In an article published by CEOWORLD, iFranchise Group CEO and franchise consultant Mark Siebert provides guidance to CEOs and other company executives as they evaluate business expansion opportunities, particularly franchising.
Siebert notes that even with anticipated economic hurdles on any given horizon, franchising as a business strategy has historically been better equipped to withstand instability than smaller independent businesses.
Siebert discusses the various advantages of franchising a business, including the core benefit of being able to grow a concept by leveraging other people’s (franchisees’) time and capital, as well as their local market knowledge. Franchise networks also benefit from the built-in buying power and additional resources that come with having more units, which contribute to the overall system’s revenues through royalty and marketing fees.
However, Siebert cautions that while there are many reasons to consider franchising as a growth strategy, it may not be right for every brand or concept, and he references other expansion alternatives, such as joint ventures, distributorships, and licensing agreements.
For business executives contemplating franchising, the following criteria are recommended for evaluation:
- Is there a proven, profitable concept with established systems that can provide an attractive ROI for an investor?
- Is the concept or brand, and its products or services, both attractive and sufficiently unique in today’s marketplace?
- Can the concept be replicated and be relevant in other markets (cities, states, regions, countries)?
- Is the concept easy enough to operate, but not simple enough to simply be copied by others?
- Is there a well-developed brand, with sufficient protection of intellectual property, through the use of trademarks or copyrights?
As the decision is made to franchise a business, owners and executives should conduct ample due diligence in order to take the appropriate next steps. This includes consulting with trusted advisors, including accountants, attorneys, and franchise consultants. It also requires an awareness and understanding of:
- The capital needed to develop a franchise program
- The legalities of franchising
- The necessary shift from being a business owner/operator to becoming a franchisor
- The eventual goals or exit strategies of the franchisor organization
In the end, Siebert stresses, franchising must be a collaborative relationship between franchisor and franchisees, and business executives need to be well-informed and well-prepared to build on this premise, in order to successfully grow their businesses through franchising.
