Following up from Franchising 101 comes the edition addressing your franchising readiness. This article covers the Franchisor perspective – i.e. you are the business owner looking to franchise your concept to willing partners in other areas within your country or new countries altogether.
As per research and practical application, franchising is a solid business expansion tool established brands could utilize for business growth. Nonetheless, this expansion strategy could easily backfire if you, as a franchisor, do not have your infrastructure ready before jumping the gun. Below is a brief discussion of the issues you would need to consider before (figuratively) putting out the “Ready to Franchise” sign in your front yard.
Business setup in home market?
- Have you invested enough time and resources in setting up your business, and brand, in your home market?
- Is your organizational structure accommodating to handle external business partners?
- If you are a product provider, does your production capacity allow for the additional demand from new markets?
- Do you have an established brand in your home market? One that would attract partners/customers in new markets?
Are Financial projections accurate?
- Do you have your finances in order? Have you realistically set the expected costs to be incurred from initiating this business relationship? Do you realize that franchising costs the franchisor startup capital fees as well in terms of invested human, financial & most importantly time resources at the initiation phase?
- Do you have a clear(ish) idea on the anticipated revenues?
Market research on targeted markets complete?
- If you are franchising to other regions within your home market or conducting international franchising – have you done the initial market research?
- Have you identified whether your products/services have demand in the new market?
- What about the competition in the new markets?
- What is your differentiating factor (USP) in the targeted markets?
- Do you need to consider demographics within these new markets?
- Would the macro and micro environments in the new market affect your business in any positive/negative way?
Potential partners line up through personal or professional networks?
- Do you have interested parties willing to invest in your concept? Do you know personally know them? Do you trust the party that introduced you to them? Do you feel comfortable around them?
- Have you done your due diligence on these partners?
- Do they have the financial resources to support your concept in their markets?
- Have you checked their track record to date? Are they franchising other concepts before? Were they success stories?
- Do they have the organizational structure to support the franchised concept?
- Do they have access to the real estate required by your brand positioning?
- How well-defined is their network in their respective market? Supply chain? Logistical set-up? Finances? Contractors? Communications? Media? Governmental?
If you have answered yes to all (or most) of the above, then the last consideration would be the readiness of your basic franchising start-up list that is to be shared with your selected franchisee. This list includes but is not limited to: concept ready (store/office setup, design guidelines, FF&E guidelines), organizational chart & position descriptions, brand identity guidelines, SOP (standard operating procedures), and music & uniforms (if applicable).
The above is not a comprehensive list of considerations – but one that would certainly get you tracking what you have achieved and what is yet to be accomplished before embarking on handing your brand over to another chaperone. After all, this is your baby, so has it grown enough to stand tall in new markets with its foster parents?