Criteria for Franchising a Business

Why Franchise your Business
Franchising provides your business with an excellent opportunity to expand rapidly without you having to outlay a lot of capital. The Franchising system allows you to conserve your capital while at the same time, achieving fast penetration of the market, thus making it a very attractive proposition for most business owners.

One of the great things about franchising a business is that you do not have to worry about the problems you have with managers employed by your company. As the franchisees are owners of the business you can be sure of receiving 100% commitment in their efforts to ensure the business is profitable. Naturally, the more profitable they are, the better you would do as owner of the franchise.

Franchising helps you to utilise the entrepreneurial skills and experience of the network of franchisees that you would have. This means that far greater results can be achieved by your group as a whole than would otherwise be.

Is your Business Franchisable?
Franchising is a very flexible format and there are not many businesses that cannot be franchised provided they possess certain characteristics.

They would need the following:

  • Must be unique.
  • Must be credible.
  • Must have a Proven Concept.
  • Must have competitive advantage
  • Must have systems in place?
  • Must make money.
  • Must make a Return.

The 10 Criteria of Franchisability
It is very hard to come up with a guaranteed answer as to whether your business would succeed if it is franchised.

It may help to look at some of the criteria involved:

  1. Credibility. Your current business should be credible in the eyes of prospective franchisees if you are to interest them into buying a franchise.

  2. Systems. Your current business should have successful systems that can be replicated and used in another franchise by the new owners.

  3. Prototype. You must have a prototype whether it is a product or a system that has been proven.

  4. Unique. What you have should be different – either unique in design or special in the way it does something. You must be able to demonstrate how different it is from that offered by competitors.

  5. Return. The asset test is whether it is going to make money for your potential franchisee. Your current business needs to be profitable otherwise it is very hard to persuade someone else that if they develop a business similar to yours they would also make profit.

  6. Be Taught. The material that you have must be able to be passed over easily so that your new franchisee would obtain all the knowledge necessary to run the business.

  7. Adaptable. Be clear on whether your concept would be easily adapted from one market to the other. Some cannot adapt when they change countries or when they change areas within a country.

  8. Capital. Your franchisee must have the ability to generate sufficient working capital that generates its own substantial income.

  9. Commitment. You must be committed to building long tern relationships with your Franchisees as that would pay dividends in the long term.

  10. Ability & Management Expertise. You and those involved in the business with you must possess the necessary expertise in all areas of business including specialised knowledge about your products or systems. You would need to provide sufficient support to the new business owners and in which they can have the utmost confidence.