How to Expand Your Business Though Franchising 2014 | Page 11

Franchising Assessment Question

1
Is your business model
proven and profitable?
People use terms like “proven” and
“profitable” all the time. Well, the
questions that you need to answer,
include: Does your business have a
good reputation? Does your business
generate free cash flow that supports
your lifestyle and your family? And
if it does, then it probably is proven,
and certainly and sounds like it’s
profitable. But will it be profitable for
franchisees?
How will the profits that you
have experienced - the cash flow
associated with your business - relate
to the income a potential franchisee
may earn when operating one of your
franchises? Will frachisees possess
an opportunity to earn a reasonable
return on their franchise investment?
So, when you evaluate your
profitability, now take the profit

levels that you have experienced
and extrapolate. If a franchisee
opens up a franchise location,
what do you believe their overall
investment will be? What do
you believe their cash flow and
profits may look like? And now,
profitability should be similar to
yours, except it will be less since
the business of your franchisee
will be in a start-up phase, in a
new market and will incur higher
expenses in the form of royalties
to be paid to you. Then evaluate
what you believe the income
potential of your franchisees will
be and compare it to their initial
investment. I think that if your
business is truly successful, you are
going to find that it could be very
suitable for franchisee profitablitiy
and growth. So, as to the first
assessment question of, “is your
business proven and profitable”,
some analysis on your part is
required. I can tell you that if you
opened up your doors two months
ago, it is too early to be thinking
about franchising and, if you are
not profitable, you absolutely
should not be considering
franchising. Your business needs
to generate that cash flow and must
be able to do the same for your
franchises.

2
Have you developed a
brand?
Now keep in mind that we don’t
need to be too fancy here. A brand
is really your business name (your
trade name), your logos and the
trade dress that may comprise the
look and feel of your business. If
your business doesn’t have any
formal trade dress right now,
well that is ok as it will or should
develop over time as you get more
and more involved in developing
your franchise system. But if your
business is successful, at one level
or another, you must have a brand.
Consider that during the franchise
development stage you will need
to protect your trade name and
the identity of your business,
and when working with your
franchise lawyer, he or she will
be evaluating your “intellectual
property” snd will put together
a plan of protection. So, do you
have a brand? Again, if you have
a successful business, I think the
answer is going to be yes.

THE FRANCHISING BASICS