Franchising can help your business achieve scale quickly, and cost-effectively. The chances are that you will be able to save on equity dilution or the amount of capital you’ll have to raise through opting for the franchising model. However, before you take the big step, it’s important to find out if it’s the right thing to do and if you have everything in place to get started.
What value will you be able to provide to franchisees?
Before you think about the business benefits to you in starting a franchise, you should also think about the value that you will be able to offer to franchisees. Do you have a brand that their customers will recognise? Do you have an infrastructure that they will be able to rely on? Will your business be able to reduce costs with scale; creating synergies that will benefit your franchisees? Once you can be sure that you will have value that you can pass onto franchisees, then you can be sure that it is something that is worth considering.
Would you be better scaling on your own?
For some businesses, scaling on your own can be better than franchising. If you sell computer hardware or software, for example, maybe it would be better to establish a network of value added resellers. If you own a website, maybe it would be better to recruit affiliates. If you sell a product, maybe you should focus on increasing the quantity of retailers that are stocking your product. It’s often best to think about how suited your business model is to the franchise business model. Looking at your competitors, and how similar businesses have benefited from having franchises, can be a great way to get started.
Do you have the infrastructure in place to handle things?
If you start getting franchisees on board, it is necessary to think about how you will support them and help them to improve their business. Think about your supply chain; think about who will be tasked with the job of maintaining a dialogue with your franchisees; and also consider what jobs will be handled at head office and what jobs the franchisees will be asked to handle on their own. Some aspects of franchising, like recruiting franchisees, can be outsourced to experienced third parties. Maybe this is something that is worthwhile for your business to consider, especially if you would rather maintain more focus on your core competencies.
Looking At The Bigger Picture
For some businesses, although franchising can be a powerful way to build your business, it may limit your growth in the long term. When you successfully grow your business to scale through using franchisees, you will have less opportunity to go after as you have to share some of your success with your franchisees. It’s also the case that you might receive better results through micro-managing your business, rather than delegating to franchisees, despite your growth being less capital intensive. You might wish to speak to an experienced franchise consultant before deciding if franchising your business is right for you.
