As an entrepreneur, you have most likely heard about franchising in an effort to scale your company and earn more cash. It is an established model that actually works. Actually, it works very well that you’re most likely acquainted with popular franchises such as Hampton Inn, Subway and 7-11. Hampton In alone has expanded to 2,000 hotels worldwide because of franchising.
Based on a report by the International Franchise Association 2015, better economic conditions brought to quick development of the franchising sector in 2014. They anticipate 2015 to provide 1.6% development in franchise industry, along with an ongoing development in franchise employment and also the sector is expected to bring in $521 billion through the end of the season.
On the other side, you have most likely also heard some failure stories of individuals losing all of their cash because of an unsuccessful attempt for franchising. While it is true that you simply risk losing your hard earned money that does not need to take place to you. Actually, if you perform careful research and answer some imperative questions, you will have the ability to determine whether or not franchising is right for you.
- What Type of Franchise Works Best for Your Company?
Based on the Small Business Administration (SBA), you will find two types of franchising. The very first is trade or product name franchising. What this means is the business owner possesses the title or trademark and sells the right to license to the franchisee, much like what Danellie LaPorte, an online entrepreneur has done with her Desire Map program.
In her case, she’s selling what she calls a business inside a box. It’s a method she sells to workshop facilitators who wish to use her Desire Map. If you wish to run your own courses or workshops, you need to buy the license.
Business format franchising is the second type of franchising. What this means is the franchiser and also the franchisee come with an enduring association, and also the franchisor offers training, site selection, product supply and promotional plans. They might also need to offer help with acquiring funds. This is actually the model we have seen with franchises such as 7-11 or Subway.
You need to choose which franchise your business qualifies under after which come to a decision according to that. The SBA offers wide range of resources that will assist you get started.
- Are you Ready to Put In the Investment?
While franchising enables companies to get benefit from many economic advantages that they may not be able to meet the expense individually – for example logistics demand/purchasing energy and market dollars – a substantial investment continues to be needed to franchise your business.
Being a franchiser, you would need to invest in marketing, infrastructure, and training and support the franchisee. The franchisee is actually responsible for running business; however that does not signify that you will not be required to continue investing cash in to the franchise.
For many entrepreneurs an investment in both forms time and cash is much more than acceptable when developing their business, however for others it’s deemed worth considering. If you are not vigilant, you can lose lots of cash when attempting to franchise your business, so think about the financials cautiously.
- Can Your Procedures Be Copied?
The prosperity of a franchise is dependent on whether the business procedures can be simply copied. You will observe that every Subway franchise operates the same way. There isn’t just one Subway in the world that deviates from the way the business make’s its cash.
Many entrepreneurs thinking about franchising realize their companies can’t be easily duplicated. Sometimes it is because the owner’s personality is simply too attached to the overall brand, a lot to ensure that the company cannot get up on its own. In other cases it’s since the business itself has not implemented systems to really make it more scalable.
- Are Your Business Income Big Enough To Magnetize Franchisees?
Without franchisees, your company is basically lifeless. To attract people to open up a franchise and potentially invest lots of their cash in to the business, there should be a clear help to doing this.
The question you will be asked first is whether or not your company is making a great profit. If franchisees will be to invest, they would like to make certain they will be getting a return.
The particular time-frame for an organization to become lucrative is almost impracticable to estimate because there are more than a few factors that go into it; however, a great guideline is that it takes three years before a business starts getting in enough cash to pay for expenses, pay salary to the business owner and have lots of cash left over.