Before the entrepreneur set out to Franchise his business, it might be a good idea for him to determine whether his business are franchiseable. The following factors would indicate a good opportunity to Franchise a business:
A business which is growing. A business in the growth phase has many opportunities for market growth, but still lack significant market share. The aim of franchising your business would be to exploit the current market growth in order to gain some market share. A Business of which the Gross margins are high enough to offer a return on investment to both the franchisor and the franchisee. A Business which success does not only depend on loyalty customers, but also have the ability to attract new customers on an ongoing basis. A business with potential future opportunities that exceed a geographical defined market, in other words, its success mustn’t depend on the opportunities in a specific location.
A potential Franchisor will have to offer franchisees a business format which includes the business brand, business system and also support services under the contractual terms of a franchise agreement. The franchise agreement will also include the financial arrangement.
The main reason why Franchisees would be interested in buying a franchise, is the opportunity to own a business which has already proved to be successful in delivering products or services in a profitable way to a specified market. Therefore, the Franchisor should be able to prove that the business in not just an idea, but an operational entity and that the business’ trade secrets can be successfully transferred to a third party.
Last mentioned requires the Franchisor to draw up a comprehensive operations manual that outlines specifics on how the business should be operated to adhere to performance and quality standards. It should also include a comprehensive training programme.