Franchising as a business model spans a whole range of industries and sectors, from fast food, hospitality and retail, to children’s activities, dog hotels, travel and pest control. In fact, there are so many weird and wonderful franchise opportunities out there now that it would be easy to assume that any business can be franchised successfully.
But whilst for many brands franchising can be a great route to expansion, it is certainly not an automatic pathway to success, nor is it the best and most appropriate course of action for every business. These 6 reasons are certainly not exhaustive but are some key points to bear in mind when considering whether franchising is right for you and your business.
The business cannot easily be replicated
A fundamental concept of franchising is that the franchisee acquires from the franchisor the right to operate under its brand and sell its goods or services using the developed business model across different territories or locations. The original business concept therefore needs to be simple enough to be replicated and for a franchisee to be easily and quickly trained up to be able to deliver the franchise brand’s offering. It is also important that it the concept can translate successfully into other locations – a business whose success depends on its specific geographical location, a niche customer demand in a particular area or on a product that is only available in a limited arena should probably not be franchised.
The business is not financially sound
Franchising should most definitely not be used as a vehicle to try and save a sinking ship. Not only is setting up a franchise brand a costly process and a long game, but you cannot ask and expect others to invest in your brand and business if it does not have a track record of financial success.
The figures don’t stack up
It’s crucial to have a realistic approach to the mathematics of franchising out a business. As stated above, franchising can be an expensive process in the first place. You need to have a firm grasp on how much it will cost to replicate the business model and set up for each new franchisee, as well as training and ongoing support. If that cost is going to run into the millions then the likelihood is that you’ll face huge financial hurdles in attracting franchisees, particularly without a track record of success behind you.
The sector doesn’t have longevity
For any franchisee looking to invest their hard earned cash in a franchise business, they’ll want to feel confident that it’s a business venture that’s not just going to be a flash in a pan. Is what you offer going to stay the course or is it something that is likely to go out of style?
You’ll struggle to let go of the reigns
This is a real issue for many would-be franchisors – their business is their brainchild, a concept that they gave birth to and nurtured to grow. As a franchisor, you need to be able to take a step back and trust your franchisees to deliver your much-loved business model. Not only that, but you also need to be able and prepared to make some tough decisions if things don’t quite go as planned. The right mindset is crucial and not all personality types will be suited to the role of a franchisor.
The business doesn’t have enough experience behind it
As a franchisor, you (and your operational team) will be the go-to for advice and support, the sounding board for your franchisees and also the place they’ll come to when things go wrong. Be confident that you’ve got the experience and track record behind you to be able to provide that to your franchisees. If not, you’ll most likely end up with a dissatisfied franchise network, which can in turn be stressful and incredibly damaging to your brand.
There are many factors to consider when weighing up whether franchising is the appropriate course of action for you and your business – and importantly, whether you’re really suited to the role of a franchisor.