Becoming a franchisor and appointing franchisees to replicate your business in different locations is a great way to expand your brand reach and generate more income. But running a franchise brings certain challenges. Here, we’re asking: what does it take to become a franchisor? And what are the top barriers to launching a franchise network?
By reading up on the unique challenges associated with becoming a franchisor, you can effectively prepare for the transition and maximise your chances of success. So, we’ve created a round-up of the five most common problems and explained how you can conquer them.
What are the biggest barriers for becoming a franchisor?
1. Misunderstanding the responsibilities involved
Not all successful businesses make good franchises; the model comes with a range of different requirements and considerations, which franchisors must acknowledge before making the leap.
In your role as franchisor, you'll be responsible not only for establishing a robust franchise system and replicable processes, but also for training and supporting franchisees on an ongoing basis.
Becoming a franchisor can involve quite a steep learning curve, particularly for business owners who are used to taking a hands-on role in day-to-day operations. The best way to prepare is to do some groundwork and try to find out as much as you can about the model and the industry. Attend franchise events, talk to existing franchisors and make the most of sector magazines and podcasts.
A franchisor must be a leader, able to inspire and motivate the team and to keep the brand moving forward – focusing on support, recruitment, innovation and strategic development. It’s all too easy to become drawn back into day-to-day operational issues…
– Fiona Simpson, founder and MD of ARTventurers
>> 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. Not doing enough market research
As a business owner, you probably already have a vision for your brand, but when you transition to a franchised business, you need to be clear on how it will fit into a bigger market. You should also research how the sector may evolve in the future, and whether your current model will stand the test of time across a large region or country.
Before you become a franchisor, take some time to do in-depth market research. Analyse your competitors and consider how you can develop your business’s unique selling point. Without fully understanding the market you’re entering, you won’t be able to take advantage of opportunities and grow your business effectively.
3. Underestimating the cost of adopting the franchise model
Many entrepreneurs are attracted to the franchise model because of its ability to generate investment from third parties. But the franchisor must still contribute a significant amount of money to establish an effective system, get it off the ground and provide high-quality franchisee support.
Of course, you'll immediately receive capital through franchise and royalty fees from your investors, but these payments may not cover your expenses until further down the line. So, having a substantial amount of working capital will help you stay afloat in the period between business launch and breaking even.
Doing some research on the costs involved in setting up similar franchises will also help you with financial projections.
4. Trying to cut corners
Becoming a franchisor can involve a fairly large cash injection, so some ambitious business owners try to take shortcuts during the franchise development stage.
Unfortunately, cutting corners rarely pays off, as you’ll need to plan and implement a high-quality infrastructure in order to give your franchisees the best chance of success. Skip these all-important steps, and you’ll probably end up spending more money in the long run trying to resolve inefficiencies in your system. Plus, you’ll discourage future franchisees from investing in your business.
The take-home? Put in the time and effort before you roll out your franchise opportunity. There are plenty of resources online to help budding franchisors expand their business effectively.
5. Failing to attract or secure quality franchisees
When you're in the process of franchising your business, it’s tempting to get franchisees on board as quickly as possible, but this can lead to incompatible candidates representing your brand. You’ve probably spent years of your life building your business from the ground up; you don’t want to hand over the reins to someone unsuitable.
In order to make sure your opportunity appeals to the highest quality investors, you’ll need to develop and advertise a robust model and extensive support programme. At this point, it could be worth investigating other franchises in the sector to find out about the benefits they offer.
It’s also a good idea to implement an effective franchisee recruitment scheme. Make the most of your chance to find out about your candidates’ experiences, attitudes and ambitions before approving their applications.
Today, finding qualified candidates who are interested and willing to invest in becoming a franchisee is more difficult than ever before. There are more franchise systems and other types of financial opportunities that compete for investment.
– Kim Ellis, Senior Consultant with MSA Worldwide
>> Read more:
Becoming a franchisor
There will always be barriers to franchising - but if you’re dedicated to becoming a franchisor, you should be able to conquer them. If the time is right, don’t let yourself be put off by some of the more daunting aspects of launching a franchise network.
Of course, rolling out a franchise network is no quick fix; it requires resilience, patience and a considerable amount of capital. Often, it can take several years to prepare a business model for the franchise universe, and even longer for the franchisor to become profitable in the new system.
Whether you’ve been your own boss for just a couple of years or you’re a seasoned business owner with decades of experience, franchising has its challenges. But if you’re prepared to put in the work and ready to tackle the obstacles ahead, you’re already in a great position to see success as a franchisor.
Want to stay up to date with changes in the franchise world? See our daily news stories to find out about the brands leading the way.
Alice Tuffery, Point Franchise ©