Becoming a franchisor means you can launch your business on a national or even international scale with the help of a network of motivated entrepreneurs
If you look around you, many of the businesses you see or indeed use on a daily basis are likely to be part of a franchised network.
They might be independently run by a husband and wife or father and son, but behind the scenes there could also be a franchisor who have issued the ‘rights granted’ for them to trade as the brand name you see above the door.
Franchising is not just reserved for the household names you see every day, though. Indeed, if you own an independent business and it’s performing well at a local level that’s a good reason to consider franchising your business. You could be the franchisor yourself and potentially have franchisees operating underneath you in a matter of a few months.
One of the most successful ways to grow
Should you franchise your business? Having a great business model is crucial when contemplating franchising, but there are other factors too, which is where a franchise consultant can give you some further clarity, guidance and support.
Any worthwhile consultant will be assessing the viability of recruiting franchisees for you, so it’s usually not in their interest to franchise the business just for the purposes of doing so. So chances are that if one decides to assist you, they also believe in the proposition.
If you own a business, it’s more than likely you can franchise it
One of the benefits of franchising your business is that you’re able to launch your brand on a national scale - potentially even internationally. But an advantage of franchising is that it will be with the assistance of franchisees, who will pay you up front in order to access your knowledge, know-how, expertise and ongoing assistance.
However, you need to think about whether you want to expand something you might have created yourself, because some owners and founders will fear losing a certain amount of control of their company.
It’s not a one-way street either, because in all probability you will help someone - a franchisee - launch their own business without the risk of starting from scratch. It’s for this reason that they will pay you an upfront fee - they will see 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 very resilient, attracting the attention of individuals who want to either buy into the system as a franchisee or purchase the business in order to franchise it.
Have a look around you and whether it’s your own business or one you use on a regular basis, consider whether it could be picked up and located in a different area and still be able to operate in a similar way, potentially serving that local market. If it can, hey presto, that’s franchising for you.
It’s also fair to say that franchising isn’t a get-rich-scheme scheme.
Just like building any new business, there will be challenges and important elements to think about, such as marketing budgets to generate franchisee interest, while in turn beefing up the head office team so that franchisees can see there is an operational set-up to support them.
Then there are cash flow issues while you’re waiting for incoming fees. You will also need to consider the long-term implications of supporting franchisees for a defined term, which can often be for 10 years and more.
Get this right, however, and the rewards can be significant.
Franchising is by far one of the better ways to grow a business in the medium to long-term and there’s a very real possibility of a successful, profitable exit, as the business valuation can be so much more than the standard two-three times net profit figure that companies are valued at historically.
Throughout the pandemic, franchising has remained incredibly resilient
As I write this, we seem to be on the verge of things slowly returning to some form of normality.
Throughout the pandemic, franchising has remained incredibly resilient. There are so many more franchisee enquiries 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.
If you’re considering this route, at the very least look into this option. There are many consultants who you can have an initial exploratory conversation with about the potential of franchising your business.
If I had my way, most companies would have a franchise element to them. You could carry on doing what you’re doing as a company-owned site and then franchise other parts out. It might just be the way to do things moving forwards.
Richard Pakey is a franchising expert and regional director for the award winning Lime Licensing Group.