According to Forbes, eight out of ten new businesses fail within the first year. This risk is especially high when trying to start a franchise. However, franchising is how restaurateurs become the mega rich. Below are eight factors you need to know before starting a franchise.
1. Does Your Idea Have Wide Appeal?
Sometimes, certain businesses can only find success in certain parts of the country. While certain areas may love eating muskrat, it’s a pretty good bet that muskrat restaurant franchises will never sweep the nation. Do the research to make sure your business could actually find success elsewhere.
2. Can Your Business Processes Be Easily Replicated?
You should also ask whether or not replication into a franchise is even possible. For example, your mother may make wonderful lasagna, but can you train others on how to follow your mother’s recipe exactly on a large scale? Consistency in replication of the core product is integral to franchise success.
3. Are You Willing to Give Up Some Control?
Franchising your business means that some control over your company will have to be given up. While you may put a lot of effort and clauses into the franchisee contract, ultimately, there will be differences between each location in regards to management, customer service and the end product.
4. Can You Protect Your Intellectual Property?
You should also be aware that franchising can put some of your trade secrets at risk. For example, a franchisee may end up closing a franchise location to start a competing business with similar recipes. Take steps to insure your IP remains safe with franchisees.
5. Are You in a Growth Industry?
According to Market Watch, the service sector of the US economy has been growing very slowly recently. While you may wish to expand, there may simply not be the growth needed in certain industries to foster that expansion.
6. What Is the Competition Like?
While you may have found a successful niche in a certain city, other territories may not be as open. A city that has 20 different pizza delivery businesses is probably over-saturated. A new franchise location may not be able to make a good enough profit margin to make it worth the effort.
7. Are You Already Famous?
While you may think your business is world renowned, that may not actually be the case. Make sure your existing locations are popular enough to warrant expanding to a franchise business. To own a franchise, you must be able to attract franchisees of course.
8. Do You Have Executive Skills?
Franchising your business also means making managerial and strategic decisions on a much larger scale than what you are probably used to. You need to have the right leadership skills and business acumen to succeed in this position.