Your assessment
This checklist is about doing your own assessment of whether or not you might be able to benefit from franchising or licensing part of your business.
The part to be franchised or licensed is typically the delivery mechanism of a specialist service but often includes some elements of sales including the sale of specialist products instead of services.
In what follows we just refer to services for the sake of simplicity but the ideas apply to product sales too.
With regard to the reference to licensing as well as franchising, for the purpose of this checklist just think of licensing as a more lightweight and lower resource option compared with a full franchise.
- Is the business currently operating well with good profit margins and with potential for growth?
It’s hard to franchise low margin business with limited growth. - Has the business been running long enough to demonstrate that it works all-year round and even when the economy is doing less well?
Prospective franchisees or licensees will need evidence that the business is sustainable. - Do you own all the intellectual property in the business and have it properly protected?
- Does the delivery of your service rely upon your own specialist methods or “winning formula”?
It pays to have a strong differentiator and market leadership. - Are you currently limited by the distance you can travel to provide your products and services, or the distance your clients can travel to you?
This is often a key driver – franchises grow by opening outlet. - Is there evidence to suggest that there would be demand for your products and services if you had “branches” or “outlets” elsewhere?
Some franchises only work with certain demographics. If the service can work country wide or even worldwide that’s a big plus. - Are there limits to what you can supply to your customers that can’t easily be addressed by just creating an internet supply mechanism? For example, do you need personal contact or site visits?
This is a very topical issue after all the changes driven by covid-19. The internet may be the answer to some of what you do but may not be enough or suitable in some cases. - Are you independent of any distribution or supply agreements that would prevent you from subcontracting out or licensing what you do?
Even if you are tied to agreements you might be able to have them changed. - Is there a part of your business that could be replicated and work by itself? (For example, could the sales or one service elements be separated out?)
Mistakes are often made here. You really need to look for a “minimal viable offering” to get started rather than an all singing all dancing first offering. - Are you keen to grow your business but reluctant to make a heavy financial investment by yourself or have others take a stake that could dilute your ownership?
The key point here is that the franchises or licensees make an investment in setting up outlets which greatly reduces the amount you need to invest for growth.
Things like trademarks, documentation, designs and domain names are often key and need protecting.
Evaluating your results
The more times you answered “Yes” the more likely it is that your business is suitable for
Franchising or licensing. If you recorded “Yes” seven times or more it may be worth doing a more
detailed evaluation. Whatever your score we are very happy to discuss your options with
you.
If you recorded “Yes” three times or less you probably have considerable work to do to make
your business franchisable or licensable.
Even if you decide you don’t want to franchise your business you have some other
interesting options. You might be interested to discover that if you apply franchising
techniques to your business you could benefit in lots of other ways. For example, you can
significantly increase productivity, spend less time managing day to day details, and improve
the saleability of your existing business by making it less dependent on you and your
availability.