The successful growth of various start-ups and small businesses has inspired business owners to take the franchise route. Year over year we have several businesses sprouting with franchise to grow domestically and globally.
Today, though franchising is considered a profitable approach to grow either a small or big business, entrepreneurs who are on the verge of taking this route should thoroughly understand the pros and cons and just not assume that franchise business model can drive complete success.
There are certain businesses which have taken up franchising and have failed to appoint any franchisee finally routed back to their earlier business operations. Growing your business needs lot of effort, a proper strategy, research and also need to consider various loopholes related to franchise your business.
The year 2017 saw franchising reach its helm with the industry seeing a business of $711.4 billion. Though the future of franchising looks promising, but on the other hand when a survey was done by Franchise Grade.com which enlightened on certain facts where it takes some time for various start- ups to achieve a decent growth through franchising.
- 30.6 % of franchises that started four years before had zero to one franchise locations.
- After ten years from launch 52.4% of the group had 50 or less franchise locations.
Franchising though is one of the best ways to grow your business, yet there are hurdles which need to be foreseen before opting for it:
Let us look into the ingredients required for successful franchising:
Be confident in your idea
The first step for an entrepreneur who either wants to start or grow your business is to confidently go ahead with your idea. Make a commitment that you’re all set with the idea of franchising your business. Donning the role of a franchisor require to undertake risks and engage in various management activities.
Acquire first-hand knowledge
Just because you’ve heard about success stories on franchising, jumping into any new business will not help. Gain knowledge on the pros and cons of a franchise business. Talk to various people related to the industry and then take a decision. Understand on why the need to franchise your business.
Understand the market
Look into the strategy of potential franchisors and understand the various areas and markets that offer best franchise opportunities. Also without a powerful marketing strategy and brand building you fail to achieve success. The knowledge of the market is critical for this.
Develop a Franchise Model
The biggest player in any business is the capital investment. Have a good understanding the costs of franchising your business. Make estimates on the total investments that would be needed to operate the franchise system, before a decision is taken. Work with your franchise consultant and lawyers to set the legal documentation in place. Certain key factors like the franchise fee, royalty, franchise agreement, training offered to franchises should be properly executed in the franchise model.
Seek Proper Guidance
One can succeed in business only if you take proper advice from people who have dived into the business. Learn and be guided from businesses which are already adopting the franchise model.
Sometimes, in spite of understanding the franchise business, there are lot of constraints in finding the required success.
Let’s delve into a few perils of most franchise business models:
- Before you opt to franchise your business, understand the costs involved and approach a few franchise consultants and see whether it works in the long run.
- Not every business is franchise ready. Even if you get advised by the best franchise firms, certain business fail to succeed as they would not have a set objectivity.
- Failing to adhere to the legal formalities with set rules and not able to change as per your requirements will also hamper the essence of franchising.
- Many of the business owners fail in franchising due to the lack of investment to run the entire show. Establishing a franchise program involves, consulting fees, legal documentation fees and at a certain point this pinches the pockets of the franchisors.
- When a business wants to grow it calls for proper skills by the owner and the management. Most of the franchises fail where the business skills are lacking in operating the franchise system.
- Many a times the business owners lack a proper knowledge on the development and launch of the franchise program. Just building a franchise program is not the only thing, but developing and launching the entire process is very crucial.
Now, it’s very important that when a business choose to franchise they need to properly understand the loopholes attached to this entire system and gain the right acumen in developing the franchise system. Franchising is a marathon and you need to be prepared in all the ways to be able to run the course comfortably.