Entrepreneurs with the drive to succeed and an excellent idea can soon become business owners with a thriving company. Before long, they can then start toying with the idea of expansion and pondering whether their success could be shared across multiple businesses of the same name.
How to Turn Your Small Business into a Franchise
Franchising a small business is a dream of many entrepreneurs, and is also one of the soundest options for growth without cutting into your bottom line with overhead costs.
You can lease the rights to your business model to other savvy business owners and enjoy fees and royalties without having to take on the role of the business owner to all of them.
While sometimes challenging to set up, a franchise may be how you take that next step and create a name for yourself in the business world.
If you’re curious about the franchising process and the potential benefits of doing so, the following information may be helpful.
Step 1: Perform a Business Analysis
Even if you have one of the most profitable businesses in your area, it may not be suitable as a franchise. To find out, get the experts involved in helping you prepare an objective business analysis.
This process allows you to determine whether your business offerings are unique enough to suit multiple stores and whether the profit margin makes the business model attractive to people looking to purchase franchises.
It can also be worth considering if your business model is easy to replicate and whether there is a large enough customer base to support more than one business like yours.
Step 2: Create a Business Plan
A business plan is crucial for when you’re just getting started and for when disaster strikes. However, it can also be essential for business owners to replicate their success in a second, third, or even fourth business.
This plan should incorporate step-by-step instructions for setting up a profitable, well-functioning business like your own.
The more detailed and easier the plan is to understand, the greater the chance a franchisee may be able to duplicate your successes and build on them.
Contributing to success is a sound marketing strategy, so include this information in your plan or a separate manual, as well.
Outline how your branding must be used and what it incorporates so you can achieve consistency across however many locations you plan to establish.
Step 3: Focus On Legalities
Business owners have to make several big decisions, and there can be a lot on the line when they make them.
As a result, it’s a good idea to make sure you do everything by the book, with franchise contracts in place, royalty and leasing agreements signed, and business registrations organized with the secretary of state.
As there can be a lot to manage and so much legislation to follow, it can be worth having all your documentation reviewed by industry professionals, such as franchise attorneys.
They can guide you through the franchising steps while making sure everything is above board.
Step 4: Start Selling Your Franchise
Once you’ve determined which legal steps you need to take to turn your dreams into reality, it’s time to focus on the sales part of the process.
This can involve creating a business prospectus that is desirable to prospective franchisees.
Many things can be included in a business prospectus, such as your marketing strategies, location strategy, and a transparent royalty fee and franchise structure.
At this point, you may be fielding inquiries, so consider hiring a support team to assist with answering questions.
It’s important not to sign up the first prospective franchisee that shows interest in your franchise opportunity.
Screen them appropriately to ensure they are a sound candidate for contributing to the excellent business reputation you’ve worked hard to build.
Why Business Owners Consider Franchising
After building a small business from the ground up, it can sometimes seem like you’ve done all you can do.
However, another option can soon show itself for those not willing to open more than one store themselves.
Franchising presents multiple benefits that many entrepreneurs can experience, such as these below.
Alternative Capital Gaining Methods
Business owners can often find themselves in the challenging position of wanting to expand but not having the funds to do so. As sound as their business model might be, financial institutions can be wary about lending significant sums of money to small businesses.
Franchising your successful small business can be a way around that. You get the business expansion you desire, but the franchisee is fronting the money for your growth, which decreases your investment amount and your liability.
Reliable Management
It can be hard to find good help. You may spend several weeks of your time training a manager to run your business, only for them to take their management skills somewhere else.
When you’re entrusting your business model in the hands of a franchise, there can often be a different outcome.
In many cases, the person managing the franchise is the same person who has just invested a significant amount of money in establishing it.
They are motivated to succeed and will often do their best to keep costs low while providing a high level of service to contribute to their success.
Growth Speed
If your business model is a successful one with a broad target market, there may be no reason why you have to stop at one franchise. The more businesses you’re able to open, the larger your market share may be.
While this may seem like a risky endeavor, it doesn’t have to be if you follow expert advice on opening a successful franchise. The same advice will likely apply to many stores as it does for just one.
As long as you have screened your franchisees and have undertaken all your necessary research, you may be able to expand your business far quicker than if you tried to open all those stores on your own, using your own capital.
Increased Business Value
In many cases, a franchisor’s business can be valued at a higher multiple than singular businesses. While this might not mean a lot to you while you’re still working in your business, it could mean something if you ever consider selling.
Your ability to create a scalable growth model may work in your favor when the time comes to retire.
Conclusion
Franchising a business is not going to be a suitable option for everyone. After all, each business type has a different target market that may or may not allow for growth. However, it’s a sound possibility for many.
With the potential for growth, more profit, and a larger market share, turning your small business into a thriving franchise chain may be worth considering sooner rather than later.
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