3 Characteristics of Businesses that are Ready to Become Franchises
You're running a successful business. Maybe that business is a hair salon, a coffee shop, or an accounting practice. As part of your growth strategy, you're wondering if your business is suitable for franchising. While just about any kind of business can be franchised, here are some of the common characteristics of businesses that successfully turned into a franchise opportunity.
1. The Business Has a Federally-Registered Trademark
One of the first orders of business for a would-be franchisor is to start the process of obtaining a federally registered trademark. There are several reasons why having a federally-registered trademark is important for franchisors. First of all, a trademark offers your brand protection from would-be copycats. Your business may be so catchy and unique that others take notice to the point that they are inspired to do something irritatingly similar. A federally registered trademark can help provide the intellectual property protection you need to prevent your name from being duped all over town.
Another reason why having a trademark is important is that it adds value to your franchise opportunity. If you're trying to sell your franchise concept to someone located on the other side of the country where you have no local brand recognition, knowing that the brand is trademarked provides value for that prospective franchise owner.
And the last, and probably most important reason for having a federally-registered trademark is the protection it affords franchisors from becoming categorized as a joint-employer. Essentially, trademarks can stave off joint-employer status if the franchisor attributes its controls over franchisees in the name of trademark and trade dress protection. What does this mean? Well, being considered a joint-employer could be detrimental to a franchisor: it would become liable for the torts of franchisee's employees, be responsible for employee benefits and salaries, workers compensation, and a whole host of other employer-related responsibilities. One hallmark of a franchisor is that the employees of the franchisee are not tied legally to the franchisor. Trademarks can help keep this distinction between franchisors and franchisees.
2. The Business Has a "Catch"
It's easy to walk a dog. You get a leash and walk. Why on earth would someone need to buy into a franchise to start a dog walking company? Well, if the dog walking franchise has its own proprietary scheduling software, a database of drug-screened walkers, and pet-CPR certified pet sitters, well that makes the business a little bit different.
While just about any kind of business can be franchised, the ones that are most successful are those that have some catch--whether it's intellectual property, unique branding, or a highly coveted product or service. After all, a franchise owner wants to buy into something that is going to stand out and have a successful following, not just another mom-and-pop shop that has no uniqueness to it.
3. The Business Is Run By a Patient Owner
Franchising a business takes time. It's one thing to operate a coffee shop in your home town, it's another to have a marketable, viable business model that others are willing to buy into. The average franchise fee hovers around $30,000 depending on the brand recognition, how long its been established, and, hopefully, the expected annual revenues. All that being said, it takes time to put together a package that is sell-able to a potential franchise owner. Done properly, you'll have a franchise attorney draft your Franchise Disclosure Document and Franchise Agreement. You'll need an Operations Manual. You'll need software or other technology to track your franchisee's income for royalty purposes. You'll need a training program, a sales strategy, and likely a hefty advertising budget. All of these things take time. When I franchised by dogwalking company it took about 1 year to get everything in order. While franchising can be a great way to grow your business and your brand, it's certainly not something that can be done overnight.
All in all, just about any kind of business model can be franchised, but it's those businesses that have their intellectual property locked down, have a unique spin on a concept, and have the time to lend to properly franchising the business that do the best.
If you're interested in franchising your business, or just want to chat about what that would actually look like, give us a call. We're happy to help.