Are you a founder or owner of a successful brand or emerging franchise — with a proven business model — thinking about emerging and scaling your business? A franchise model is one of the easiest and fastest ways of expanding a business for long-term success.
In its February 2020 report, the International Franchise Association forecasted that U.S. franchises would grow by 2.8%, adding 232,000 jobs in 2020, for a total of 8.67 million employees.
While COVID-19 may have modified that prediction, there is exciting news for franchisors, even during an economic or health crisis. Many franchise brands are thriving, depending on the industry. So, for franchisors and franchisees, there are many reasons franchising will be more vital in 2021 than ever before.
According to 2019 research of census data, the two-year franchise success rate is about 8% higher than the independent business success rate. The one-year survival rate for franchises is about 6.3% higher. (Francine Lafontaine, Journal of Economics & Management Strategy).
Franchising your business can be a lucrative opportunity as you replicate your already successful business model to build a successful enterprise that can be highly profitable in the future. Following is some information that can help you succeed.
What is an Emerging Franchise?
Most new franchisors are small business startups when they start tendering franchises. Many are entrepreneurs and small business owners who are using the franchise business model as an opportunity to add franchise locations and scale their small businesses to the next level.
Although size is not the only measure of success, in most cases, franchise systems require a minimum number of franchise locations to achieve positive results for both franchisor and its franchisees. An emerging franchise can refer to franchise locations ranging from 100 to 25 units or less to a startup franchise.
Is Your Business Franchisable?
The main characteristic of a franchisable business is a business model that a franchisee can replicate easily. Not surprisingly, not all businesses are franchisable. Although there are numerous features of a franchisable business, key characteristics include:
A Proven Track Record, Including a Well-Known Brand Name In The Marketplace
Franchising is all about success — taking the business, systems, processes, and people that made your business successful and duplicating those for your franchisee partners. Your business must have a track record of results.
A Scalable Model
Can your franchisees duplicate your business model successfully? If they can, then your business is scalable. Scalability questions to consider include:
- Can you provide the required knowledge and train franchisees to deliver your or services successfully?
- Can you develop systems to ensure that franchisees maintain consistent levels of quality and customer service?
- Can you provide the necessary products and services to franchisees for their day-to-day operations (e.g., ingredients and branded packaging for foodservice businesses) and support systems (e.g., customer relationship management systems and call centers for service-based businesses)?
- Are you willing to invest the time to improve your business systems and processes and provide the best experience as your franchise system scales?
- Will your franchisees be profitable if they follow your systems and business model?
A Protected and Secure Brand
As a franchisor, your brand is one of the primary assets that you will be licensing and communicating to your franchisees. Therefore, it needs protection and security. To protect your brand, you have to own and control your business and trade name. Brand protection questions to consider include:
- Is your business trade name registered with the United States Patent and Trademark Office (USPTO)? If it is not, can it obtain USPTO registration in the future?
- Do you own the URL website address for your brand name (i.e., www.yourbrand.com)?
- Are there competitors with an almost identical brand name (i.e., your brand name is somewhat generic)?
A Commitment to Building a Franchise System
The most successful franchise systems are those with the best execution and commitment to building a franchise system. Whether your franchise management team will launch as a team of one (just you) or a team of 10, franchise success and the franchisability of your business have to do with your commitment to building a franchise system. Commitment questions to consider include:
- Can you commit to a 1-, 2- and 5-year plan focused on consistently building out a franchise system that will scale over time and not overnight?
- Are you of the opinion that emerging franchise success has more to do with consistent execution and focus than just big ideas?
- Are you approaching franchising as a natural extension of your business’s success and your desire to expand and grow your brand?
A Suitable Franchise Budget
An emerging franchise is like any new business and requires the budget and capital to grow. Before franchising your business, you need to determine your franchise goals, how quickly you want to achieve them, and the funding required to get you to your goals. Keep in mind, launching your franchise system is not the finish line – it is just the start. Budget questions to consider include:
- What will it cost to launch an emerging franchise system that includes a Franchise Disclosure Document (FDD) and infrastructure that is unique to your business — and your franchise system — and designed to achieve real growth?
- How much will it cost to protect your trademarks and brand?
- What will it cost to register your (FDD) in the states you are targeting?
- What are the ongoing legal costs to retain your FDD and registrations?
- What costs will promoting and marketing your emerging franchise system and selling franchises incur?
- Is the franchise affordable for potential franchisees? If it is too costly, there will likely be fewer people who can afford to invest in the business.
Many emerging franchises have great potential but realizing this potential requires objective analysis, an effective operational plan, a comprehensive franchise development strategy, and careful execution.
One of the most important and most challenging aspects of scaling is finding the right franchise partners for an emerging franchise. Emerging brands don’t typically have brand awareness at the start of their growth trajectory, and most franchisors are also still trying to identify how their ideal franchisee looks. For these reasons, many emerging franchise brands turn to a franchise consultancy to expand their footprint.
Many emerging franchises have great potential but realizing this potential requires objective analysis, an effective operational plan, a comprehensive franchise development strategy, and careful execution.
If you are considering franchising your business, a franchise consultant can provide an independent assessment of whether your business is franchisable. At EmmerScale, we have decades of experience working with franchisors to penetrate and successfully engage the franchise market. If your long-term objective is to harness the opportunities successfully within the franchise market to grow your business, contact us for more information. We can help you achieve that goal.
