Do you know what a franchise is?
Have you heard talks about how you can franchise your small business?
If you haven’t, you are in the right place. For me, when I hear franchising, I instantly think about McDonald’s and KFC which are very successful in their trade.
We have a chain of small businesses that operate under these big names as a franchise.
Franchising is an excellent way to grow your business.
You get to sell your products on a developed brand and incur low startup and operational costs. With franchising, you increase the purchasing power of your products to your buyers and there is easier management of your business activities.
Starting a franchise is a very wise decision to make today, especially if you want to survive in the competitive business environment.
However, before you franchise your business, you need to prepare yourself for it.
Do not just jump right into franchising your business without preparing yourself for it.
In this article, I will take you through what franchising is and how you can prepare your business for franchising.
By the end of this article, you should be able to franchise your business with these simple guidelines.
What is Franchising?
Franchising is a business expansion method where a successful business (franchisor) allows independent business operators (franchisee) to use its trademarks, service marks, operating system and marketing system to sell or distribute its goods and services in exchange for franchise fees and royalties.
If you are franchising your business, what this means is that you, as the franchisee, will be operating under a franchisee and use their brand identity as yours to sell your products.
You will be selling your products under this umbrella and working with franchises.
Your business therefore will not be operating solo but under the motivation of franchises.
Following on, we will look at the different things you must do to prepare your business for franchising.
18 Ways to Prepare Your Business for Franchising
This is what you need to do to prepare your business for franchising.
- Do your research
Before you even start preparing your business for franchising, do your research.
A lot of people want to skip over this step and it only proves difficult for them as they keep on progressing.
Do thorough research and find out what franchising is if you don’t already know.
How does franchising work? What should you expect as a franchisor or franchisee?
What franchising options are available and what do you want to consider?
You have to have well-grounded information about franchising before you even start preparing your business for it.
You also have to consider your own personal franchising preference as well as the rules and regulation, market base and cost of franchising before you start your preparations.
- Set your objectives
What are your objectives when you want to franchise your business?
When you set your objectives, you will have to state why you are franchising your business, how you are going to do it and what you want to achieve from the business franchise.
This is also a very important step that you shouldn’t skip over because it gives you a clear vision of what you want and how you are going to achieve it.
If you are planning on franchising your business, part of the preparation process is to set solid objectives that will catapult you in the direction you want to go.
- Evaluate if your business is ready
When you are evaluating your business, you have to go over your inventory and analyse how it moves, look at the sales invoices, pay close attention to your customers and how they interact with your business, look at your financials etc.
Before a franchisor decides to house you in their business, they will want to look at how the business performs overall.
This is especially important if their intention is to operate in the same line of business that you are in.
You need to provide a thorough evaluation of your business so that they will assess you and clear your business for franchising.
You need to know how your business is as part of the process of franchising your business.
- Define who your potential franchisor is
Prepare a list of franchisors and define who can be a potential franchisor for your business.
Doing this helps you reduce a lot of time wastage and also saves you money that you would otherwise be using on different marketing platforms.
Here is an example; if you are planning on franchising a cosmetic business, your ideal franchisor would be a company that has established a brand identity and has been able to survive in the competitive business environment.
You cannot just franchise your business to anyone who just walks into your premises. Much as you are transferring management of your business, you need to know that you are living it in safe hands.
- Make important decisions about your model.
There are some things that you are going to consider about the model of your franchise.
For starters, you have to put the franchise fee and royalty percentage into consideration.
You also have to establish the terms of your franchise agreement, the size of territory you will give to each franchisee and the geographical area you are willing to offer franchises within.
If there is any type of training and business experience that franchisees need, you will also have to include that in your model.
Making decisions about your franchising model is a very important step that should not be ignored.
- Choose a franchise
After you have prepared your list of franchisors and you have done the necessary cutting off of unqualified franchisors, you need to choose one franchise that suits your needs.
If you want to know that a particular franchise meets your needs, look at your budget, their management style and your personal preferences.
You also have to consider the cost to turn your business into a franchise.
If you are going for cheaper franchising options with flexible management, then you should make sure that the franchise you choose meets these needs.
With that, you are sure to pick a franchise that satisfies your business needs.
- Review the franchising agreement
Now, there is a franchising agreement that clearly outlines the terms and conditions of operating a franchise.
Before you (franchisee) and the franchisor come together to operate as a single unit, you need to come into an agreement with one another.
Part of the agreement will include the management process, sales process and how profits will be distributed.
Always do your due diligence on the terms of the agreement.
You cannot be too careful here.
You can have a legal advisor take you through this part of the preparation if you are afraid you might miss out on something.
- Choose a location
Just as you choose the location for any business, your new franchise should also be located in certain places that are convenient to both you and the franchisor.
For starters, it helps to have the franchise in proximity to the franchisor.
This helps in the customer flow and management is easier.
Apart from that, you must consider all the other rules that dictate how you locate your business.
For example, your business should be located in areas that are accessible by roads or motorways, there should be high foot traffic, it should be in a crime-free zone and you should also consider lighting.
Most importantly, when you are franchising, choose a location that has low business rates so that you do not incur a lot of costs when you start operating the franchise.
