If you look around you, many of the businesses you see or use daily are very likely to be part of a franchised network. They might well be independently run with a husband and wife or father and son perhaps but behind the scenes. There could also be a franchisor who have issued the ‘rights granted’ for that couple to trade as the brand name you see above the door.
Franchising is not just reserved for the household names that you see every day, though. Suppose you own an independent business, and it is performing very well at a local level. In that case, that is an excellent reason for considering franchising your business. In turn, you could be the franchisor yourself and potentially have franchisees operate underneath you in a matter of a few months!
Franchising Is Simply One Business Format And One Of The Most Successful Ways To Grow
Should you franchise your business, though? Well, that’s another part of this story.
Having a great business model is undoubtedly a significant step to the merits of franchising. Still, there are other factors too, and this is where assistance via a franchising consultant can give you some further clarity, guidance and support. Any worthwhile consultant will be thinking about the viability of recruiting franchisees for you, so it is usually not in their best interest to franchise the business to do so, so the chances are that if one decides to assist you, they also believe in the proposition itself!
If You Own A Business, Most Likely You Can Franchise It!
One of the benefits of franchising your business is that you can launch your brand on a national scale, potentially even internationally.
Still, the benefit of franchising is that it will be with the assistance of franchisees who will pay you upfront for the use of your knowledge, know-how, expertise, and ongoing service, so this does need some careful thought on your part. Have a long and hard think about whether you want to expand something that you might have created yourself because some will fear the control aspects in their business; franchising does give you as much control over it. However, there will still be an ideology in your mind, as you build, that the company is quite far removed from what you set it up to be.
It is not a one-way street either, because, in all probability, you will help someone (a franchisee) launch their own business without the risks of starting from scratch. It is for this very reason that they will pay you an upfront fee. They will see that you have already done most of the hard work, and they will pay you to get ahead from the outset.
Franchise Your Business For A Profitable Exit!
During the current pandemic, food-based businesses have been remarkably resilient. They have attracted individuals’ attention to either buy into that system as a franchise or purchase the company to get some scale and go about franchising it. However, virtually any sector can be taken through this format.
Have a look around you and whether it is your own business or one you use regularly, think to yourself whether that business could be picked up and located in a different area and operated in a very similar way, potentially serving that local market and hey presto, that is franchising for you!
It is also fair to say that franchising is no ‘get rich scheme’. Ask any established franchisor, and just like building any new business, there are challenges. There are elements to think about, such as marketing budgets to generate franchisee interest and beefing up the head office team so that franchisees can see an operational set-up that will support them. There are also cash flow issues while you are waiting for incoming fees.
You will also need to think about the long term implications of supporting franchisees for a defined term, which can often be ten years and beyond. However, overcome all of this, and the rewards are there. It is again, by far, one of the better ways to grow a business in the medium to long term. There is a genuine possibility of a successful, profitable exit as the business valuation can be so much more reliant than the standard ways of 2-3x net profit figures that businesses are valued at historically; maybe this area is a topic for another article later on in the year!
As we move into what feels more like an intense period in our history, yet still relatively short at a year or so, we are slowly coming out of the current pandemic.
Franchising has remained incredibly resilient. There are so many more franchisee enquiries currently being generated than at any moment in our history, as well as businesses looking to diversify into franchising as a way to generate further growth as franchisors.
Please do, at the very least, look into this option. Many consultants will offer an initial exploratory chat to check you and the business potential out there. If I had my way, most businesses out there would have a franchise element to it. You could carry on doing what you are doing as a company-owned site and then franchise other parts out. It might just be the way to do things moving forwards!
This article was written by Richard Pakey, a franchising expert and Regional Director for the award-winning Lime Licensing Group.