Determining If Franchising Is Right For Small Business Owners

Franchising can be a smart move for first-time small business owners and owners seeking to strategically expand their businesses. At the same time, not every franchise is right for every small business owner. For that reason, it’s important for owners to research and understand their franchise options before jumping into a business model. This article will offer small business owners guidance on how to find a brand, decide if franchising is right for them, and determine the right brand to partner with.

Finding a brand

When determining what brands to partner with, owners should assess complementary businesses and business models that offer similar costs of entry and return on investment propositions. When Value Place seeks to identify new franchisees to bring into the hospitality fold, we pursue small business owners that are already in the self storage, hospitality, real estate development, and retail sectors.

The first step in deciding if franchising is right for you is to research the types of brands that interest you and complement your existing skills. Once you identify a few different brands, contact them for more information and ask if they sponsor any informational events. For example, Value Place hosts 24 cocktail receptions per year in different regional markets where executives give formal remarks and current and potential franchisees can mingle and meet with Value Place executives to answer their questions. If it’s a retail brand, speak with shopping center landlords and see if they have any special programs for small business owners and franchising firms. Some landlords have pre-approved space in their shopping centers for specific brands, simplifying the on boarding process.

Also, utilize your existing business contacts to see if you know any brand advocates. For example, your banker, real estate broker, or other business owners might have business contacts seeking new franchisees.

Determining if a brand is a perfect match

After stating an interest in a potential franchise brand, the brand will then evaluate you as a potential franchisee. Small business owners must share relevant personal and professional financial data and submit to reference checks. On top of finances, franchises look for specific traits before accepting a franchisee, such as:

  • A willingness to participate in the evaluation process
  • A professional chemistry with the leadership team
  • A clear vision of the brand and its trajectory
  • An expressed intention to comply with the brand and its standards

In the same vein, make sure the brand encourages franchisee feedback, and uses it to collect additional brand insights and stay ahead of market trends.

Next, perform the same due diligence on a franchise brand as the brand conducts on you. Ask for corporate financials. Not all companies will share their financial information, but this information helps shed light on the company’s business model and the expenses involved for a franchisee. Ask for supporting information on expenses, such as utility bills for a property in a similar geographic region. These could include construction costs, marketing costs, and other franchising fees. Also factor in a franchise’s working dynamic and the general rapport before committing to a brand.

By asking these questions and taking time to conduct the research upfront, small business owners will increase their chance of franchise success down the road.

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