Once you have decided that you have a “franchise-able” concept, next you must determine whether franchising is the right step for you. Becoming a franchisor requires a substantial investment of time and money, but the rewards can be well worth it. Before you move forward, consider these factors to help you decide if you are ready to be a franchisor:
- Change in business. Are you excited about starting a new business? As a franchisor, your business now will be selling franchises and servicing franchisees. You will need the entrepreneurial spirit that drove you when you launched your first business.
- Cost. Can you get financing? When you first begin, you must spend money on business plans, legal documents, operations manuals, marketing materials and other expenses. In addition, you may need to hire and train additional staff to sell franchises and oversee and support franchisees. If you do not have enough capital to cover these expenses, you must raise it. An attorney and business advisor can help you develop your pitch to financial institutions and investors.
- Time. Are you committed to working more hours initially to launch your franchise? Beginning any new business takes time. Franchising may require more time at least at the beginning because of travel if you are expanding geographically and assisting potential franchisees to start their own business.
- Supporting franchisees. Do you want to help other business owners be successful? People buy franchises in part because they get assistance from the franchisor. You will be giving them training, advice, marketing and other services so they can start and run a profitable business of their own. It can be a very rewarding experience financially and psychologically.
Franchising can be very lucrative, but not every business owner would make a good franchisor.
If you are ready to be a franchisor and move forward, our next post discusses what you need to do to get the franchising process started.
If you have questions about franchising your business, consult Lusthaus Law.