Is My Business Ready to Franchise?

Do you have dreams of owning the next Starbucks? Are customers clamoring for your product or service outside of your local area? Do you miss the thrill of startup and long for the challenge of launching a new venture? If you answered “yes” to these questions, you might be ready to franchise.

More questions to ask to find out if you're ready to franchise

However, these aren’t the only questions one must answer to determine if it's time to franchise a business. Also ask yourself:

1. Do I have strong systems in place?

To franchise a business, your business must be easily replicable, which means the systems and processes you use for operations can be taught to other people, and the products or services you provide can be standardized (think McDonald’s). If you don’t have an employee handbook and operations manual, for example, you’re not ready to franchise yet. Get going on systematizing your processes and you’ll be on your way.

2. Does my business rely on my personal presence?

This problem can frequently arise in service businesses. If you are a consultant, graphic designer or masseuse whose clients only want to work with you, it doesn’t matter how many people outside your location ask for your services—there’s only one of you, and you can only spread yourself so thin. Start training employees to provide the same services you do, get your customers used to working with your team instead of you (perhaps by charging more for your personal services, or using employees to handle new customers) and it will be easier to franchise a business.

3. Do I have a high tolerance for rules and regulations?

As a franchisor, you’ll need to follow both state and federal laws regarding franchises, such as the FTC’s requirement to provide prospective franchisees with a Franchise Disclosure Document (FDD). Getting up to speed legally and qualifying to sell franchises is time-consuming and costly. If you don’t have the patience for this, franchising may not be for you.

4. Have I done market research?

It’s important to research the market for your concept in other parts of the country before you try to franchise a business. A concept that is hot in one city or state (such as Hawaiian shave ice) may not translate to other parts of the U.S. without educating potential customers about it. Similarly, if your franchise targets seniors, families with infants or other specific demographics, you’ll want to make sure there’s enough of that group in the regions you’re considering.

5. Is my business financially sound?

Having one profitable location is a good start, but in general, you’ll want to have at least two successful locations with strong financials before you contemplate franchising. You’ll also need enough working capital to prepare necessary legal documents, market your concept and hire salespeople to sell the franchises, and train franchisees. This can add up to hundreds of thousands of dollars or more.

6. Do I like teaching and managing?

As a franchisor, your job will be far less day-to-day, in-the-trenches operations and more corporate manager. You’ll be occupied with identifying new areas for franchise expansion, marketing franchises, assessing potential franchisees, training new franchisees and providing ongoing support to franchisees. You either need to be ready to switch roles or prepared to hire a trusted manager to lead franchise efforts.

If franchising still sounds like fun to you, the International Franchise Association’s website has lots of resources for you to learn more.