Should I Franchise My Business? - Black Enterprise
Black Enterprise magazine Fall 2019 issue

Whether you’re thinking about starting an independent concept business or you’ve already been in business for a few years, entrepreneurs should learn about the various ways to scale their business. Major food brands like Starbucks and Chipotle Mexican Grill, for instance, grew by using private capital and decided to keep most of their locations as corporate-owned. However, if a business owner doesn’t have the resources and time it takes to seek private capital, franchising might be the perfect solution. But not all great businesses make good franchise opportunities. I counsel business owners that they should have a minimum of three years of operational history and be profitable. Here are some additional things you should consider:

Is the business repeatable, sustainable, and with proven systems in place?

One of the things that makes franchise opportunities so attractive is that they have proven track records and systems in place, so that an investor can get up and running quickly, without making some of the mistakes that new business owners often make. If your business is not easy to understand, repeatable, and sustainable, it will be difficult to teach it to someone that may have no experience in that area, and that will increase the possibility of failure.

Is the business adaptable to different regions of the country?

Granted, there are successful regional franchise brands that do extremely well. But when thinking about franchising your business, you’ll want to have the “sky’s the limit” attitude going in. This means your product or service will be much more attractive to a wider audience if it can be successful anywhere in the country—and also internationally. If you have a product that is difficult to obtain in a certain region or the service you’re providing is needed only in areas based on a certain climate, then that limits the population of investor owners.

Gary Brackett, The Stacked Pickle franchisor, said that one of the keys to their success is that they aren’t simply a sports bar, but part of the local community.

Am I ready to change my life?

I realized there was only one of me, and I couldn’t be everywhere” –Hakika Wise, founder and CEO of Kika Stretch Studios.

This is a topic I address quite often with business owners. While franchising does provide growth opportunities, the first question an owner needs to ask themselves is, “Am I ready to completely step away from running my business?” Once you decide to become a franchisor, your daily activities and mindset will need to shift significantly. You will most likely not be able to do the thing you love—such as being a chef or providing therapeutic massages. Your focus will now become creating operations and training manuals, filing legal and trademark paperwork, recruiting and interviewing candidates, and marketing the brand for expansion. There are several franchise firms that can assist with all these activities, but you will need to work with them closely to develop your franchise program.

Do you have sufficient capital available to franchise and market the business? 

There’s an extensive list of paperwork and documents that have to be created and filed when franchising a business. Again, it can be a great way to grow your brand, but you’ll need to be prepared to invest in the process before people are going to be excited about investing in you. We generally tell business owners that they need to be prepared to invest $75,000 – $100,000 in the first nine months of franchising. This investment will be going toward creating the Franchise Disclosure Document (FDD) – sometimes referred to as “the Bible” of the franchise, filing the necessary paperwork in the 13 states that require registration, building training manuals, marketing, and potentially hiring additional staff to support you as a new franchisor. This amount may vary if you choose to limit the market roll-out or if you have much of the required documentation already completed. But keep in mind, the most successful launches are those that have the funds to build excitement about the new franchise.

For small business owners that have a successful business and are excited about the idea of having consumers across the country have access to the product or service, and feel confident that it’s a business that people would be interested in investing in and running, franchising may be worth exploring.