When it comes to business expansion, franchising involves less capital risk but more limited returns.

By Allan DJ Dick

You operate a business. It has received a positive reception in your market and is generating profits. Perhaps you are considering expanding by opening a second location, or an admiring customer tells you that they too would like to open a second location somewhere else. You’ve heard of franchising and are wondering if it’s a potential avenue to develop. If a business owner can answer yes to the following 10 questions, he is ready to franchise.

Do you understand the key differences between running a business and running a franchise?

When you started your business, you weighed the cost, ongoing expenses, and potential profits. You then made the investment and achieved operating results. Your franchisees will do the exact same thing. They will assess their level of investment and whether they will make an adequate profit.

You should also do the same analysis of your franchising business. You will need to assess how much money you will invest to get started, what it will cost to maintain operations, and what income you will receive. As a franchisor, you will focus on finding new franchisees and new locations, managing the supply chain, supporting and supervising franchisees and managing the legal compliance obligation as a franchisor, while keeping your brand current and interesting for customers. You may continue to manage and operate your business site(s) and you will also need to decide whether you will enjoy these aspects of your daily life.

It is important to create an operations manual so that a business can be replicated and someone can be trained to operate it in the same way.

Do you have a valid trademark?

A brand’s goodwill is associated with its trademark(s), trade name and any associated logos. If they are not already, you will need to apply to have them registered. The registration process is relatively straightforward, although it currently takes several years for a trademark application to be approved. The mark will need to be registrable as there are rules governing this. One of the first tasks is to assess whether, in fact, the mark can be successfully registered. Registration provides nationwide protection for marks that will be associated with the franchise system.

Can your business be replicated?

The concept of a franchise is an operating system of a business that can be replicated and trained to operate it in the same way.

Potential franchisees want to identify with the brand and operate the same successful business. You will need to narrow down the details of your systems to fit into an operations manual. The creation of this manual, which should be digitized, takes time. Hiring a consultant to prepare your manual can also be expensive.


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