10 Reasons Not to Franchise Your Business

Franchising is a sizable, duplicable model that offers the opportunity to expand your business outwards. While franchising opens a whole new world of opportunities for a starting or established concept, there are several variables to consider before you take the plunge and transition your company. We spoke with Steve Beagelman of SMB Franchise Advisors* to get his thoughts on when’s really the right time to head into franchising.

1. Don’t franchise to save a sinking ship. If your business is declining in sales and revenue, franchising isn’t going to act as a Band-Aid and turn around sales. Take a look at the core problems plaguing the location and focus on improving revenue before expanding outwards and asking for people to invest. 

2. The concept can’t be easily duplicated. The success of a franchise is partly based on the simplicity of the concept. Franchisees who invest in the business need to be able to quickly learn, understand and replicate operations throughout the U.S. For example, if a family-run restaurant relies on certain ingredients that can only be found in a small town and can’t be mass-produced, this poses a big shortage as the brand expands outwards.

3. Letting go of the reigns. Being a supportive franchisor means being able to trust a person with running a concept that you once had complete control over. And that can be tough. Franchising requires an entrepreneur to look at the bigger picture, the entire system rather than hone in on the day-to-day operations of a location.

4. It’s stressful. Franchising isn’t a way to transition your business if you’re thinking about heading into retirement anytime soon. Trusting a franchisee with the idea you’ve worked hard to establish is a scary reality and its never smooth sailing. As a franchisor, you’re there to support at a distance and implement new systems and processes that will make new and existing franchisees successful long-term – meaning you’re always looking ahead at how to improve the menu or implement a new promotion that will propel your brand image forward.

5. Look at the start-up costs. Your business is thriving. It’s an innovative idea. However, when you total out the costs, it would be a couple million to duplicate the concept and have it be successful. It’s rare that a franchisee – not having any brand recognition to work off of – would invest two million in a business that’s relatively unknown.

6. Take a hard look at the industry that your business is in. If you run a mom and pop video rental business that’s thriving (doubtable!), this time is not the best to franchise. Spend time researching the sector see how it's trending, the competition you’d face and problems that are facing the industry so you have a diverse grasp on what you’re truly getting into.

7. Building an experience. Finding a cohesive brand image that works in markets across the country is a challenge. One of the most important components to the success of a new brand and it gaining speed is how its conveyed and viewed by the public. It needs to be able to withstand changing trends, tastes and consumer preferences.

8. It’s a process, and it’s expensive. Between the legal fees, trademarking, accounting fees, operational fees, starting a franchise can translate into hundreds of thousands of dollars and requires months of preparing franchise agreements and documents to get everything off the ground. It’s no walk in the park.

9. Expected the unexpected. Mastering the franchise sector is a completely different animal. It’s a nuance. You might think you have the best idea and the best investment, but how do you stand out from the competition and sign franchisees who are looking at several different concepts to put their money towards? It starts with an experienced sales team and builds out from there, but keep in mind that it’s a slow curve upward.

10. Be prepared to risk your prize baby. You’ve worked so hard to build a family business that you’re proud of. You’ve put years or even decades into creating a concept that you’ve mastered and established in your local community and feel like it’s the right time to build it outwards with franchising. Spreading that concept, however, is a huge risk, and one rogue franchisee can ruin the brand’s reputation past a point that’s repairable.