The theory of evolution applies not only to science but also to business. Unless one learns to adapt, what could have been a legacy will die a slow and painful death. Companies these days can already take many routes for growth, and one of the tried-and-tested options is to franchise.
Franchising can help multiply income in a lot of ways. Here’s simple math. Say a business earns $200,000 a month in one location. With at least five franchises, it can grow at least $100,000 every 30 days. Companies can also derive revenues from franchise fees and other charges, as well as the purchase of inventory, among others.
In spite of being lucrative, this business model can still be complicated. When done wrong, it can end a fledgling empire in a snap. To help entrepreneurs decide if they’re ready for it, here are essential questions to ask:
1. How Much Will It Cost to Franchise?
How much does franchising cost? This business model requires money for many expenses. These include legal and accounting fees, permits and licenses, and marketing costs. Those involved in the products business may even have to spend on logistics and fulfillment facilities, as well as commissaries.
Because of the risks involved, companies should consider comparing the possible costs and profits if they franchise their business or grow corporately. In many cases, however, the former turns out cheaper and better income-generating than the latter.
2. What Is Your Reputation?
One of the advantages of franchising is the opportunity to ride on with a popular brand name. It can significantly reduce marketing costs. Building up goodwill among prospects can also be easier.
That’s why reputation also matters among the franchisees. For those who perform due diligence, they often ask around. They interview other franchisees. They monitor the performance of the business in their industry and the community. They ask for recommendations from friends and target customers. They feel the market, and some might even conduct a study.
What happens then if the company has some dark past? It doesn’t mean it can no longer offer a franchise, but it needs to do more than those with positive reviews. The good news is that it can always turn a failure into a success story, and that can be attractive to franchisees.
3. What Kind of Support Can You Provide to Franchisees?
Franchisees may end up spending thousands of dollars to “buy” the business. They might as well ensure they get the best value for money. These people expect their franchisor to provide as much support as they can to keep them running as quickly and efficiently as possible. The question is, what kind of assistance can the franchisor extend? Here are some of them:
- Marketing and advertising
- Customer service
- Supply chain management
- Staff training
- Site buildup or design
Franchising is one of the smartest ways to grow a business, but a company must be ready for it. After all, failure can have a significant impact on credibility and may place franchisees’ earnings at stake. Consider these questions, and when ready, get the assistance the company needs.