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Are You Ready to Franchise?

Top 10 questions to ask yourself if you're thinking of franchising your business.

At the beginning of each new year, I find myself in the quest to update my business plan. Likewise, I encourage all my franchisor (and soon-to-be franchisor) clients to do the same.

For some of you, no doubt, franchising may be in your future. But if you're thinking of making franchising your New Year's resolution, I would suggest you answer the following questions first.

1. Is my business ready to franchise?

This column has frequently addressed this question, but it's still the first question to ask. The core questions that impact your readiness to franchise are:

  • Is the business adequately differentiated from its competitors?
  • Are systems in place to allow it to be duplicated?
  • Can the average franchisee make a good return on their investment even after paying a royalty?

These questions should be answered before you give any serious thought to franchising.

2. Do I need to franchise to achieve my personal goals?

Almost as important as the "Can I?" question is the "Should I?" question. Just because you have a business that can be franchised doesn't mean you should. The decision to franchise, like any strategic decision, should be driven by your personal goals as a business owner.

Ask yourself where you want to be in your life five years from now. Then ask if you can get there without franchising--perhaps through company-owned growth or some other expansion strategy. If there are other routes that'll allow you to achieve your goals, then you must assess the relative cost and risk of each route. Perhaps franchising won't be the best route for you to take.

3. What's happening in my marketplace?

Is there an 800-pound gorilla in your marketplace? Did you get to the market too late? Before franchising, you should get out your crystal ball and see if you can determine if you're well positioned to take advantage of the trends in the marketplace. If future potential in your market doesn't exist, then franchises could be more difficult to sell and your franchisees may be less profitable than they had expected.

4. Am I ready to start a new business?

People getting into franchising for the first time sometimes fail to realize that they are, in fact, starting an entirely new business when they first start franchising--the business of selling franchises and servicing franchisees.

That leads to a number of related questions that you would ask yourself in assessing any new business opportunity. Is there a market for my product (i.e., my franchise)? Do I have the time to devote to this business? Do I have the right skill sets?

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Mark Siebert is the CEO of the iFranchise Group, a franchise consulting firm that has worked with 98 of the nation's top 200 franchisors. He can be reached at 708-957-2300 or at
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