How Do You Know When Your Business Model is Finally Ripe to Franchise?

In retirement, I do a little bit of micro-consulting to help startup businesses. One of my areas of expertise happens to be franchising, because before retirement I had franchised the company that I founded. One question I get quite a bit from small business owners that have a great business model, and lots of customers is; “should I franchise my business, how do I know when I’m ready?” Well, there are a lot of things that you must have in order to make a successful franchising company.

For instance, your business model needs to be perfect, and able to regionally adapt, because not all markets in the United States are the same, and you need to know where it will work and where it won’t. You can still franchise, skipping markets where it doesn’t make sense, but you need to understand that. Next, you need about $1 million in liquid money available because it takes a lot of money to run a franchising company for the first couple of years until it starts bringing in a steady cash flow.

The faster you expand, the more money you need, and depending on your expansion and growth rate, in your strategic plan, you may need quite a bit more than that even. Indeed, you also need a simplified business model, one which is easy to teach, and one, where a franchisee can go through on the job training in one of your corporate stores, or one of your prototype models and learn the business within two weeks or less.

Finally, you need to be in the right mindset. If you think you are going to make tens of millions of dollars right away, and retire wealthy, you are kidding yourself. You can’t be successful as a franchisor unless you have the strength of perseverance, and some strong will and personal character. Needless to say, you have to really want it to make it work. And once it does start working it’s like trying to hold onto a rocket that’s been blasted into space. Sure, it looks easy, but franchising a company is one of the toughest jobs in America.

Perhaps that’s why there are so few franchisors, and yet their economic activity accounts for 35% of our retail GDP. Think about that for a second only about 2000 active franchisors exist in the United States, and their sales account for 35% of our GDP on a retail level. That’s huge, and it’s a huge responsibility, a lot of hard work, and it takes a lot of time and perseverance to get there. In other words you can’t do it unless you personally have what it takes and are ready. I hope I’ve answered question.

Lance Winslow is a retired Founder of a Nationwide Franchise Chain, and now runs the Online Think Tank. Lance Winslow believes writing 24,000 articles by July 24, 2011 is going to be difficult because all the letters on his keyboard are now worn off now..