5 Tips to Help You Decide If Franchising Is Right for You

Posted on 27th Apr, 2018 by Barbara Davidson

So your business is doing great: strong sales, a solid customer base, maybe even some additional locations. There are many questions to consider when you’re thinking about further expansion — check out our recent post on scaling a successful business for a few tips — but if you’re still interested in further growth, now might be the time to think about franchising. It’s a big decision to make, with the potential for a lot of profit balanced against a greater level of effort and risk than most small business owners are likely used to. Answer these five questions to start to get a sense of whether franchising might be right for you.


1. How strong is your underlying concept or brand? 

Businesses can succeed for lots of reasons, many of them not directly tied to the business’s underlying “brand,” “concept” or “hook.” Maybe you’re just an exceptional salesperson, or your business just filled a local niche. You can’t count on franchisees having these sorts of advantages — your business idea has to be strong in a variety of environments and markets. If you can’t articulate a strong brand or hook that makes it likely to succeed against competitors in many situations, your business might not be cut out for franchising.


2. Is the business easily replicable?

Even if a business has a strong hook and easily articulated brand, franchising still might not be the best option for growth. The best franchises are replicable without a lot of specialized knowledge or an unreasonable amount of upfront capital. Keep in mind that many of your franchisees may be less experienced than you, and remember that they will need to open and start generating revenue as quickly as possible. All things considered, the most franchisable concepts are those that can get off the ground in a few months.


3. Do you have enough capital?

Franchising might be a more affordable expansion strategy than funding a regional or national expansion yourself, but there are still major costs. You’ll need a strong management team to lead the expanded business, with PR, marketing, development and legal issues to deal with that smaller businesses don’t have. Make sure you’re prepared to meet those extra costs and pay those new salaries while the business ramps up or you could find yourself in trouble before you start to see any profit.


4. Is it an attractive investment?

You’ll need to be able to convince investors and franchisees that partnering with you is a good investment. That means a business strategy that will lead to profit — and don’t forget that your franchisees need to be making attractive profits after they pay your royalty fees. If your business isn’t a better bet than comparable investments in your area or industry, you’re unlikely to see the kind of growth that you want.


5. Are you ready to change how you operate?

A business with franchisees is fundamentally different than one without, and your relationship to your own business will change if you take that step. Where you once may have spent your time running the day-to-day, you’ll now have to spend your time managing your brand and your franchisees. That means being able to work at a more strategic level on the one hand — creating regional or national marketing strategy, for instance — while also needing to offer in-the-trenches support to your franchisees.

About Barbara Davidson

Babs is Lead Content Strategist and financial guru. She loves exploring fresh ways to save more and enjoy life on a budget! When she’s not writing, you’ll find her binge-watching musicals, reading in the (sporadic) Chicago sunshine and discovering great new places to eat. Accio, tacos!