Should You Expand Your Business Through Franchise Development?
There are various ways a business can expand, and one of them is through franchise development. Franchise development refers to the process of leveraging your business’ image and brand togrow. It involves selling your franchise to franchisees. A franchise development consultant can help you through the franchise development process.
To determine whether or not your business is ready for franchising, consultants will carry out a feasibility test. The test compares the company against the business and financial benchmarks used in franchising. Some of these benchmarks include the products and services offered, skills franchisees will require, support needed, and potential for expansion, to mention a few. We will look at some these below;
- The capacity to expand
Some franchisors find it challenging to manage their franchisees because they are too widely spread. These franchisors lack funds to provide support to the widespread branches.Location and timing are vital when deciding on expansion. You need to invest in market research. Choose areas that can generate business and are also easily accessible to you.
- How long you have been in operation
A business that wants to franchise should have a long operating history. It should also have a stable record of profitability and a handsome return on investment. Operational efficiency is one of the valuable assets you will be selling to franchisees. It allows for uniformity in customer service.
If there are no fool-proof methods of operation, there is a risk of business failure for both the franchisor and franchisee. Some of the issues that need to be clear include seasonal operations, competitor strategy, and consumer patterns.
- Is your product likely to survive in the future?
Thorough market research on the future of your business is vital. Is your product or service still going to be viable years from now? What marketchanges could cause a shift in tastes and preferences? Look at current and potential technological developments. Will they render your business obsolete?Additionally, keep up with your competitors. What could they do to throw you out of the market?
- The number of branches your business has
If the answer is one, then you may not be ready to franchise. You need to have two, preferably more branches. Having branches in several locations gives your potential franchisees the impression of an extensive customer base.
- Availability of franchisees who are willing and able to buy your franchise
Are there franchisees who are willing and able to learn the skills required? Is their number sufficient to meet your expansion goals? Are they able to buy your franchise?You may need to determine if you have the finances to offer some financial assistance to high-quality franchisees who may need it.
Getting into the franchising business requires a good strategy and extensive research. Once your consultants give you the go-ahead to develop your franchise, you can go into the final step of drafting legal documents. The documents will act as a point of reference between you and your franchisees.