Joel LibavaFranchising your current business could be an option for you, if you feel you are ready to take the next step in your growth cycle. Great wealth has been created by a multitude of
business owners who have used franchising as their growth vehicle. If you are starting to think big as it relates to your business, fasten your seat belt! This could be a fun ride.
One huge advantage with franchising, is that you can use OPM {Other People’s Money}, to fund your expansion. Another words, if you choose instead to add more business units by adding “company stores”, it can get very expensive.
Obtaining large loans or getting investors can be challenging, and expensive. By using OPM, they put in their capital to fund your expansion.
Of course you will still have to make a sizable investment for infrastructure, marketing, technology, and support, but your franchisees open the units, and run them. One other thing…You will charge them an entry fee {Franchise fee} to allow them to use your systems etc, and you will get a percentage of their monthly sales
{Royalties}, too!
So in a perfect scenario, you have the potential to receive upfront and monthly fees from investors, who also happen to run their businesses that you gave them the model for, and they then use your tools to become successful. It can be a win-win.
If, however, you skimp on development costs up front, and use shortcuts to get your franchise company up and running, it could prove to be a disaster. Angry franchisees, and possible litigation from them, and others, could ruin things for you, and leave a bitter taste in your mouth towards franchising.
We highly recommend that you use development companies that have experience in all types of franchised businesses, and that will take their time to do things the right way.
If you are considering franchising your business, here is a short checklist that will help you decide if franchising is the right way to expand your business:
1. Do you have a time tested, proven business model?
2. Have you duplicated your concept at least once?
3. Do you have the basis for a detailed start-up operations manual?
4. Do you have the desire and energy to expand your concept in a big way?
5. Is your concept unique? Does it fill an unmet need?
6. Are the profit margins large enough to attract franchisees?
7. Is there a formal training program in place? Or can you design one?
8. Do
you have strong relationships with lenders? Can you get investment capital?
9. Is there technology in place, to help with efficiency?
10. Are you prepared for the legalities involved with franchise laws and regulations?
Lots to consider. Lots to do. Prepare to work really hard!
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