Should You Franchise Your Business?
Franchising has been in existence, in some form or fashion, since the days of Millard Fillmore’s presidency. That’s 1850, for those of you who slept through high school like I did. The concept bounced around for the next 80 years or so until Howard Johnson put it to good (and profitable) use in the 1930’s.
But the modern poster child that most of us can relate to is none other than Mickey-D’s.
Many people know the story of Ray Kroc, the 50-something, milkshake machine peddler who transformed a few burger stands into ground beef gold. We also know that he owed his success to franchising. Kroc’s concept was simple: Develop a formula that could be duplicated by nearly anyone and nearly everywhere.
Regardless of whether or not you’re fond of Kroc’s cooking, you’ve got to admire his plan…and you can’t argue with his results. A Big Mac tastes exactly the same from Anchorage to Augusta, and probably Athens to Australia. I can’t say for sure because I work too much to get a stinking vacation.
In a nutshell (or in Ray’s case a hamburger bun), a franchise is simply this: A service or product that can be successfully reproduced for a profit. This process is then sold to someone else (the franchisee). The seller (franchisor) holds control over how the product or service is marketed . The franchisor usually gets a percentage of the ongoing sales and keeps an eye on the franchisee.
Can it be cloned?
Franchising is great way to grow your empire, but it’s definitely not for every business. Remember, the model needs to be something that can be reproduced, and often done so by minimally trained, low-paid workers. Using McDonalds as an example, it works because almost anyone can be trained to flip frozen pre-formed burgers, drown French fries in boiling oil and wear a funny uniform, but what if you’re specialty is soufflés? Can they be successfully and, more importantly, cost-effectively duplicated?
“Fastsigns” is a franchise that produces banners, graphics, vehicle signage and the like. They have been a valuable resource to me when I need quick turnaround on my marketing materials. They deliver a good quality product and they do it consistently at a fair price.
That said, I don’t use them for any type of custom graphics or what I call “concept work.” I need a graphic designer that I can exchange ideas with in a more intimate fashion (ok, someone I can scream at). That’s just not how this franchise is built, at least in my experience.
If your business involves a very special creative talent, it may not be a good choice to franchise. The malls are filled with “quickie” photography studios, but do you want them shooting your wedding?
The second key to a successful franchise is “the manual.” The best business plan on the planet is worthless if it can’t be understood by the guy who bought it. The bigger franchises have extensive training seminars and departments dedicated to franchisee support, but that all take gobs of dough-ray-me. In today’s Youtube world, much of your training and educational material can be produced on video for a fraction of what the big boys pay. Still, it has to be done.
NOTE: Even if you never plan to franchise, it’s a very good idea to have a comprehensive procedures manual. This can prove invaluable if you ever decide to sell or need to step away from the day-to-day operations.
If you do decide to get into the franchise game, remember that you’re no longer in the business of hamburger making, but the business of teaching others to make hamburgers and then making sure they make the hamburgers the way you’ve trained them. You’re also the one who comes down on them when they make bad hamburgers, or don’t give you your cut of the hamburger pie. Is that what you want to do for a living? Do you have the skill set and resources to pull it off?
Franchising your successful business is, in many cases, a natural progression in growing your brand. Just don’t forget how you got there, because now you’re going to have to teach it to someone else. You want fries with that?
- How to Write a Business Plan
- Hiring Your First Employee
- How Much Cash Do I Need to Start a Small Business?
Chris Prickett is a successful entrepreneur who specializes in defying conventional thinking. He’s built and sold two companies and made many mistakes along the way. He started a Phoenix, AZ real estate business in 2007, during the worst market in modern history, and business is booming.