Below is a simple self test to determine if your business is ready to be franchised:

 

1. Profitable Business

 

The most important consideration is the business must be profitable. If the business is not profitable, you will not sell many franchises, as initial franchisees will not recommend the brand.  Depending on the nature of the business, the franchisee should be able to cover the market rate in the territory for the manager plus a 20% yearly return on investment by the second or third year.

 

1. Affordable

 

The franchise must be affordable.  Not all franchisees are large well capitalized organizations. In fact, the vast majority of franchisees are owner-operators with $100-200,000 of equity. The franchise offer must take this into account.

 

1. Efficient Training

 

The franchisee must be able to learn to operate the business within a few weeks of training. Longer training times increase the cost of the franchise. Furthermore, the major reason for buying a franchise rather than starting a business from scratch is the ease of operation.

 

1. Business can be Documented

 

The business operation must be capable of being documented. Without a documented system of operation, it may be difficult to teach the business to someone else, and it would be difficult to maintain consistency within each unit and across all units within the franchise network, leading to customer dissatisfaction, loss of brand loyalty, and ultimately, disintegration of the whole chain.

 

1. Committed Management Team

 

The management team must be committed to promoting the franchise and supporting franchisees. Some franchisees require more support than others, but, every franchisee is important to the network and the franchisor must have sufficient resources to support its franchisees.

 

1. Sufficient Funding

 

A franchisor must be able to fund the launch of the franchise, both in the preparation of the franchise program and the initial marketing, sales, and support. Depending on a franchisor goals and objectives, a budget of at least $100-300,000 would be required.

 

1. Viability outside your Market

 

The business must be viable in more than just a few markets. Without this, the franchise may not have sufficient potential and may not attract franchisees.