You want to expand your business and you are wondering whether or not franchising is the best way to do it. To help bring some clarity into this question, this article will attmept to simplify this topic. When you think of expansion, you need to keep the following three points in mind:
- You want your business associates to use the name of your business (your brand),
- You want to dictate to them how to operate their businesses; and
- You want them to pay you money now and on an ongoing basis.
If all of these three conditions are present, the law says you have a franchise. Some people find that the cost of franchising a business can be steep and try to use a different name for their network such as: an agency, a license, or some other form of business opportunity. But as they say: “If it looks like a duck, swims like a duck and quacks like a duck, it is probably a duck.” So, no matter what you call it, if it has all three of the above conditions, it is a franchise. If you call it something else and are challenged, you are going to lose, and will most likely have to pay severe penalties depending on what the dispute is about or where in the country it arises.
On the other hand, you may meet the definition of franchising as it is set in the franchise rule and may have the desire, resources and energy to franchise your business, but there is more to this decision. There are more questions you need to ask yourself, such as:
- If you had to pay someone a royalty fee, would your business still be profitable?
- Do you have marketing, administrative and operational systems in place?
- Can you easily teach these systems to someone else?
- Will you offer value to your franchisees, not only in the first year, but on an ongoing basis for the life of the franchise agreement?
- Do you have a “secret sauce”? That is: Do you have a significant competitive advantage that allows you to stand out from yourcompetition and that will do the same for your franchisees?
- Do you have the resources (time and money) to devote to the franchising efforts?
- Do you want to change what you do now to the business of franchising which includes recruiting, training, and supporting franchisees as well as making sure that your company stays ahead of the competition?
- Are you using technology in your business now to the fullest advantage? Are you willing to invest in future technology for communication, marketing, management ease and efficiency purposes?
If you answered “no” to these questions, franchising may not be the best answer for you at present. You need to get some things in place first before you consider franchising your business. Other articles will explore the conditions you must have in place before you franchise your business. Make sure to stay tuned to this information.