In this episode, we discuss if your business is franchise-able. Meaning, is your business a quality candidate for franchising. We will explore what items could exclude your business from being a good franchise and other important items to consider when deciding to franchise.
Hi and welcome to another edition of All about franchising.
A lot of people wonder, is my business franchise able? If you are an entrepreneur and you’ve thought about franchising your business, you may have asked this question and wondered, what’s the criteria for becoming a franchise? And is my business good for franchising? Well, the short answer is yes!
It’s likely your business is franchise-able. There are many companies that would have you pay a bunch of money to put all your criteria into their “franchise-able computer system” and see if it spits out a yes or no. But realistically, most businesses are franchise-able. However, there are some things that may hinder you from being a good franchise.
Some road bumps may be extreme upfront costs, and a business that is slow to grow. Other criteria that may eliminate you being franchise-able would be, if it would take an exceptionally long time to train someone to execute on the product or service. If training would require months, and months, and months, for someone to become proficient. That may be a hindrance to you being a good franchise and may lead to a lack of available personnel. Meaning, if it takes an extremely high skill level to produce the product or service, there’s probably not going to be a lot of people to hire. So, if the initial folks that were trained- quit, or as the franchisee expands, they needed more staff, it might be hard to find staff or get them trained up in time. Those are some things that may eliminate you from being a good franchise.
Something that may determine you would be a good franchise is, a proven business model. There are a lot of questions about this topic, so we’re going to go into this in another video. But the short answer is…it’s not 100% necessary to have a long-term business model to franchise. People have started successful franchises off just a concept. Some have done it with only one or two units, while some companies have waited until they had many units before starting to franchise.
A few other items to consider are, can the main product or service be learned pretty easily? Is it a simple product we can teach someone to do in a few weeks’ time? Is the overall investment reasonable? Obviously, the lower the amount of the investment, the more suitors you’re going to have, the more possible buyers that you could have. Other considerations are, can the business become profitable in a reasonable time period? Most quality franchises are going to be turning a profit in about a year to 18 months at the longest. It doesn’t mean the franchisee has to be making a lot of money, but the franchisee must be able to see the path to making money earlier than you might in your own private business. Another consideration is, can the franchisee continue to grow the profit over the years?
There are exceptions to these criteria because there are businesses like Mailbox, etc. that became UPS Store, where they didn’t really expect there to be high, high profit from a single unit. There are different types of franchise models. Your business model may not be a model where someone buys one single franchise and makes an exceptionally good living. It may be one where someone buys one unit and then a second or a third over time, like a Mailbox/UPS type situation. The individual UPS Store units don’t make a ton of money. And if you the franchisee puts in a manager, obviously they’d make a bit less. But as the franchisee went on running the business and paid off the equipment and debt, after about five years, then the profit goes up considerably.
Since the UPS units don’t require a lot of maintenance and are not intense to operate. People would buy two, three, four of them, and then when they had them all paid off, they could sell them all at a nice profit.
So, there are a lot of different models, and the success of a franchise is not always about having the highest-volume single franchise units, where the franchisee could make a remarkably high profit. Sometimes people just want to be their own boss. They don’t necessarily have to make a fortune. The franchise owner may be the second or third income in a family. So, there are assorted flavors to franchising. Most likely your business is franchise-able, as long as it doesn’t run up against the major criteria points we covered, that may make it unattractive.
A final item to consider is if the business requires a special license, that’s really hard to achieve. However, even if you have a special licensing requirement, it does not mean your business is not franchise-bale. Consider medical type businesses that do require a medical license, you could still franchise and only sell to doctors in those cases or people that have the specific type of license.
So, most businesses can be franchised.
If you have questions, it is best to seek out an expert and see if they can help with determining if your specific business is a good fit for franchising.
If you have any questions or comments about the video or general questions about franchising, please put them below. We will be answering questions from time to time and doing videos on some of the topics from comments left below.
Thank you for coming to another episode of All About Franchising!
