Franchising is one of the best ways to expand a business. Its success doesn’t necessarily depend on predetermined factors, but rather on the business owner’s personality and mindset, and well as the competence of the franchisees. However, not every successful business makes a good franchise.
Take a look at Sbarro Pizza. Despite their good reputation and solid customer base, they still filed for bankruptcy in 2014, which is their second bankruptcy in the past three years. The company announced its plans to close down 155 of their 400 North American branches. Overall, Sbarro had around 800 branches and 600 franchised locations. Despite those abundant numbers though, Sbarro Inc. still missed their interest payments on their debts, leading to their bankruptcy.
Hence, before getting in touch with a trusted franchise broker, ensure that the following factors don’t apply to your business, otherwise, it is not yet franchise-ready:
1. You Don’t Have a Clear and Identifiable Brand
A successful franchise is all about having a brand, vision, message, and unique selling proposition (USP). All of these should translate well across a range of geographical locations, and effectively communicated to both potential franchisors and customers.
Basically, your brand should make potential franchisors willing to seize the chance to put your name on their storefronts. Your USP will determine whether you can elicit such a decision. It must be cut out from your competitors, like Domino’s commitment to timely delivery, for example. It’s focused on their service instead of their product, unlike their competitors’ USPs.
2. Your Business isn’t Easy to Replicate
While having a unique concept will help your business stand out, it could make your business model tough or costly to replicate. One of the keys to being a good franchise is a successful business model that franchisees can replicate in three months or less. Such is because franchisees are using their capital to stay afloat while waiting for the business to launch. Therefore, if your systems are hard to teach to a different manager, you’re probably better off as a company-owned business.
3. You Don’t Have Standardized Systems
Similar to the point above, the lack of standardized systems also makes your business infeasible for franchising. If you have a food business, for example, a standardized system should involve the following:
- How and when to wash kitchen utensils
- Whether to put on gloves when serving customers or preparing orders
- The amount of ingredients or add-ons to put in every serving of an order
These simple produces define the consistency of your products and services. If you don’t have a standardized system, your franchisee may offer larger servings, while you, the franchisor, offers significantly less. This will destroy your brand reputation, and affect the profits of the franchisees who offer larger servings.
4. Your Product or Service May Not Withstand the Test of Time
During the pandemic, a lot of food and beverage recipes were born and became viral. Some people might’ve developed a business idea from those, but are people still patronizing those trending products? If your product or service is inspired by a particular trend, it may not withstand the test of time, which is a deal-breaker for potential franchisees. Franchisees are looking to invest for the long term, so they’ll only take the risk for a business that will have a consistent demand.
5. You’re Not Yet Ready to Take on the Responsibilities of a Franchisor
As a franchisor, you won’t simply run your business as usual and wait for your profits to flood in. Instead, you’d be bound to state and federal laws that protect your franchisees. You’ll be required to give your prospective franchisees a Franchise Disclosure Document (FDD), which often runs on more than a hundred pages. Preparing it alone is time-consuming, which can be stressful, considering that you also have to meet the legal requirements to sell a franchise.
Franchising isn’t automatically a good business move just because you’re selling well. Make sure that you’re the opposite of the factors above first, and you might just have a promising franchising journey ahead of you.
