You started with that small gourmet burger shop on the west side five years ago. Since that joyous time, you have used “tried and true” research methods and have managed to expand your outlets from one to five. The profits are amazing and now you have the financial independence to really enjoy the fruits of your labor.
There’s only one problem, you’re never off work long enough to enjoy it. You are slaving away 26 hours a day and eight days a week, but because your employees have no real vested interest in your operations, you continually need to be at the helm to ensure that your business is operating the way it should. Before you lose your mind, there is a way of maintaining your business and its profitability while retaining your sanity. It is called franchising.
What’s to know about franchising?
Before you begin starting your franchise, you should be aware of a few things.
Franchising can be loosely described as a business transaction where a franchisor licenses their operations to a franchisee for a single payment, recurring fees and/or sales percentages. This can be a perfect solution as it potentially releases you from day-to-day operations of the outlets you decide to franchise, because the person taking over for you has a vested interest in the business and will do their best to maintain and grow its profitability.
However, this isn’t a solution that allows you to wash your hands and walk away completely. There are certain important relationships in this type of transaction that you need to be aware of, as they will require your continued involvement in certain aspects of the operation.
As a franchisor, you are most likely selling your methods of operation to someone that hasn’t been involved in the initial development of the buisness. Therefore, you need to clearly outline your business practices and policies in a manual format in order to ensure operational continuity. This will also prevent your franchisee from falling prey to the mistakes that you encountered and corrected as you grew your business.
Also, as a franchisor you will continue to bear the responsibility of support in advertising, marketing and product supply. Remember, you gained your buying power from suppliers because of loyalty and long-developed relationships. The last thing you need is for your franchisee to undermine this by going to another supplier at higher rates with untried product quality and service.
So where do I begin?
Starting a franchise costs money in manual preparation, training and other aspects. Many small business owners have discovered that by accessing business cash advances, they are able to secure the capital necessary to begin the franchising process.
Because a franchisee is considered to be a separate entity on certain levels, you are not liable for debt responsibility that your franchisee may incur during the course of business. However, you don’t want them running the business into the ground through bad debt management. This means that you should be doing regular spot checks of their books. This is your right as a franchisor. After all, you spent all this time and energy building your operations, so you should know the condition of your company. By that same token, it’s your responsibility to provide a transparent financial record review for your prospective franchisee. After all, they need to be completely informed about the nature and profitability of your business before entering into any agreement.
If you do proper research and provide proper support, combined with due diligence, you will be able to finally take that vacation you so richly deserve, without losing a dime.