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The 6 Step Guide to Turn Your Small Business into a Franchise by @TracyVides

by Tracy Vides | Featured Contributor

Small business owners are constantly on the lookout to grow their business efficiently and profitably. Expanding an existing business into a franchise helps small business grow rapidly without incurring the risks of expansion.

Why franchise, you ask? Well, franchise businesses are created with the twin goals of rapid growth and limited risk exposure, for both the franchisee and the franchisor. Franchise owners don’t have to worry about spending on a new office or retail location, employing a staff of people, or even balancing the day to day operations of the new outlet. Similarly, franchisees don’t have to worry about building a brand up from scratch, testing an unknown product in a new market. As an industry, franchises contributed over 3% of the US GDP in 2017.

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Employment growth in the franchise sector has outpaced the US economy by leaps and bounds, signifying a similar blistering pace of growth in economic output from the franchise industry.

So without wasting any more time, let’s see how your business could become the next McDonald’s, 7 Eleven, or H&R Block.

1. Simplify your business model down to its ABCs

The core of a franchise business is replicating a simple business model over and over again, profitably. The first thing you need to do to turn your business into a franchise is to first understand the nuts and bolts of your business, discover what makes it tick and then create a simple 1-2-3 step process of creating your business under someone else’s watch. Layout the blueprint of your business and spell out each detail in such a way that a stranger who’s never set foot in your business is able to recreate it to a T.

The key thing to remember here is to take yourself as an individual out of the process of creating value. If you think your business runs purely because of some inherent skill or talent you possess, your business may not be the best type to be franchised.

2. Decide on your franchise structure

Once you know what your franchise business will sell and how it will go about creating this value for customers, you then need to figure out how you’ll structure your franchise business. Some key points to consider here are:

  • Number of franchisees
  • Location of franchisees
  • Upfront franchise fees (e.g. from $50,000 to $100,000)
  • Recurring royalty fees (e.g. between 4% to 8% of gross sales)
  • Dividing duties and responsibilities for the business between yourself and your franchisees
  • Degree of control you’ll have over your franchisees
  • Managing legal requirements – registration, licenses, permissions etc.

Want to learn more about structuring your franchise business? Go here.

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3. Start building your brand

Now that you know whether your business will be an individual franchisee or area franchise or something entirely different, you need to give your franchisees bang for their buck – a well-recognized, well-loved brand that they can sell in each of their locations.

Invest time in carefully crafting your brand identity – your logo, your main colors, your key messaging, taglines, etc. Once you have the building blocks of your brand in place, start infusing some character into your brand and flesh out a clear brand personality. This is where you figure out what your brand stands for, who is your core target audience, what does your advertisement say, which platforms should you advertise on and so on.

4. Identify and shortlist your core group of franchisees

When you first start out your franchise business, it’s imperative to get going with partners who are as committed to the business as you are. You want people who are smart, understand your business inside out and most importantly, can be trusted with your brand out in the big, bad world.

Interview and shortlist franchisee partners by evaluating them on the following criteria:

  • Role and responsibilities fit
  • Financial health
  • Detailed background check – credit scores, criminal check, references, etc.
  • Temperament fit – matches your goals and attitudes towards the business
  • Past business/employment record

5. Handhold franchisees and empower them

Setting up a new franchisee’s business is almost like building your business from scratch all over again. Only this time, you’ve already learnt from your past mistakes and know exactly what to expect (for the most part!).

Set aside team and resources to help a new franchisee start their business. Spend time personally on premises (at least for the first few franchisees) so you know can teach them the ropes of the business without any misunderstanding. Learning on the job will also make the franchisees more confident in their abilities to run the business and offer them a chance to see what a successful version of your franchise should look like.

Once you’ve set up the first handful of franchise outlets, you’ll slowly realize that you need to distinguish between your overall franchise business and the business of each individual outlet. As you create that mental distance between yourself and your franchisees, make sure you give them the tools to run their businesses as efficiently as possible. Besides in-store and on the job training, create detailed operations manuals that franchisees can refer to when you’re not around. You can use simple online training software to set up a dedicated portal for your franchisees and their employees to log in and learn more about the business, get tips and tricks, or more.

6. Maintain quality

Even though you have other people running individual franchise outlets, the overall franchise is still your baby. It’s up to you to ensure that your partners are delivering value to your customers.

Set up clear and strict guidelines to maintain the quality of your products or services. Make sure that the operations manual is adhered to by franchisees to the letter.

Sometimes, something as basic as selecting the right franchise location can have an impact on the quality of output. Bacon Bros. Public House, a farm-to-table restaurant chain, insists on having its franchises located within 50 miles of farming communities to ensure they get the freshest possible local produce for their restaurant.

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Surprise checks at the franchise outlets, sending in mystery shoppers to check processes, and conducting regular surveys of your customers are other simple and effective ways of monitoring quality.

The final word

Starting a franchise business is a huge leap for any small business, but done right the payoffs are tremendous as well. So ask yourself, would you rather be the queen of your own little castle or the boss of the next big business empire? Once you have the answer, go forth and conquer!

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