It takes two to do the franchise tango.
First there’s the franchisor. He’s typically the entrepreneur that built a company from scratch. He also generally likes taking risks, said Eric Perkins, a business attorney at Hirschler Fleischer. The franchisee, on the other hand, is usually a “straight-A student and likes to learn a system and play along with the rules.”
At the Central Virginia Franchise and Financing Expo Friday, Perkins and his team of attorneys said that business owners need to take a hard look in the mirror before going down Franchisor Road.
A few business matters to mull before deciding to franchise: What gives you a competitive advantage? Has anyone asked you to be a franchise? (That’s always a good sign)
Is your business straight forward, replicable and easy to explain?
Can you train others to replicate operations without significant training, meaning maybe three months or less?
Does your business satisfy a fundamental need?
Is there an identifiable target franchisee (some franchisors give personality tests to potential franchisees) and end customers?
Personality and wallet considerations:
Can you handle the hit if the franchising investment fails?
Is expected return better than other ways to invest money?
Are you prepared to show your books to potential franchisees?
Do you have the patience to deal with growing a franchise and losing some control over the business?
Signs that franchising might be for you:
You have several years of operating history
You have multiple units that show the model can work in different markets
You experience demand for your product or service in other markets
Some potential costs (the following figures are more ballpark than bull’s-eye):
Developing an operations manual: $25,000
Registration fees, depending on states: around $6,000
Updated website: $1,000 and up
Legal fees: $25,000-$35,000
Registered trademark: $2,000-$4,000
Timeline:
As you can see, deciding to franchise isn’t an overnight decision. Even if you are ready to pull the trigger, it can take up to a year or more to be ready to put your plan in motion. For starters, expect to spend anywhere from 3-9 months structuring your franchise system, drafting the necessary documents, designing a marketing strategy, and complying with state franchise registration requirements.
Further Reading:
How to Be a Successful Franchisor, Entrepreneur
It takes two to do the franchise tango.
First there’s the franchisor. He’s typically the entrepreneur that built a company from scratch. He also generally likes taking risks, said Eric Perkins, a business attorney at Hirschler Fleischer. The franchisee, on the other hand, is usually a “straight-A student and likes to learn a system and play along with the rules.”
At the Central Virginia Franchise and Financing Expo Friday, Perkins and his team of attorneys said that business owners need to take a hard look in the mirror before going down Franchisor Road.
A few business matters to mull before deciding to franchise: What gives you a competitive advantage? Has anyone asked you to be a franchise? (That’s always a good sign)
Is your business straight forward, replicable and easy to explain?
Can you train others to replicate operations without significant training, meaning maybe three months or less?
Does your business satisfy a fundamental need?
Is there an identifiable target franchisee (some franchisors give personality tests to potential franchisees) and end customers?
Personality and wallet considerations:
Can you handle the hit if the franchising investment fails?
Is expected return better than other ways to invest money?
Are you prepared to show your books to potential franchisees?
Do you have the patience to deal with growing a franchise and losing some control over the business?
Signs that franchising might be for you:
You have several years of operating history
You have multiple units that show the model can work in different markets
You experience demand for your product or service in other markets
Some potential costs (the following figures are more ballpark than bull’s-eye):
Developing an operations manual: $25,000
Registration fees, depending on states: around $6,000
Updated website: $1,000 and up
Legal fees: $25,000-$35,000
Registered trademark: $2,000-$4,000
Timeline:
As you can see, deciding to franchise isn’t an overnight decision. Even if you are ready to pull the trigger, it can take up to a year or more to be ready to put your plan in motion. For starters, expect to spend anywhere from 3-9 months structuring your franchise system, drafting the necessary documents, designing a marketing strategy, and complying with state franchise registration requirements.
Further Reading:
How to Be a Successful Franchisor, Entrepreneur