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It is debatable who first introduced the franchise model. It is widely believed that the first franchisor in the United States was his Singer Sewing Machine Company in 1851, according to this report from the International Franchise Association. The same report also credits Martha Matilda Harper, who built a network of beauty salons with a retail division, as the first franchisor. And, of course, there's the McDonald's story involving Ray Klock, which many mention as perhaps one of his first forays into food service franchising.
Why am I mentioning all this?
As I have witnessed in the 20 or so years I have been involved in franchising (on the franchisor, franchisee, and consultant sides of the industry), franchising was, and continues to be, a viable business expansion. . A model with a long track record. Over the decades, franchising has evolved from a novel idea for business growth to a sophisticated, regulated way of doing business that benefits both franchisor and franchisee. Since that first handshake deal, smart entrepreneurs have helped people build sustainable businesses, from salaried workers buying a single franchise unit to large capital owners spanning multiple geographies. We have developed best practices and trainable systems for
Franchising is often thought of as a huge and growing industry in its own right, and its principles are being adopted by countless other industries and business models, from restaurants to car services, to hair salons and retail stores, to all kinds of B2C and B2B services. Even dentists and dermatologists (and doctors in many other medical fields) have benefited from the franchising business model.
Related: Franchising isn't for everyone. Consider lucrative alternatives to expand your business.
Applying the franchise model
The word “franchise” is derived from French Fran, That means it's free. But don't assume that franchising is free or cheap. Franchising is an important undertaking and business owners should do thorough research, starting with self-analysis. For example, you might ask yourself questions like:
- Do you have sufficient resources, both human and financial, to expand your business through franchising? (As mentioned above, franchising is not a “free” endeavor for emerging franchisors. At the very least, you will need to develop the franchise legal documents and operations manual. Also, a business plan and marketing tools are important. So leverage the capital and human resources of your current business, but don't overextend yourself.)
- Can you handle the risks that involve both your own funds and the capital of others?
- Am I collaborative and interested in building long-term relationships with franchisees (not employees)?
- Do I have strong leadership skills and a team that inspires trust?
Once you have analyzed yourself as a business owner and potential franchisor, do the same analysis on your business to determine if it is truly franchisable.
- Are you running one unit or multiple units? Are you making a profit?
- Do you have a product, service, or system that could be replicated in other markets with proper training and guidance?
- Are all of your systems dialed in for quick learning by people with and without industry experience?
- Can you show your potential franchisee investors that they can build a solid business following your blueprint?
- If your business is franchised, can you provide a solid ROI for both the franchisor and franchisees?
You may not know the answers to all of these questions, and that's okay. Now is the time to talk to a franchise expert who can help businesses like yours reap the benefits of franchising and help you decide if you're ready to take the next step.
pave the right path
A fact that sometimes gets buried in the equation is that when you transition from business owner to franchisor, your day-to-day business responsibilities change and require a different way of thinking. You're no longer grooming dogs; you're hiring other businesses to groom dogs or training employees to change tires or make sandwiches. Your business is now focused on selling franchises and supporting franchisees.
Also, before a franchisee candidate signs on with you, they need assurance that your concept will penetrate other communities where your brand is unknown and that it will be able to attract enough customers to survive. It is also important to know what you are looking for.
Let's say you have a pizza concept. People rave about your pizza, and some customers have asked if you plan to franchise your concept. It's nice to have people in their neighborhood who want to replicate your pizza, but it's not just about that. Every pizza owner will tell you that their pizza is the best in the world.
To launch a successful franchise brand, you need not only a product people crave, but also something that sets you apart from your competitors. You need detailed recipes, a proven system, well-documented procedures, a well-developed (and trademarkable!) brand, a solid marketing plan, and an established supply chain. Proprietary products and operational tools also help.
Ultimately, you need to offer prospective franchisees benefits that are better than, or at least as good as, what your competitors are offering and that your competitors cannot easily develop on their own.
Get the support you need
Of course, as a business owner, you don't have to do all the franchising work yourself. A franchise advisor can help you create manuals, training materials, and marketing plans, and a franchise lawyer and accountant can help you prepare the necessary legal documents and financial audits. However, franchising is a specialized field, so you need people who understand the unique structure, laws, and practices of franchising. Don't try to save money by hiring a personal acquaintance who is just starting out as a sole proprietor or a company with limited franchising experience.
But all the professional consulting and guidance in the world won't do you any good if you don't get your business excited about a hot concept that your franchise salesperson can sell. You also need to be patient and avoid jumping on the first person who shows interest. Once you've built your franchise model and started offering franchises (legally), selecting your franchise partner becomes one of the most important tasks you can do. There's a reason why even the most established franchise systems have high rejection and approval rates when it comes to selecting franchise partners to join your brand.
One of the principles of franchising is consistency, not just at a single location but across the entire system. When ordering from McDonald's, consumers want the same burger and fries in Portland, Oregon as they do in Portland, Maine. They also have certain expectations, such as that the restrooms be clean and the service be friendly. This is why hotel chains are popular with seasoned travelers: people on the go don't want any surprises about where they spend a night away from home.
Final thoughts
Another consideration when evaluating the potential for franchising your business is a question that is probably the most common question everyone is asked in an interview. “Where do you see yourself in five years?” Or, put another way, what is your appetite for both risk and growth? How fast do you want to grow? Do you want to grow into a regional, national, or even international chain?
Deciding on your goals is important. Timing your franchising efforts is equally important. There is something to be said for taking your time and waiting until everything is perfect before franchising your business. But the problem with this approach is that by the time you're ready to launch, your competitors may already have dozens, or even hundreds, of units open. While being first to market has its advantages, it's still a tricky act because you don't want to be the first to misfire. You can tweak your system as you grow, but you don't want to confuse your customers (and franchisees) by constantly changing the core items people go out of their way to get.
Deciding when to franchise your concept can be a daunting task if you don't take the time to do due diligence and do some self-analysis. Whether you're passionate about your product or service and want others to benefit from it, or you're looking to franchising as a way to make a living in retirement, franchising can help you and your family. This is a career- and life-changing choice for your organization. But the best of all is following in the footsteps of the giants of entrepreneurship.
