One of the biggest misconceptions about franchising is that every successful business should become a franchise. Nothing could be further from the truth.
Every year we talk with hundreds of business owners who are interested in franchising their business. Surprisingly, more often than not, we advise many of these ambitious business owners against franchising. Why? Because just because almost any business can be franchised doesn’t mean every business should be franchised. There are times when waiting is the smarter decision (take a look at “Why Franchise Systems Fail“).
Over the years we’ve heard just about every reason imaginable for wanting to franchise. Based on our experience, here are five of the most common reasons why a business owner should wait before franchising.
1. Your Business Has No Proven Track Record
When your “business” is really just an idea, there is no proof of concept. There may have been plenty of research and excitement surrounding the idea, but there are no customers, no sales, no operating history and no way to know whether there is real demand for the products or services you want to offer.
Ideally, your business should be operating for at least six months before considering franchising, although there are exceptions. The longer your business has been operating successfully, the easier it becomes to demonstrate that your concept works.
Remember, people buy franchises because they are investing in a proven business model, not simply a good idea. Without proof of concept, you are asking prospective franchisees to assume unnecessary risk (for further clarity you may find this article helpful “When, How and Why to Franchise Your Business“).
2. Your Business is Really Just a Hobby
George works full time managing a pet store. On weekends he cleans fish tanks for friends and neighbors because he enjoys it and earns a little extra money.
While George’s service may be unique, his business is really more of a hobby than a business. Very little effort has gone into building systems, marketing, branding or long-term growth. A “hobby business” is a part-time business that is not treated very seriously and done really more for fun (and some cash on the side). While the service may be unique, a quick check reveals very little effort has been put into turning this hobby into a real business.
Franchising requires much more than having a unique service. It requires a business that is organized, repeatable and capable of supporting future franchise owners.
3. Your Business is Not Profitable
Too often we speak with business owners who want to franchise because they think it is a way for them to make money since their current business is NOT making money. They hope that franchising will somehow solve their financial woes.
Unfortunately, it doesn’t work that way.
If your current business isn’t making money, why would someone else invest in operating the exact same business? Franchising is about giving other entrepreneurs the opportunity to succeed using a business model that has already proven itself.
If your business isn’t profitable today, focus first on making the business successful. Then consider franchising once you have a model worth duplicating (learn “Why Franchising is Not a Good Option for Struggling Businesses“).
4. You Can’t Let Go
Meredith owns a popular bakery and is the only baker in the kitchen. While she has many capable employees, she can’t trust anyone to follow her baking process but her. Consequently, she makes more work for herself and is run ragged each day. She has her hands wrapped around the business so tightly that she can’t let go, train and trust others to learn her baking process.
Sound familiar?
In this situation, the business itself may be an excellent candidate for franchising, but Meredith (the prospective franchisor) has a hard time teaching her baking process and letting go (learn “Why Franchising is Not for Control Freaks“). This is an example of the “no one can do it better than I can” attitude.
Franchising is about teaching other entrepreneurs every aspect of the operation so these people can run their own business. If a business owner looking to expand wants ultimate power and control over day-to-day operations, then organic growth is a better way to go.
If organic growth is something you may be considering, take a look at this article “Want to Start a Chain Business“, which discusses organic growth vs franchising.
5. Your Business is Not Scalable
Richard handcrafts beautiful wood patio furniture made from indigenous trees on his property in Idaho. It is this special type of wood that gives his patio furniture a unique flair (no other wood will work). His craftsmanship is exceptional, demand is growing and customers love his work. He’s been successful selling pieces over the internet and is thinking of franchising.
The problem?
Richard’s business depends on limited resources, indigenous trees on his property. Unless he lives in a bountiful forest, it is not realistic to get materials (specifically the wood) that franchisees need to build the same patio furniture and sell it in their area. Unless Richard is providing the already built furniture to franchisees (which is not the case) this business would be difficult to duplicate.
Successful franchise systems must be scalable. Franchisees need access to the same products (in this case materials), suppliers, systems and operational processes regardless of where they are located. If the business cannot realistically be duplicated in other markets, it may not yet be ready for franchising.
Before franchising, ask yourself one simple question:
Can someone else realistically duplicate my business in another city using the same products, systems and achieve similar results?
If the answer is no, your business may need further development before it is ready to franchise.
Is Your Business Ready to Franchise?
Not every business is ready to franchise today, but that doesn’t mean it never will be.
Many of the challenges discussed above can be corrected with time, planning and the right strategy. Sometimes the best decision is to strengthen your business first and franchise later.
At The Franchise Maker, we’d rather tell you the truth than encourage you to franchise before you’re ready. If we believe your business needs additional work before franchising, we’ll tell you exactly why and help you understand what needs to happen first.
If you’re still unsure whether franchising is the right next step, we encourage you to read “How to Know if My Business is Franchisable” which may help shed some more light on your situation.
If your business doesn’t fall into any of the situations discussed above and you believe your concept is ready for expansion, then give us a call directly at 1-877-615-5177 and we’ll be happy to help you figure out if franchising is the right move!
- Franchising is for People Who Think Big
- What Types of Businesses are Franchisable
- Why People Seek Out Franchise Ownership
- Requirements to Franchise a Business
- Frequently Asked Questions About Franchising
- Can My Business be Franchised if it Requires a License
