Back in 2019, there were some 7 3,603 franchise establishments across the U.S., with around $787.5 billion worth of revenue. The industry employed around 8.43 million people during the same time, with McDonald’s leading the way as the biggest US-based franchise with more than $96 billion in total sales.
For many successful business owners, franchising their brand is the easiest route to expand given the popularity of franchising in the US and many other countries. With a few week’s worth of studying how the system works, even a greenhorn can effectively offer to franchise one’s successful business, unlike other business models that take a longer time to get familiarized with.
But, is it that easy to own, start, and manage a franchise sales business? Should you just take the plunge and start offering franchise slots right now?
Before you sign that contract that would put yourself in a legally binding agreement (also called the point of no return), here are five things you need to know first about franchising a business:
You should hire a consultant
Keep in mind that once you decide to invest money and time in branching out your business through franchise sales, you’ll be in it through and through. As such, it’s only wise to be 100 percent certain about the path you’re going into and not let your excitement cloud your better judgment.
Before you begin making sales pitch to prospects, you should consider hiring a reputable franchise sales consultant first to know how you could handle inquiries and how you could respond to different types of prospects.
As it stands, not all potential franchisees have the same financial, emotional, and skill readiness to franchise a business. One of the duties of a franchise sales consultant is to assist you in responding to these different types of prospective franchisees so you won’t have a single approach to all of them. This way, you can manage time and resources effectively, which would boost your chances of making successful franchise sales.
You must know the legalities of the franchising business
It’s not enough that you have an unquestionable passion for business or how much faith you have in your business model. Among the critical requirements of becoming a successful franchisor is knowing how the entire system works, particularly the legal side of things.
As it is, there are federal and state laws governing franchising and you must be certain that you’re compliant with all of the legal requirements. A skilled franchise lawyer can assist you as you navigate the legal route towards closing a successful franchising deal.
This route includes preparing franchise agreements, setting franchising costs, and determining intellectual property matters. These are all potential legal pitfalls, so you must be properly guided every step of the way to avoid problems with the law.
Document your processes and policies
The idea behind franchising your business is you’re selling it to other business-savvy individuals who want a tried and tested business model. And the only way you can convince them to give your offer a try is if you can show them proof positive that the model you’re following works flawlessly.
You can only do this when you have documented your company policies and processes, and you can show verifiable and positive figures in terms of sales. Your processes, in particular, should be standardized and stated in plain language, so they can be easily understood and replicated by your franchisees.
Keep in mind that potential franchisees would want to see whether your business model is organized, as it is an indication of your competency.
Highlight your uniqueness and best practices
If you can also highlight best practices that set your business apart from the competition, then it would greatly help your pitch as it would show that you’re not just successful financially, but also operationally and ethically.
Moreover, you must shine a spotlight on the things that make your business unique, since there are a lot of prospective franchisees who would only bank on a business model that’s not from the same mold as all the other businesses.
Be sure to explain to potential franchisees just what your unique traits result in, so they’ll realize that your uniqueness is a good thing.
Maintain a high credit score
You’ll most likely need to apply for some loans as you gradually venture out and begin approving franchises. The only way you can secure excellent loan terms is if you can show a high credit rating. As such, be sure to maintain a high credit score, especially if you’re planning on applying for small business loans as part of your franchising strategy.
Your journey towards a successful franchising business won’t be easy and straightforward. But with these five tips, it should be a whole lot easier to achieve.