It takes jumping one major hurdle to get a business off the ground, but it’s a whole other game when trying to franchise your operation. There are many benefits, to be sure:
- Expansion of capital without the responsibility of major debt
- More motivated management through ownership
- Smaller staff to manage
- Overall reduction of risk
But these benefits don’t come without significant potential drawback. If you’re thinking about expanding your small business into franchises, consider these pitfalls that trap many entrepreneurs. It’s important to learn lessons through mistakes but it’s best to avoid the really big ones. So, for those looking for more, here are our 6 tips for franchising your business.
As more and more franchises open, communication between each is critical. Too often, franchisors are left in the dark with reporting information from each of their franchises. Constantly having to ask for inventory, sales, labor costs and other reports is annoying and easily forgotten. Your retail point of sale system must be able to make this easy. Franchisors can pull one comparison and consolidated report for all franchises. KORONA is designed for franchises and also automatically bills each franchise for monthly royalties through its franchise-integrated reporting. Plus, you can pull any report, at any time, from any place with our cloud-based reporting.
Give yourself some credit for the success of your business so far. It would not be successful without you. Make sure you don’t leave the “you” out of the equation with your franchises. Your personal touch needs to be imprinted on each business. Though one of the benefits of franchising is reduced risk and responsibility, adequate training and consistent branding are absolutely essential. Figure out EXACTLY what made your business successful and replicate with each new franchise. This means that each franchise must know the secrets of your success, whether it’s the secret sauce or the ratio of the 13 herbs and spices. Each franchisee must understand and feel connected to your growing brand.
Lawyers are expensive and fees are sometimes unpredictable. But it’s the nature of the beast. Opening a business in 2018 in the United States requires foresight of future problems. A seemingly small legal matter that goes ignored has the potential to topple even the largest of businesses. Many entrepreneurs are “big picture” thinkers or “ideas people.” Dealing with nuanced legal jargon that constitutes a large up front fee might be a royal pain. Many before you have convinced themselves of this. Suck it up and protect your future success.
In order to franchise it’s vital that you have a readily recognizable brand that can be easily described. A good test of this is making sure you can define your brand in six words or less in a way that makes sense to someone with no background knowledge on your business. This makes certain that your brand will be able to reach many people easily.
This also means that regular oversight is necessary. While franchisees are owners, and a healthy working relationship is key, you must also keep all products uniform so that customers know exactly what they’re getting no matter which franchise they visit.
Growth in your business is good. It’s why you’re thinking about or already have franchised. But growing too fast can be a major pitfall. Break your goals into reasonable pieces and build a thorough business plan. This also includes selling to the right people. Positive growth will only occur with the right framework, and that includes each of the people around you. Growth that your business is not ready for will only lead to flawed systems in your franchises. This is happening with even some of the biggest franchisors. Poor structure and unvetted franchisees are leaving the businesses in serious legal trouble. At best, it will lead to cutting costs and again, a lack of consistency.
Face it, you’re gonna be wrong about a few things. And hopefully, you sold the rights of each franchise to franchisees that you trust and respect. So as you grow, be aware of repeated comments or concerns about certain operations. Your initial formula worked at one location but there may be small details that don’t universally translate into success. Some franchisors look to gain much of their profit on the initial sale itself. Instead, your profit should come from the long-term royalties of each successful franchise. That means staying in tune with the performance of each and applying change when necessary.
Conclusion on Tips for Franchising
Franchising is a big step to take. Watch out for mistakes like these. Check out KORONA for your franchise POS solution. We make sure that your life is easier and business runs smoother. You’ll always know exactly how each of your locations is performing.