I often get asked whether a particular business is good enough to scale by franchising.
So today, I will list seven important attributes I look out for in the business to give you an idea. Your business does not need ALL of them, and when we work on the scalable business model, often some of the attributes are created.
12 Months Trading
It is a great idea before you franchise that your business has been trading for at least 12 months. Reasons for this are three fold.
First, you understand the seasonal ups and downs a franchisee could experience, so this may be important when you are looking at how much working capital is required by the franchisee. I have also seen commencement dates change to fit around any quiet patch or super busy patch. Damage from opening when it will be super busy is just as bad as a lack of customers for the franchisee.
Second, by operating your business for 12 months you get to understand your customers problem the business solves. Products or services may also be tweaked during this time to be what the customers are looking for.
And thirdly, your business systems and processes are embedded and proven. This helps the franchisee run smoothly.
The business has secret sauce. A secret sauce that is hard for a competitor to copy.
This can come in a few different ways: the product itself, internal processes, particular raw materials, contracts, history, supply licence, manufactured product, brand or knowledge.
It's not just franchises, but businesses in general. Success comes easier when what the business sells is unique in some way. It could be the brand, the product or even the delivery of the product/service.
The larger the target market the better. Large may not be actual customer numbers, but the demand is common everywhere. It's not isolated pockets.
The existing business is profitable. The business has worked out a way how to make money. DO NOT franchise if it is a way for you to turn a business making a loss into a profit. That would be unfair on the franchisee.
Above Average Income
This is a golden rule of mine. The franchisee must be able to earn above average income for the industry they are in.
What does this mean?
Using a recent example, if the franchisee was employed in an equivalent role in the business, they would expect to earn $50,000. But as a franchisee they should be able to earn $80,000. This gives them renumeration for the role they are doing plus a ROI on the franchise investment.
The business has figured out how to attract customers. Their marketing bring in customers predictably.
This makes life so much easier for a new franchisee when all they have to do is follow a proven marketing plan.
Happy franchisee = happy founder.
I trust this sheds some light on attributes to look out for in your business if you are considering scale by franchising.