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 now that it’s easy to assume that any business can be successfully franchised.
But while franchising can be a great way for many brands to expand, it is certainly not an automatic route to success, nor is it the best and most appropriate course of action for any business. These 6 reasons are certainly not exhaustive, but they are some important points to consider when considering whether franchising is right for you and your business.
Business cannot be easily replicated
A basic concept of franchising is that the franchisee acquires from the franchisor the right to operate under their brand and sell their goods or services across different territories or locations using the developed business model. The original business concept must therefore be simple enough to be replicated and to allow a franchisee to be easily and quickly trained to offer the franchise brand’s offering. It is also important that the concept can be successfully transferred to other locations – a company whose success depends on its specific geographic location, a niche customer demand in a certain area, or a product that is only available in a limited area, should this probably won’t be a franchise.
The business is not financially sound
Franchising should by no means be used to save a sinking ship. Not only is building a franchise brand a costly and lengthy process, but you also cannot demand and expect others to invest in your brand and business if they do not have a financial track record of success.
The figures do not stack
It is crucial to have a realistic approach to the math of franchising a business. As mentioned above, franchising can be an expensive process in the first place. You need to know exactly how much it will cost to replicate and set up the business model for each new franchisee, as well as training and ongoing support. When that cost is in the millions, you likely face major financial hurdles when it comes to attracting franchisees, especially without a track record of success behind you.
The sector has no longevity
Any franchisee looking to invest their hard-earned money in a franchise business should be assured that it is a business that will not be just a flash in the pan. Will your offer last or will it likely go out of style?
You will have trouble letting go of the reins
This is a real problem for many would-be franchisors – their business is their idea, a concept they born and nurtured to grow. As a franchisor, you need to be able to step back and trust your franchisees to implement your favorite business model. Not only that, but you also need to be able and willing to make some tough decisions when things don’t go quite as planned. The right mindset is crucial and not all personality types are suitable for the role of franchisor.
The business does not have enough experience behind it
As a franchisor, you (and your operational team) are the go-to source for advice and support, the sounding board for your franchisees, and also the place to go when something goes wrong. Be confident that you have the experience and track record behind you to offer this to your franchisees. If not, you will most likely end up with an unhappy franchise network, which in turn can be stressful and incredibly damaging to your brand.
There are many factors to consider when considering whether franchising is the right course of action for you and your business – and more importantly, whether you are truly a fit for the role of franchisor.