Your business is going well, it’s making money!!! YAY!! Now you are ready to expand?! That is a great feeling. Will you open a second location or will you franchise? Franchising means that someone else will be operating the business, but you own the brand and get a percentage of the sales.
Whether you become a franchisor or if you decide to open the next location alone it will require a lot of work! Many think that franchising is an easier way to allow someone else to do the hard work, but still have the financial benefits. It’s not so simple! Here are a few things to consider when determining if you indeed are ready to franchise your business:
1. COSTS: Do not underestimate the costs associated with franchising. Although franchising can help your business earn higher revenue, it can also cause you to sink into a huge hole if you are not realistic about the costs. A legal team to ensure your franchise agreement is solid, accounting team to ensure pricing models and potential profit and loss statements are all in your best interest, marketing to ensure that people know about the new locations…the list goes on! Be sure that you cover all aspects of exactly how much this next level will cost you. It may cause you to lose money for awhile…are you prepared for that?
2. PLAN: You need a plan. Where do you want the franchise locations? What radius will each location cover? Do you want to remain local? Nationwide? Maybe even global? How will you go about doing this? What type and how long will the training be for the franchisees? What type of royalty percentage and franchise fee will you receive? There are so many things to consider and so many elements which require a plan. A poor plan can cost your business a significant amount of money!
3. BE READY TO SAY NO: Regardless of the number of franchisees you have this will always be your brand…aka your baby. You have to protect your baby as you would with any small child. Some may have an interest, but they may not be a good fit. They may have a great location in an area in which you want to expand and have the money to get started. You worked hard to build this brand. The last thing you should ever do is to allow someone to throw money in your face, improperly represent your brand and destroy what you have worked so hard to build.
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