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Key Questions for Companies Considering a Franchise Expansion

Picture of a laptop screen with franchising written on it

Picture of a laptop screen with franchising written on it

Key Questions for Companies Considering a Franchise Expansion

Franchising all or part of your business can be an attractive expansion strategy, but how do you know if yours is a business that will work well for others? There are a few key questions to consider.

This is an exciting time in the franchise market. Not only do prospective franchise buyers benefit from the abundance of new opportunities created by advances in technology, better access to customers and greater convenience. Franchisors are also leveraging these benefits to expand and create new revenue streams. 

Just like their franchisee counterparts, companies considering expansion through a franchise model must also conduct careful research and reflection. When I meet with companies interested in franchising all or part of their business, I ask a few key questions:

  1. Proven Model: Does your business have a proven, consistent and validated business model on which a franchise can be based?

  2. Financials: Does your business have financials that are organized and well documented? Can your financials be presented to a potential buyer and are they included in your Franchise Disclosure Document (FDD)? Typically the business would hire an attorney to develop its FDD. The FDD is a requirement for franchising and in some states, like California, it must be audited and approved.

  3. Day-to-Day: Do you have a day-to-day playbook? Does your business have technology in place, operative procedures documented and daily methodologies detailed in order to deliver the product or service to customers? Having a day-to-day playbook is critical in making a franchise business model work.

  4. Legal Entity: Does your business have its legal entity set up? Is it a corporation, partnership or LLC? Has it filed and established all the appropriate paperwork?

  5. Insurance: Does your business have proper insurance in place? There are different types of insurance companies should consider.

  6. Administration: What are the administrative processes? Are they defined, refined and documented?

  7. Marketing: Has the business defined a marketing and business development system for getting and retaining new clients and customers? How is this system impacted by franchising?

  8. Long-Term: What is your long-term vision for the company? Does a franchise model support this vision? Is there plan to exit the franchise model if it begins to stray away from your vision? If you decide to exit your business in the future, what is the plan for the franchises?

The franchise model is an excellent option for companies that are ready for growth and have the right set of parts in place. Evaluating your current business model, financials, processes and procedures is a great place to start to determine if franchising is right for your business.

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Rick Morgin is a Consultant with The Franchise Consulting Company and alumnus of Santa Clara University. The Franchise Consulting Company assists clients with the educational process of researching and selecting available franchise businesses that best suit desired lifestyles and financial goals. The research, qualification, and application services provided are free; fees are paid by the Franchise company when a client opens their business. Rick is a guest blogger for MOBI. For more information please email rick@thefranchiseconsultingcompany.com or visit https://thefranchiseconsultingcompany.com 

For more information about pursuing a franchise model, please visit MOBI’s Business Expansion course Session 10, “Franchising Your Business.”

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Picture of a laptop with the word franchising on it.