10 Things New Franchisors Need to Know About Becoming a Franchise

After years of pouring blood, sweat and tears into your small business, whether it be a Southern-style candy shop with one-of-a-kind recipes or a premium doggie daycare and boarding facility, finally being able to take a step back and look at the business you’ve nurtured and grown is the moment every business owner strives for. But as an entrepreneur, there’s always a next step and challenge to be taken on, and franchising your business might be it.

That’s why 1851 recently spoke with the founder of Zarian Firm International Business Brokers and award-winning franchise consultant for The Franchise Consulting Company Holly Ford to discuss must-know tips for small business owners looking to take the leap into franchising their business.

Identify whether or not your business fits the franchise model.

In other words, your concept absolutely has to be replicable. Ford advises that all new franchise concepts should have “detailed systems and procedures in place that have the ability to translate operational expertise to a new owner in less than 3 months.” If you aren’t sure whether or not your business would thrive as a franchise, consider turning to an experienced franchise consultant for guidance.

Consider the costs.

Getting a franchise off of the ground is no easy, or cheap, feat. When thinking about the costs behind franchising your business, you’ll want to take a hard and realistic look at your budget. Ford advises new franchisors dig into the estimated costs for everything from operational support, training and legal matters to marketing support and sales and development.

Choose the right markets for expansion.

In identifying the best initial markets for your franchise, Ford explains, “This is heavily determined by the specific concept, although there are basic principles that govern market determination as a whole. The first is to target markets proximal to the initial concept, giving ample room for market share for each location.” Not only does this strategically set you up from a proximity standpoint, making it easier to assist franchisees as difficulties arise, but it helps strengthen your franchise’s branding and customer awareness by establishing a presence in the region and growing outward.

Build your franchise’s persona.

Creating a persona for your ideal franchisee is a great first step in identifying who and what you want to drive your brand. From past job experiences to age to personal interests, building your franchisee persona does not only help make the selection process easier for bringing on franchisees, but it will be invaluable later down the road when establishing and executing your marketing strategy including Facebook and LinkedIn advertising and pay-per-click campaigns.

Choose franchisees who have a genuine interest in the industry.

A company is only as good as its people, and that rings true when selecting the right franchisees to surround yourself with and represent your brand. While it may be tempting to jump at the first willing prospective franchisee who can hand over the cash right then and there, be cautious. You should be especially careful when selecting your system’s first franchisees, as their performance can either make or break your brand’s reputation.

According to Ford, when vetting prospective candidates, “The most important factor is interest. Many invest in concepts because of its ROI or resale value.  All good reasons, but without a true passion for the concept, the business is often kept at the status quo, or relegated behind other interests and thus declines. Excitement for the concept translates into great employees and raving fans, which of course validates well and creates great royalties for you.”

Now ensure that those franchisees financially qualify.

Your existing franchisees will always be your greatest validator in persuading new franchisees to join your team, so even if you are confident that you are choosing an enthusiastic representative for your brand, it’s important to consider their financial standing as well.

“Make sure your candidate has the working capital to see the concept to profitability and ensure that you do not erode that capital with any underestimations on build-out or start-up costs,” said Ford. “A financially solvent candidate who doesn’t have to look over their shoulder to make sure they can make payroll can focus forward on building their new business.”

Care for your franchisees.

Your franchisees are your company’s greatest strength, so making it a top priority to support, engage and involve your franchisees is critical in helping them not only grow your franchise, but helping them grow as business owners within their local communities. While there may come a point down the road where a franchisee becomes more independent as their local customer base solidifies, taking the time to nurture new franchisees to ensure a smooth transition is worth the extra time and effort.

Ford warns, “Many brands are phenomenally successful at selling the concept only to find themselves with high attrition rates and extremely difficult validation.” So, while it’s exciting to watch deals come through and the number of locations rise, sacrificing support for sales might only end up hurting your brand’s growth in the long run.

Patience is key.

Similar to any business, emerging or established, it will take time for you and you franchise to work out the kinks and see what works best for the brand. A critical milestone in a franchisor’s life cycle is the 2-4 mark and Ford recommends that franchisors take this time to self-reflect and take a hard look at your franchise system, including refining your franchisee persona and updating performance standards, compliance checklists and best practices.

Keep an eye on competitors.

Both from a brand standpoint and when granting new franchise locations, you’ll want to assess any direct and non-direct competitors in the markets your brand is looking to enter. Doing thorough research and drawing up a competitor analysis will help familiarize yourself with the competition, making it easier to anticipate your competitor’s moves and ultimately giving you and your franchisees the best chance of a smooth reaction.

Think about the future of your franchise.

The leadership behind the business can take a franchise opportunity from good to great, so a bit of self-reflection can be necessary in helping achieve that status. As a franchisor, you’ll want to dedicate time to creating a long-term vision for your concept that is sustainable and easily illustrated for your franchisees.

In describing what makes a strong franchisor, Ford emphasizes, “This franchisor is continuously evaluating the ongoing value of the concept. They engage in annual negotiation of discounts for their franchisees, updates in software that support the franchisee’s growth, and they introduce and test new products and services to keep the brand positioned well.