A time comes for a successful small business owner when a choice needs to be made between expanding into other areas with fully owned and operated branches, or investing in a franchising model that allows you to benefit from royalties but does not involve the same hands-on level of work. The choice can be difficult for many owners, since it is tough to look at your business from an external perspective and judge its fit as franchise.
Here are a few signs that a franchise model may work best for your company.
1. Your Money is Tied Up in Operations:
Franchising certainly takes some capital investment. In many ways it requires forming a new business model with standardized materials, consultations, software and other assets that will require funds. But generally speaking, a franchise model is not nearly so costly as building out branches on your own. So if a large percentage of your revenues end up going toward operations in each year, a franchise model is probably a more comfortable option.
2. The Business Has Operated Dependably for Several Years:
To have a successful franchise, you must have a business model that is attractive enough for other entrepreneurs to purchase. A key fact here is your long-term performance. You need to market a business that has demonstrated steady growth and dependable revenues for at least several years for other owners to be interested in buying. This will also help buyers acquire loans to purchase franchise rights and start their own businesses.
3. Your Products are Trending:
Another key part of attracting buyers is offering a trending product with plenty of room for growth. Trying to franchise a business at the end of its product life cycle is a dangerous game, and not many entrepreneurs will bite. The more potential a business model has, the more easily it will sell.
4. Competencies are Easy to Replicate:
Sometimes the franchise is in the details. Not all businesses make good franchises, simply because they depend on competencies that cannot be replicated. Businesses that depend on a certain individual creativity, an owner-based level of customer service, and similar factors fall into this category. Other owners need to pick up your plan and run with them with equal success.
5. Your Schedule is Full:
If your schedule is already packed with activities, chances are good that you will not have enough time to build an entirely new branch by yourself. In this case, a franchise model may be a better option for expansion, since it allows your brand to grow without taking up nearly as much of your own day-to-day time.
6. Demand is High and Inventory Moves Quickly:
How are your customer levels? Are they still steady and growing? Is your inventory turnover at a healthy level for your industry? These key stats will show you if a full franchise model has a good chance of succeeding. Strong ratios indicate that multiple franchises could be supported in your market. Low levels show that you may be better off focusing on a single branch instead.
7. You Need Specialized Management:
Sometimes the best sign that it is time for a franchise is that your business has reached a point where it needs input from others – especially talented operations managers and skilled owners with an eye on local marketing and sales. If these are not your strong suits but remain key factors for your business, franchising may be a way to solve your problems.
8. Counseling and High-Level Work are Up Your Alley:
A new franchisor needs to do a lot of high-level strategic work, counseling, and brand management. If you love these skills, purchasing a franchise.
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Peter Bowman is a professional blogger that provides tips and information on franchise opportunities you should invest in. He writes for FranchiseExpo.com, the place to find the best franchise opportunities available.