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3 Signs Your Existing Startup Should Franchise Right Now

Bruce Hakutizwi

Bruce Hakutizwi

U.S. and International Manager at BusinessesForSale.com
Bruce Hakutizwi is the U.S. and international manager of BusinessesForSale.com, a global online marketplace for buying and selling small- and medium-sized businesses. Bruce manages business development, account management, content building and client acquisition and retention in the United States, Canada, South Africa and Europe. He frequently writes about entrepreneurship and small business ownership.
Bruce Hakutizwi

It is estimated that that a new franchise opens every eight minutes. Every. Single. Day. That’s a lot of competition — with over 900,000 franchise businesses operating in the U.S. today, it can be overwhelming to even attempt to enter the market.

Choosing to franchise can be a make or break decision, and timing is everything. Franchise too early, and you run the risk of incurring huge debt. Franchise too late, and you might miss your optimal window of opportunity.

Don’t be intimidated, but don’t enter in blindly either. The following features are a good indication that it’s time to franchise your existing business, so evaluate your business against these criteria before opening yourself up to the scrutiny of the market.


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Is your business proven?

On average, franchises experience a success rate of 90 percent, which makes them some of the safest of any business type. This is a proven model, but also a saturated one. Certain businesses (or even mere ideas) are better suited for franchising than others.

So, before you enter the market, you need to identify what makes your business viable. Take note of your greatest selling points and make clear how these features can offer a competitive advantage.

A few franchise features that help prove market viability include:

  • Revenue: Numbers don’t lie. Although you might be hesitant to divulge a specific figure, revenue (even just a ballpark) will undoubtedly be your greatest selling point.
  • Future potential: Did you know that Netflix has over $12 billion in long-term debt? And, frankly, it doesn’t really bother the company, considering that $2 billion of that was tacked on just last year to bolster its content spending. This is instructive to franchising because Netflix, by all financial and cultural metrics, is doing just fine. Why? Because people trust its future potential. This is the optima of “you have to spend money to make money.” Don’t be bashful about your debt, because sometimes it’s better to be broke with potential than rich and stagnant.
  • Brand: This is possibly your greatest selling point. Other factors (debt, inventory, location, etc.) can all be changed. Your reputation, however, is mostly steadfast and nearly impossible to influence. More than anything, franchisees will want to attach themselves to a strong brand.

Franchising requires extreme scrutiny, so now is not the time to be shy. A proven track record is the greatest leverage you can bring to a potential franchisee. Partners want proof that your model, concept and business plan have the potential to deliver ROI, so past successes will act as the linchpin of your franchising use case.


Related: Starting a Business or Buying a Franchise: How to Know Which One Works For You

Is your business adaptable?

On average, it costs around $250,000 (excluding real estate) to buy a franchise. Sure, this is fairly modest compared to the cost of starting a business from scratch, but franchisees — especially first-time owners — need assurance that their investment can last the test of time.

The term “recession-proof” gets thrown around a lot, but in the context of franchises, it is especially important. Consider the lasting power of your business. Is your service necessary to a customer’s way of life, or will it be abandoned early if they are looking to cut costs?

For example, restaurant franchises are some of the safest investments on the market. Not only do they offer unprecedented brand awareness, but they also offer an enduring, consistent service: food. History has shown that a strong brand, mixed with an in-demand product, tend to last the test of time.

This is all to say that certain businesses just don’t go out of style, no matter the economic climate. Consider the value of your business and really take note of your lasting power. When you decide to franchise, your investors will want to know that your model can last the test of time and adapt to an ever-changing consumer culture.

Is your business practice repeatable?

As a small business owner, you have likely operated a certain way over the years. Whether you realize it or not, you have particular rules, processes and strategies.

In fact, you probably possess a great deal of undocumented operational knowledge that you simply store in your head. Up until now, you may have been a one-person operation, so there has been no need to democratize processes. If you franchise, that has to change.

The purpose of franchising is to extend the reach of your business, and that can’t happen if you hoard your successful processes.

The best franchises are “turnkey,” meaning that processes, systems, technologies, training and overall business know-how are all universal. Working in Franchise A will, ideally, be identical to working in Franchise B. Turnkey operations not only help franchisees get off the ground, but will also help establish standard practices that have proven successful for running the business.


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Is it time to franchise your business?

If your business exhibits the above criteria, you’re in good shape to franchise your business. As long as your business model has proven profitable, adaptable and repeatable, you are as ready as ever to open your doors to new investors and franchisees.

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