Tried and tested: How to tell if a business is franchise-ready
By Armando Bartolome at Manila Times
Franchising has hit mainstream. More would-be entrepreneurs are now giving as much consideration to owning a franchise as they do to setting up their own business. Consequently, business owners are also looking into franchising out their brand. But how does one determine if the business has been tried and tested and therefore ready to be franchised?
Let me share some of GMB Franchise Developers’ criteria:
1. The longevity of the business.
A business should at least be in operation for one year. However, the longer the business has been operational, the better. No businessperson will continually operate a business if he is not generating profits from it. But this is not a guarantee that the franchisee will also generate the same profits as the Franchisor. All this means is that there is an available business system that has the potential to generate profits. The potential can fully be explored by the Franchisee if he follows the business system and provides the hands-on management required.
Longevity will also enable one to identify if after going through the business cycle, the business’ end result will be financially attractive. One knows that a business goes thru a cycle of good sales and low sales. No business will forever give one the same level of high sales. Longevity is also important since the Franchisor should be able to give the franchisees guidance on what to do during the business’ peak and bottom levels. If a Franchisor has not had this experience, there is nothing that can be transferred to the Franchisee.
Check the Franchisor’s branches. Check the market it caters to. Does it cater to different markets or does it cater to a very specific market. These are important questions since the wider the market the franchise concept can cater to, the better. This is not however to say that very specific concepts cannot be franchised. If and when there are franchise concepts like these, then the franchise applicant should accept that there would be limitations as far as locations are concerned. Also, it will be important for the applicant to have a full understanding of the market the franchise concept caters to and possible locations can be identified using this criteria.
3. The concept
The market has seen the rise and fall of franchise concepts that were fads. The pearl shake fad, the shawarma fad, and the lechon manok fad are among the more famous examples of this. A fad concept cannot be franchised right away. It has to go thru the test of time to determine if it can be franchised or not. A fad has no staying power in the market. However, even fad concepts can be franchised, but this is where one-year operations will not be enough. One would need over two or more years to determine whether it can franchised or not.
Time will be needed to check the concepts’ survival, including its highs and lows, in the market.
I hope these tips give you a better understanding of how to evaluate whether a franchise has been tried and tested, and if it will be a lucrative business opportunity for you.
The Franchise Times is a public service project of the Association of Filipino Franchisers, Inc. (AFFI) and The Manila Times. This week’s contributor, Mr. Armando O. Bartolome is a founding member of AFFI and Chief Executive Officer of GMB Franchise Consultants. For feedback, please e-mail [email protected] For more info on AFFI, visit www.filfranchisers.com, call the AFFI Secretariat at 873-8144, or text AFFI to Smart 326.