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Question added to topic FranchisesDecember 21, 2010

Is my business suitable for franchising?

What characteristics are needed for a business to be a possible candidate for franchising?
There are three quick and dirty tests for whether or not a business might be a candidate for franchising:

1. Is it a good moneymaker? The old rule of thumb is that the franchise company is going to take a royalty fee of about one-third of the expected or average profits to cover their service expenses and make money. Is that going to leave enough profit for the franchisee to get a good return on their money? If not, it will be very difficult to recruit franchisees.

2. Can you systemize the operation of the business to make it simple enough that any reasonably talented and smart individual can follow your instructions after a fairly short training program and be successful? If it is more difficult than that or requires a lot of special skills or education, it may not work because the prospective franchisee pool will be too small.

3. Is it fairly easy to market the business so that you attract a sufficient number of customers at a reasonable price? If not, then you're going to end up with failures and that's not going to be good for anyone.

If you pass these tests, the next step is to have an initial consultation with an experienced franchise attorney. These appointments are typically free and the attorney will give you quite a few more questions to consider before franchising.

The attorney will also give you a realistic picture of the size of investment required to go through this process. Then you'll have a much better idea if it is practical for you to go forth and start ringing up a tab to explore this idea further.

Jeff Elgin has almost 20 years of experience franchising, both as a franchisee and a senior franchise company executive. He's currently the CEO of FranChoice Inc., a company that provides free consulting to consumers looking for a franchise that best meets their needs.

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