Thinking about running a franchise network? The benefits of franchising a business are clear to see; you can generate investment, access a greater customer pool and boost your brand awareness. But franchising isn’t right for everyone. Here are some of the key signs you shouldn’t franchise your business.
If you think you’re ready to expand your business, the idea of adopting the franchise model might seem appealing. Many entrepreneurs view it as a one-way ticket to high profitability - but this isn’t always the case.
Becoming a franchisor takes a lot of careful planning and due diligence. Rush the process, and it could end in disaster - not only for you, but for your franchisees as well. So, it’s vital you can recognise when it’s the right time to franchise your business - and when you should step back and continue building on your brand.
Signs you shouldn't franchise your business
1. You struggle to describe your brand
If your business is to see success across a number of different geographical territories, it’ll need a defined brand identity. By making sure each location has a similar design, atmosphere and set of strategies, you encourage customers to perceive your business as a unified, professional brand. You’ll achieve more sales if people know they can get the same high-quality products and service at any of your sites.
If you find it difficult to explain your brand concept in a sentence or two, it may need some refining. Make sure you know what your business stands for and what message you want to send out. The aim is to help customers see your company as distinctive and memorable.
I have worked with scores of companies and seen hundreds of concepts in the franchise industry, some of which left me scratching my head as to why anyone would believe a particular idea would be a viable business under a franchise model.
– Gary Occhiogrosso, Forbes contributor
>> Read more:
- 5 Qualities of a Successful Franchisor
- 5 Reasons Why A Strong Franchisor-Franchisee Relationship Is So Important
- 5 Ways to Keep on Learning as a Franchisor
- What It Really Means To Be a Franchisor
- Ten Ways to Be the Best Franchisor a Franchisee Could Wish For
- Why it’s Important for Franchisors to Visit Franchisees.
2. Your customers are a small pool of locals
In theory, there’s nothing wrong with establishing a group of loyal customers in your local area - but it could be a sign your business isn’t ready to hit a wider market. Perhaps your concept works particularly well in your current location - or maybe it just doesn’t attract a fanbase diverse enough to justify expansion. It’s worth doing some market research to find out how it might fare in another region.
Another way to check whether you should franchise your business is to consider where your customers come from. If they’re willing to travel a long way to buy your products or services, there’s a good chance your brand could thrive in additional locations.
3. You feel uncomfortable relinquishing control to employees or business partners
Although the franchisor is always the leading figure in any franchise, allowing franchisees to set up their own branches of the brand involves handing over a certain amount of responsibility. Lots of budding franchisors feel uneasy about revealing their secrets to success and encouraging others to replicate their long-term passion project - it’s only natural.
But you must be able to act professionally and considerately; after all, it’s in your best interests to give your franchisees the best chance at success within your network. If you don’t think you can do this, it might not be the right time to franchise your business.
4. You don’t generate consistent profit
Investors want to join a franchise with the ability to give them a reliable income, as well as a great work/life balance. But if you, the would-be franchisor, can’t generate a stable turnover, it’s unlikely your franchisees would be able to.
What’s more, being able to depend on a steady income is important for investors, who will be surviving on working capital until they reach their break-even point. Sooner or later, your franchisees will either see failure or become frustrated with the inconsistent revenue.
To expect a new franchisee in a start-up franchise programme to surpass the existing business owner's financial performance is a dangerous strategy. The fledgling franchisor should identify why [their] business is not profitable and correct the situation before expecting a new franchisee to solve the problem.
– Ed Teixeira, former franchisor executive and franchisee
>> Read more:
5. You’re nervous about franchising your business
Being risk-averse is a blessing and a curse; although it could stop you entering dangerous waters, it could also cut you off from great opportunities. The trick is to recognise when a risk is worth taking. But if you find yourself dreading the thought of being accountable for other people - and, potentially, their mistakes - it could be a sign you’re not ready to franchise your business.
As a franchisor, you must be comfortable taking on the risk of launching your business in new locations and responsibility for franchisees who - advertently or inadvertently - tarnish your brand. And, if things go downhill, you’ll need to be ready to take action quickly to nip issues in the bud before they become big problems.
What does it take to franchise a business?
If you’ve got to this point and you don’t think any of these warning signs apply to you and your brand, there’s a good chance you are ready to franchise your business. If so, your research journey doesn’t end here. Luckily, Point Franchise has thousands of handy guides to help aspiring franchisors launch profitable and personally fulfilling business networks.
Why not start by discovering the pros and cons of franchising your business and the benefits of growing your network slowly? You might also be interested in finding out how to prepare to overcome the five most common barriers to becoming a franchisor.
You could also take a look at our key franchisor guide, Franchising 101: 7 Steps You Must Take To Franchise Your Business.
Alternatively, use the search box to find other relevant articles - we publish two new business guides every single day.
Alice Tuffery, Point Franchise ©