteristics and qualities to franchise.

To ascertain whether your business is right for franchising, consider the following:

A Proven Business Model

Before turning your business into a franchise, you must first have an initial pilot or prototype concept that has a proven record of success. You need to have a concept that has been put to the test to show investors that your franchise opportunity is sustainable. 

Marketability

If your business is marketable, it will likely appeal to investors who are looking to invest in a franchise. A franchise is only marketable if it has proven systems, a strong brand, and a path to profitability for investors.

Ability to Replicate Success

A key factor to look at when franchising is whether your business can be replicated. Important questions to ask yourself include; “can the average business-minded person learn to operate your business in less than three months?”, “do you have systems in place that will accommodate rapid expansion?”, and “how well have you documented all the operating procedures for your playbook?”.

Strong Returns on Investment

Entrepreneurs should then look at their Return on Investment (ROI). In the current market, a business should ideally generate a net operating income of 15% to 20% after deductions like royalties and payroll. Royalties can run anywhere from 4% to 8%, so you need to have a pretty considerable ROI to be successful. It is also important to have an understanding of the time it will take your franchisees to see a return on their investment, so as to manage their expectations.

Support and Training

Lastly, consider whether the business concept requires a lot of support. As the franchisor, you will be responsible for providing training. Knowing how much support to provide each franchise owner to help them achieve success is key.

With these factors to consider, Franchise Administration can assist with your franchising venture, as a part of your long-term growth strategy and goals. We will assist you in every way, with the goal of expanding your brand to build an organisation to effectively support and assist your future franchisees.

Contact Franchise Administration if you’re wondering “how do I know if my business is right for franchising?”