Franchising Your Small Business: What You Need To Know

You are ready to take your success to the next level. Determining if franchising is the right path for you means knowing your business and yourself.


Eric Bell, General Manager at Franchise Gator | Source: Courtesy
Eric Bell, General Manager at Franchise Gator | Source: Courtesy

You are ready to take your successful small business to the next level. After evaluating various options for growth, you’ve decided that the franchise model is very attractive.

Franchising will allow your small business to grow faster without the kind of capital investment required if you grow it alone. Before you jump into franchising, there are many aspects to consider. Determining if franchising is the right path for you means knowing your business and yourself.

Having spent the majority of my career working with franchise brands, I’ve noticed certain characteristics that set the successful franchises apart from the rest.

 

I’m ready to franchise my small business, what’s next?

There are many factors to consider before franchising your small business. By far the most critical is the franchisor’s ability to prove their concept to a prospective franchisee before they have results to showcase.

Validate your business model

Growth through franchising depends on being able to demonstrate to a prospective investor and future small business owner that your brand will help them achieve their goals and lifestyle.

Validating the business model of a mature franchise is a pretty straightforward process. They have a track record, franchisees who can speak about their experience with the franchisor, and an Item 19 – the “Financial Performance Representations” in the Franchise Disclosure Document.

This answers the most pressing question of prospective franchisees, “How much money can I make?”

As a new franchise brand, you most likely won’t have any of these important validators. But successful emerging franchises are able to validate their business models in other ways.

Demonstrate success

Can you demonstrate that your business is successful? Do you have multiple locations? How profitable are you? What signs illustrate continued and future growth as you head into the franchising phase?

Ready to franchise your small business
Photo: © Artem Varnitsin, YFS Magazine

You can get around your lack of franchising experience by making it clear that you have a successful business. If you don’t have specific evidence that points to profitability, consider holding off on franchising your business until you do.

Point to your happy customers

Does your business have positive customer reviews? Most likely a prospective franchisee who is considering investing with you will do some basic research which will no doubt include a Google search.

If there is no information about your business online or even worse, negative reviews, franchise deals will inevitably fall through. You can tell yourself that only disgruntled customers take the time to review businesses but try to explain that to a prospective franchisee whose livelihood and future depends on the success they achieve with your brand. Before franchising, take care of your online reputation. Make sure that Google searches return results that validate your opportunity and don’t act as red flags, sending prospects fleeing.

Exhibit proof of demand

Conduct market studies to demonstrate just how much of a market exists for your goods or services and that there is strong growth potential. Include competitive research.

Successful competitors also show a demand for the product. Too much competition may indicate that the market is saturated. No competition at all could mean that the market for the product or service isn’t big enough to sustain franchises.

Express your value

You have a successful business, and people should be knocking down your door to get in on the opportunity. Let’s say that’s exactly what happens. But what’s next?

Franchising is more than selling franchises. It’s about building a successful franchise system one location at a time. To occur at scale franchisees need quality support–from initial training to marketing. Plan, test, and execute the required levels of support.

You may have systems that work for you, but if you are like the majority of successful business owners, it’s likely that most of this knowledge in your head. Document your systems and create franchisee support programs that are easily duplicated and add value.

As an emerging franchise brand, you likely don’t have much value in the brand itself as of yet. So, what exactly are you selling to franchise prospects? You are selling your secret sauce to success.

Share your growth plans

Prospective investors who are willing to take a chance on an emerging franchise often look for the next big thing. Buying into an established franchise doesn’t excite them. They are willing to take a gamble for the potential of a big payoff, rapid growth, and success of a new franchise concept.

Growth may be your goal, but it is essential to be strategic about how you scale your company. Prospective investors will want to know your growth plans. You need to have a vision that fits within the reality of your business.

Your franchise business model may focus on gradual expansion to surrounding areas, coast to coast, or even internationally. Grow at a rate that is natural for your business.

Consider where your business model will work and how far you can reasonably expand the brand into unknown territory. Regardless of how you plan to grow, you have to be able to explain it in a way that gets buy-in from prospective franchisees.

Perfect your sales process

Understand that without a track record the more mature brands come with, a prospective franchisee will be buying into your concept, and even more so you and your team.

Don’t underestimate the need for a fine-tuned sales process and just how much any investor’s faith in you and your staff will play a part.

Selling a new franchise is one of the toughest sales you may encounter. It’s a high ticket item, and in many cases, your competition is the status quo – that is, the prospect deciding to do nothing and not make any change to their professional life.

Rehearse your sales process, from the initial phone calls and emails through the signing of the FDD. Identify every step in the process and make sure to stick to it. Don’t let the prospect dictate the next step. Guide them through the process that you have meticulously crafted.

 

Growing a successful franchise

The bottom line is that to have success in franchising, you must be proactive in providing and validating information. Don’t wait for franchise prospects to ask the important questions. Overcome potential obstacles to investing before they arise. As a new franchise brand, your success depends on being able to attract investors and communicate your potential.

 

Eric Bell, General Manager at Franchise Gator, has more than 15 years of franchise industry experience. He began his career in 2002 as a Hollywood Tans franchisee in Atlanta where he also served as area manager and helped develop the Atlanta territory. In October 2005, Eric joined Franchise Gator as a sales representative and went on to hold several positions including sales manager and director of sales and service. Eric is also a member of the Southeast Franchise Forum and is a Certified Franchise Executive.

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