Table of Contents
Franchising can be an excellent way for businesses of any size to expand their reach and grow their brand. Many successful franchises began as small businesses. Whether you should franchise your business depends on multiple factors, including whether your business has a history of success and whether you have the suitable skill set to become a franchisor. This article will explain several factors essential for successful franchising to help determine whether you should franchise your small business.
What is Franchising?
Franchising is a business model. A business owner gives others the right to own and operate independent businesses that use their branding, proven business model, systems and operating processes. The original business owner becomes the franchisor, and those who run businesses under their brand are franchisees.
Franchising is a popular method for brand growth across many industries, including:
- restaurants and catering;
- home and professional services;
- hospitality; and
- vehicle sale and repair.
Is Franchising Suitable for My Small Business?
Whether franchising is suitable for growing your small business’s brand depends on several factors. It can be an appropriate choice if your business meets specific criteria. These include the following:
- you have a tried and tested business model;
- the business model is straightforward enough for franchisees to replicate in their businesses; and
- there is a good chance that your business will be successful in other locations.
You should also consider your experience and whether you have the skill set to manage franchisees and grow your franchise network.
It is important to note that there can be no guarantee of franchising success, even if your business ticks all of these boxes and appears franchisable. However, franchising can be an appropriate choice if your business has a good history of profitability and fits the above criteria. The following sections further outline these elements.
Continue reading this article below the formCall 0808 196 8584 for urgent assistance.
Otherwise, complete this form and we will contact you within one business day.
A Tried and Tested Business Model
A tried and tested business model means that your business model has shown success and durability. You will have successfully delivered your small business’s products and services to a growing customer base over some time.
Business owners with unsuccessful businesses should refrain from using franchising to save it. It is best practice that only those with successful and proven business models seek growth through franchising. This practice ensures prospective franchisees invest in financially sound franchise opportunities with the best chance of success. A franchisor is also far less likely to attract prospective franchisees to a failing brand. An established brand with a successful history puts you in the best position.
Replicability
Your business model should be replicable. This means a franchisee can copy and use it in their business. One method of assessing replicability is to put your business model into words. Write it down and be as detailed as possible. Consider giving this to somebody unfamiliar with your business and see if they can understand it. If they can, you might have a replicable business model.
Market Demand
An essential factor to consider is whether your business model will be successful in further locations. Do you see market demand for your business’s products and services elsewhere? You can assess demand by conducting thorough market research. This type of research will also help when determining new franchise locations.
Discover the key legal and commercial issues to consider when buying a franchise.
There should be a strong chance that franchisees can establish thriving customer bases within new locations. If demand for your business is limited to only your local area or current market, franchisees will not be likely to succeed in further locations.
Key Takeaways
The key factors that distinguish businesses with the best chances of franchising success from those who do not include:
- a proven business model;
- others can easily understand and replicate that business model;
- there is market demand for the business’s products and services in new locations; and
- the business owner is prepared to act as the franchisor and has a suitable skill set to manage their franchise network.
If you decide franchising is appropriate for your business, you must draft a franchise agreement and an operations manual before you seek prospective franchisees by offering franchise opportunities. A lawyer can help you draft these documents and assist with additional aspects, such as protecting your brand’s intellectual property.
If you are considering franchising your small business and would like legal advice, LegalVision’s experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
We appreciate your feedback – your submission has been successfully received.