- Get the funding you need
During the preparation process, you are going to incur some costs which may be expensive.
You will need funding for that.
As you prepare your business for franchising, have an estimate of the amount of money you will need to get everything in order.
If you need to boost sales or get your team in place, then you have to consider getting funding.
There are many funding options available to you.
You only have to pick one that suits your lifestyle and that will most your business needs fast.
I have to warn you to always be careful when you are taking out loans for funding.
Always go for loans which have relatively lower interest rates so that you can pay them off easily and not spend the rest of your life strapped in debt.
Do not sweat the franchising process if you do not have money.
- Learn the legal requirements
Since you want to operate your business as a franchise, there are legal rules and regulations that must be followed.
Failure to comply with these legal requirements will have you paying hefty fines or getting your business shut down altogether.
Besides, franchisors will want to see your legal paperwork so that they will know that your business is legitimate.
Get your legal paperwork in order and have a legal team advise you on what you need or don’t need for your franchising business.
You will avoid making mistakes that may lead to severe consequences when you do this.
- Establish your brand’s identity
As a franchisor, you need to establish your brand’s identity.
This you can do by making sure that you have a catchy and memorable business name, a good logo design and a reliable website.
This is the easiest way people are going to know about your brand.
You also have to make sure that you build a good reputation if you want to establish your brand’s identity fast.
When you establish your brand’s identity first before franchising, it makes it easier for other businesses to want to operate under your franchise.
Always prepare for brand recognition as part of the franchising process.
- Get an advisory team
When you are preparing your business for franchising, do not do it alone.
Preparing a business for franchising can be overwhelming and frustrating and sometimes important details can fly right over your head.
If you want to make sure you prepare your business effectively, get people who are going to advise you on how to do it.
Have your legal team guide you through the legal requirements and processes.
A finance team will help you determine the price to franchise your business and take you through your financials.
This is very important when franchising.
- Portray your business as a big opportunity
Make your franchisor see that opening up a franchise with your business is the wisest decision they can make today.
Talk to them about how they can make a lot of profit and serve a wider market with this business.
Talk highly about your business.
Show them how reputable your business is so that they can understand they are passing up a great opportunity if they do not franchise your business.
You can sell your talk on your marketing platforms or when you have meetings with them.
When franchisors can see your business as a great opportunity, they are more likely to buy your business.
- Invest in business relationships
Fostering good relationships in your business is a very vital preparation process for your business before franchising.
You have to have a good relationship with your customers, suppliers, employees and other businesses in your industry.
When you have a good relationship with your customers, franchisors are assured of continued workflow and business growth.
Your suppliers will also be diligent to provide you with supplies in a timely fashion.
If you have a good relationship with other related businesses in the industry, you get to learn from each other and seize opportunities together.
This is a good way to grow your franchise business and attract more buyers.
- Take or offer the required training
Operating as a franchise can be a bit complex for both parties.
As a franchisor or a franchisee, you need to offer training or take the required training.
During this training program, you will learn how the business works and the environment it serves.
You will also get to learn about how management works in a franchise.
Make sure that you stay open-minded so that you can learn as much as you can during this training.
Some training programs will only take a few weeks while others will take months, depending on how big the franchise is.
If you are preparing for franchising, training is very important.
- Make key hires
If there are any key hires that you need to make, you have to do them as you prepare your business for franchising.
You need to have a reliable workforce that will help you when you start operating your business as a franchise.
You have to train your new employees on the basics of franchising.
If you are going to use your current employees, then they must understand that the conditions for business operations have changed and they must be willing and eager to help you in your franchise.
- Check your financials
Prepare your books of account and make sure they are in order before you decide to franchise your business.
Make sure that your statement of income and financial position are well balanced so that the franchisors can have a clear understanding of how assets and liabilities are distributed in your business.
You have to be honest and not leave out any details that may be of importance to the franchisor.
You can hire an accountant to help prepare your financial details.
Just make sure the person is credible and trustworthy.
- Consider management successions
Talk to your franchisor and know about the management style that is going to be put in place.
This is a very important part of the preparation process because you know what you have signed yourself up for right from the start.
There are different manager styles in franchising and it is going to be utterly fair to you to know what they are so that you can prepare yourself.
Management succession has to be there in franchising, so you have to keep an open mind if you want your franchisor to take management control of your business.
A lot of people who are operating a failing business think that when they franchise their business, they can save it.
If you belong to this group, then I must tell you that franchising is not a fix for a failing business.
Chances are that franchisors will not support your business if it is already down in the dumps or it has a bad reputation.
You need to start preparing your business for franchising and address any problems that you are making your business today.
The process of franchising your business will need a lot of time investment and that is why you need to prepare yourself beforehand.
You may also incur some extra costs for franchising and you will need training and support to franchise your business.
Always do your research and know-how you must prepare your business before franchising.
You will avoid a lot of mistakes and the franchising process will be much easier.
Follow the guidelines I have outlined for you to prepare your business for franchising today and expand your business.
Do you want to franchise your small business?
Why do you want to franchise your business?
Do you know the steps required to franchise your business?