Today, one in every four new businesses is a franchise. And 90% of them are in the business five years later. So, there's no doubt that franchising works. But how?
- It all begins with the idea. The service or product must be unique and of the highest quality and it must be working well in at least one location. It's nearly impossible to go from idea directly to franchising for several reasons, namely that the methods to success haven't been tested yet. The product or service must be unique, but it doesn't mean that every idea is worth going national. Some products and services will never truly break free from regional status and that's OK. An idea doesn't have to have national appeal to be successful. Just know the limits going in.
- It develops at a faster rate than a standalone business. Because the franchisor takes his idea and allows others to replicate it, it can expand more rapidly. If the business owner tries to expand by opening in multiple locations, he's limited by his own time and money. But taking the idea to a franchise will then allow others to get involved. Before this can happen, though, the franchisor has to spend a lot of time working on policies and procedures that make the franchise work. If the policies can't be easily explained, or the model can't be easily replicated, it probably doesn't need to be franchised.
- It builds a team of the right franchisees. While it is true that people with general business skills and required capital usually buy a franchise, it is equally true that not all people are made for franchising. People who are too independent may find themselves at odds with the franchisor. The franchisor keeps standards by making sure that rules and regulations imposed offer a consistent experience for its customers. An independent franchisee will see potential and want to expand in ways that perhaps don't fit with the franchisor. Of course, most franchisors are willing to listen to great ideas presented by the franchisee. But if you're the type who will have an argument over being told to paint the restaurant walls blue when you want to paint them yellow, this might not be the business for you. Franchisors are typically looking for someone coachable and in many cases, they want someone without experience in that field. That gives them the opportunity to train the franchisees, without having to undo what they already know. In some cases, though, food and restaurant franchises want someone with at least a measure of restaurant experience due to the complexity of that particular business. If you're in the market for a franchise, steer clear of franchisors who merely want to sell a franchise. The franchisor should be focused on carefully selecting the right franchisees to maintain the high standard. While you may be the greatest potential franchisee in the world, if you feel the franchisor merely wants your check, run. The next person through the door may also have the money, but be the worst possible franchisee. A franchise won't survive long without strong franchisees.
- It transfers knowledge to its franchisees. Again, the franchisor develops the plan for delivering on his unique product or service. Then that knowledge is transferred to franchisees. Where to buy the materials needed. What the decor should look like. How many employees are needed. Working capital requirements. Hiring procedures. How to actually deliver the product or service. You name it. The franchisor must have all of these things in place before he can begin to sell franchises. It's because of this that franchises have such a higher success rate -- the business plan has been proved.
These four tips speak to what makes a successful franchisor. But they also provide key details on what you should look for if you're thinking of buying a franchise. A franchisor who hasn't thought through these issues, or who lacks in some areas, won't offer the support you need to get your business of the ground.
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