Every entrepreneur’s goal is to grow their business, and one way of doing this is through franchising. The franchising model has become an enormous success in the country. It is evident in the country’s fast-food restaurants, bakeshops, drugs, milk tea shops, and laundromats. Franchising offers countless benefits when it comes to expansion strategy.
Lack of capital is probably the most common barrier to business expansion. If this is what prevents an entrepreneur from moving the business forward, he may take a loan from a bank and seek investors or loans from friends and relatives. Taking a loan from financial institutions means paying interest, which may cause problems paying back the loan.
You also need a supportive and highly-motivated team that is dedicated to building your growth goals. The team should fully commit to their jobs to maintain the quality of products and services expected by the consumers.
Franchisability Criteria
You may have dreamed of expanding the business through franchising as soon as you started the company. However, you cannot just take the step without being prepared. To take that step, here are the conditions that the company should meet.
Credibility – A business must have a market standing to be considered franchisable. It means that it should at least be operating with good financial records for more than two years. No aspiring entrepreneur would spend their hard-earned money on a business that has not consistently grown in the past years.
Uniqueness – If you think that your business has some unique qualities that can attract aspiring entrepreneurs, then others may consider franchising it. There may be many similar products in the market so you must have something unique to make the business stand out.
Transfer of skills and expertise – A franchisee cannot “run the show” independently. The franchisor should have the means to transfer the knowledge to its franchisee to maintain uniformity.
Adaptability – Some products may not sell very well in certain areas. If your products can only be sold in a specific place, then it is unlikely that your business can be fully franchisable.
Effective System – As a franchise owner, there should be a set of guidelines, policies, and systems available to be used by the franchisees. These should all be clear from the start and written in a comprehensive manual that every franchisee should have. As a franchise business, franchisees are not free to use alternative ways to sell products or services. Everything should be the same.
Competitive Pricing – You may think that the easiest way to earn profit from franchising your business is by imposing a high franchising fee. While that is possible, the cost that a franchisee pays should cover everything the franchisee expects – initial inventory, marketing paraphernalia, support, etc.
Capital – You still need a certain amount to start a franchise business. The amount you need should cover the cost of the system, support, and marketing.
Commitment – Being a franchisor has its responsibilities. Franchisees expect the support that they would need to run the franchise business. A franchisor cannot ignore a franchisee, especially when problems arise. The franchisor is not the one who personally runs the company; a franchisor should commit to looking after each franchisee to determine if it is operating according to what is in the Franchising Agreement.
Any company considering franchising their business should consider the criteria mentioned to determine if they are ready to take their business to the next level. Seek guidance from business consultants to understand better how to start a franchise business.
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You may contact Armando “Butz” Bartolome for questions and more information.
By email: aob@gmb.ph
FB Page: Armando Bartolome
Linkedin: https://www.linkedin.com/in/franguru/
Website: https://www.gmb.ph
