MyBusiness Extra: Could Your Business Be Franchised? | NFIB

MyBusiness Extra: Could Your Business Be Franchised? | NFIB

If you have spent years building a successful small business, maybe you aren’t interested in buying a franchise. But maybe franchising is interested in your business.

Hundreds of companies are now rapidly expanding by franchising their business idea. Who would have thought that edible bouquets made of candy or fruit could be turned into a franchised business? Or managing vending machines? Or estate planning?

Experts say these concepts and others that succeed in franchising have four main elements: they’re teachable, duplicable, sustainable and provide an adequate return on investment. Here’s what that means:

Teachable. “First, you must be able to train others—who may or may not have prior experience—to perform your concept in a reasonable amount of time,” says Marc Plaisted, president of BrandChise, a franchise consulting firm in Lakeland, Fla. And remember to think big: You may think you could train your neighbor to run a franchise, but imagine training 100 of your neighbors. How many would be successful?

Duplicable. Your business must be able to retain brand integrity across all locations. Customers will expect the same products, pricing options and level of customer service whether they’re in Atlanta or Albuquerque. Is that feasible? Keep in mind that some business concepts are only franchisable in specific regions, which limits your company’s potential. A scuba shop, for example, could only be franchised in coastal states. Also, your brand should offer something different than competitors. What does your burger-and-fries joint offer that Burger King, Wendy’s and McDonald’s can’t?

Sustainable. Your business is likely not suitable for franchising if it relies too heavily on consumer fads, or has a limited audience or lifespan. Think about some of the most successful franchises: McDonald’s, Midas Inc., Supercuts. At some point, everyone eats food on the go, gets an oil change or needs a haircut (even during a recession). If you own a dog-sweater retail shop, though, your audience is too narrow for franchising.

Return on Investment. If your company’s one or two locations are not profitable now—or only minimally profitable—chances are no one will want to buy a franchise from you. “You need to make sure someone else can make a living off this,” says Alisa Harrison, vice president of communications at the International Franchise Association. A typical return on investment rate for franchisees ranges between 14% and 20%, according to Plaisted.

If your business scores well in all these categories, the next step is to evaluate yourself: Are you cut out to be a good franchisor? Consider the fact that you will no longer be in charge of the day-to-day operations of your business—your new job will be to lead, train and support franchisees. You will no longer be running a business location, but building an infrastructure that supports your franchise system.

“This can be a pretty strange change for some [business owners] and frankly, not all people can make the switch,” says Plaisted.