How To Know If Your Business Is Ready To Franchise

We’ve worked with many entrepreneurs and business owners, and if there is anything they have in common, it’s that they are ambitious and focused on the big picture. That’s why many business owners look to franchise their business when they have reached a certain level of success. Franchising is the logical next step when your business has a proven concept, is profitable and operations are established and functional.

Franchising is one of the most successful business growth models in Australia. However, franchising isn’t a simple process to be taken lightly, and only businesses that are truly ready, and are run by a team that has a solid strategy for their franchise, enjoy that success.

In our experience developing franchise business programs for businesses that are thriving and expanding internationally, we’ve identified three key indicators that a business is ready to franchise.

You have a loyal and growing customer base

Whether your business is an online business or a bricks and mortar location, it is critical that your product or service is at the point where it is ready to scale. That means the product or service must work and provide value to your customer base. This will be made clear to you when you have return customers, referrals, positive reviews and your customer base continues to grow, particularly with a strong following of customers from beyond the local area.

In order to reach this milestone, successful businesses listen to their customer feedback and make adjustments to their product or service where applicable. It’s important to always listen to your customer base as they will be the champions of your business growth. 

Once you’ve reached this phase in your business, you are one step closer to franchising.

Your business is proven and profitable

To determine if your business is ready to scale through franchising it’s important that the business is proven and profitable and provides not only a viable but attractive financial proposition to prospective franchisees. By this, we mean what a franchisee can potentially expect in terms of return on investment based on the current performance of your existing locations after taking into consideration all the upfront and ongoing franchise fees you charge them for joining your franchise system. 

This can be a daunting task, but qualified and experienced franchise consultants at DC Strategy can provide you with a financial model and analysis which considers the capital commitments to set up a new location, your key revenue and cost drivers, resource requirements and key performance requirements of each franchised business unit. The financial model produces  a range of outcomes based on different performance scenarios after determining the appropriate initial franchise fees and ongoing fees and costs including the magnitude of royalties and advertising contribution.

Your business is replicable

Though your business may be thriving at its current location or online, you are not guaranteed the same outcome in other locations. Though you may have the right operations and brand loyalty in your local market, it doesn’t mean the same structure is replicable in the broader market.

There are 5 business functions to consider to determine if your business is replicable: people skills and experience, operations, sales generation and fulfilment, brand strategy and finance.

However, if your business functions are not well-established just yet, it shouldn’t stop you in your ambition to improve your business functions to eventually franchise. To assess and optimise these functions it’s always a good idea to bring in a team of experts.

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At DC Strategy we have launched hundreds of franchises over the past 35 years, helping create $2bn in enterprise value. It is our passion to develop sustainable franchise networks, to hold and protect intellectual property, and to recruit committed franchisees and to grow market share and brand authority nationally and overseas. Contact our franchise consultants today for a complimentary 20-minute assessment to help determine if your business is ready to franchise.