3 Things to Consider Before You Franchise

By Maryalene LaPonsie | Posted October 31, 2012

Franchising allows budding or entrepreneurs to invest in an established or promising business. McDonald's, Subway and other fast-food restaurants serve as industry stalwarts, but franchising exists in just about every sector, from financial planning and wealth management to convenience stores and beauty salons.

3 Pre-Franchise Questions

Of course, your business is the greatest thing since the toaster oven, but should you franchise? Not sure? Answer these three questions first.

1. Do you have a track record of profitability?

Sure, some new (or reckless) business owners are willing to jump on an unproven concept. However, savvy businessmen and women look for reassurance before plunking down their cash for a piece of the pie. Don't think you can simply open one location and six months later offer it as a franchise.

There is no hard and fast rule about how long your business needs to be open before franchising, but you do need to have solid financials. Your Financial Disclosure Document should be immaculate, and you need to be ready to answer questions about your business history in regards to litigation, client testimonials and Better Business Bureau rankings.

2. Are you offering something new?

A sandwich shop that lets you pick your own toppings and then prepares your food right in front of you is a neat concept, but it's been done before. If you want to attract franchisees, you need a new angle.


Maybe you cater to a niche population. Maybe your place offers delivery when everyone else is carry-out. While having a familiar concept often makes your business attractive to customers, offering a twist can make it a successful franchise. If you compete against dozens of other businesses offering the same product or service, you have a harder sell to franchisees.

3. Can you let your baby go?

This might be the most difficult test of your readiness to enter the franchise game. After all, you became a business owner because you like to be in charge, right? If you can't fathom the idea of turning over operational decisions to someone else, you might be in for a miserable experience as a franchisor.

Of course, you want to screen potential franchisees carefully, and you want to be sure you have set up appropriate restrictions and responsibilities to protect your brand. But at the end of the day, franchised locations are not your business. You'll need to hand over certain freedoms to franchisees, and if that thought makes you hyperventilate, you may want to keep your biz to yourself.

Franchising can be a win-win proposition. You get to expand your brand without the headaches involved in daily operations, while your franchisee gets a proven business opportunity and great professional support. However, not every business owner is cut out to be a franchisor. Are you?

Do you have a comment or question about this article or other small business topics in general? Speak out in the SmallBusinessComputing.com Forums. Join the discussion today!

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