Want To Become A Franchise? 15 Important Things To Consider First
Oct 29, 2020
When your business is successful and growing, the idea of franchising can be incredibly enticing. After all, it’s an easy way to expand your company’s presence while leveraging the passion and drive of aspiring entrepreneurs who want to manage their own location. However, it’s important to think through this decision and determine whether becoming a franchise is right for your business at this time.
We asked members of Forbes Coaches Council what entrepreneurs should know about franchising their business, including some pros and cons might they not have considered. Here are 15 important questions to ask yourself before taking the leap.
1. Have You Looked Beyond Your Emotions?
Franchises are a fast way to expedite your learning curve via proven operating systems and brand recognition. However, these “advantages” do come with caveats. Factor the entire value proposition before leaping. High franchise and royalty fees and required marketing/ingredient purchase programs all sap profits. Territorial rights and exit strategy are equally important. Invest wisely; don’t just buy a job! – Kevin Leonard, Emerald Bay Performance
2. Do You Add Value To Your Franchisees?
In order to grow through a franchise system, it is vital to have a differential advantage over the rest of the market. This advantage makes it really attractive for someone to decide to invest and pay royalties for a real differentiation and a know-how that is not available to anyone. Finally, keep in mind the importance of continually adding value to the franchisee to maintain fidelity. – José Luís González Rodriguez, ActionCOACH
Forbes Coaches Council is an invitation-only community for leading business and career coaches. Do I qualify?
3. Did You Consider Your Exit Strategy?
Most people entering a franchise think they are building a business for a future capital event. Read the fine print and understand what you control and what you don’t. Ensure you understand your exit strategy and options. Many franchises today are really just that in name only and you may end up just being a contractor or agent with little to no control. – Thomas Bradley Cox, Oliver Group
4. Have You Thought About The Downsides?
Franchises are a great way for getting a business quickly off the ground and receiving relevant training, support and logistics. Having an established, successful business model in your back pocket makes financing much easier. The downsides are that franchises are usually costly and allow for much less flexibility and freedom of choice. You are further bearing all financial obligations, even when the business folds. – Sharesz T. Wilkinson, The Speech Improvement Company
5. Is A Franchise True To Your Entrepreneurial Vision?
Moving to a franchise model can create all sorts of issues for an entrepreneur. On the one hand, the hope for quick additional funding, market expansion, new customers, etc. is enticing, but will the franchises remain true to the entrepreneur’s vision? This question, I think, is quite key. You must also consider supply, logistics, legal protection, brand integrity and more against your vision! – Ash Varma, Varma & Associates
6. Do You Want To Follow A Business Model Or Make One?
Much like the equally important question, “Mayonnaise or Miracle Whip?” you’re likely one type of owner or the other: you follow a business model or you make one. Neither guarantees more success than the other, but choosing a model aligned with your preference will give you the head start of working in your individual groove. – Dodie Jacobi, The Consultant’s Consultant™
The Consultant’s Consultant™
7. Do You Have All The Right Elements?
A franchise is a great business model, but to be successful, you have to have many elements aligned. These elements include clear processes, supporting tools, a great supply chain, effective communications, outstanding training, strong management support, a strong banking partner and a vetting process to determine if new operators are a fit for your franchise offering. – Bobbie Goheen, Synthesis Management Group
8. Have You Found The Right People?
One of the most overlooked aspects of franchising a business is the time and effort that it will take to carefully craft and manage multiple stores. One of the best ways to handle this type of oversight and plan better for multiple locations is by hiring the right people. This may take longer to execute, but it is always better to hire great and not settle! – Jon Dwoskin, The Jon Dwoskin Experience
9. Have You Had Your Personality Assessed?
In many of the best franchises, there are “types” of people who are most likely to succeed. If your franchise broker or franchise does not want you to go through their assessment testing or suggest you do some of this work at this stage in your life, I would strongly consider walking away from the deal. Every one of my executive clients who have chosen franchising have been better matched this way. – John M. O’Connor, Career Pro Inc.
10. Have You Performed A Talent Strategy Audit?
Before taking the leap to scale the business model, assess the existing culture and talent for skills and competencies. Perform a talent strategy audit for a future state. Assess profile models for hiring. Develop other recruiting, onboarding and retention strategies for successful employee engagement and experience. Lastly, align strategies to mission, vision, values, goals and objectives. – Lori Harris, Harris Whitesell Consulting
11. Are You Willing To Share Control Of Your Business?
When investing in a franchise, you are building someone else’s business while building your own. That means someone else has control over key business aspects that might include sourcing, pricing, territory, advertising and other aspects that could affect your profitability and growth. Is the safety net of investing in a known product or service and its system worth that lack of control? – Johanna Wise, Connect•Work•Thrive
12. Will Your Culture Dilute?
Franchising a business can be a way to expand operations while minimizing risks. However, doing so can dilute the entrepreneur’s desired culture for the organization. The franchisee can implement policies that may be contrary to the original philosophy of the entrepreneur. It’s a matter of weighing possible conflicts to potential success. – Deborah Hightower, Deborah Hightower, Inc.
13. What Are Your Long-Term Goals?
Before investing in a franchise, do your homework. Just because there are so many franchises available doesn’t mean it will be a good fit for your location. Do the leg work and find out if the need is in your geographic area. Is it something that will still be needed in five, 10 or 15 years from now? – Frances McIntosh, Intentional Coaching LLC
14. Will A Partnership Enable A Win-Win?
Every franchise builds on partnerships. Partnerships are only meaningful and desirable if both sides have the same values and vision and benefit from it. Make sure what the benefits are for you, but also for the other. When it comes to advantages, I don’t just mean money, but also emotions, power, energy and time. – Michael Thiemann, Strategy-Lab™
15. Do You Have A Great Story That’s Easy To Repeat?
Nail your offer and story so it’s repeatable by salespeople, the media, your employees and the buyers. Make sure it passes “The Mary Kay Test.” First, is it easy? Second, can I do it? Third, does it work and will it work for me? If the answer is “yes,” make sure you create a “moat” around your product so it isn’t easy to knock off. Protect your IP and start selling! – Mike Koenigs, MikeKoenigs.com