Stuart Cook, Founding Partner of TWIYO and former CEO of Zambrero, one of Australia’s fastest growing franchises, shares his thoughts on the critical aspects of franchising to help business owners determine the right path for their business.

I want to franchise my business, can you help?

“Don’t franchise, I was making more money when I had 3 of my own stores than I am now” - argued a high profile franchisor at an awards night in Zambrero’s early years.

This left me feeling stunned and numb. How could someone in their position be this against franchising? Luckily this was one of the few times I'd ever heard this statement. As Zambrero grew I came to understand how franchising can be amazing for some but debilitating for others.

Over the last few years people have approached me with businesses ranging from gyms to restaurants to consulting services and have said, not asked, “I want to franchise my business, can you help me?” Because these people, thanks to McDonalds, assume franchising your business is a guaranteed get rich quick scheme.

Don’t get me wrong, franchising your business can be incredibly rewarding both financially and personally, not least through the relationships that you build with your franchisees. However, there’s a lot to consider when assessing if your business would suit a franchise model.

Franchising is a lot of work

Franchising your concept is - and needs to be said loudly - A LOT OF WORK. Your primary goal is to ensure that your franchisees are able to succeed. Before beginning, you must take a close look at your business model and ask yourself. ‘Can I take a large enough royalty to make enough money for me to run the franchise as well as enough money for the franchisee to get a great return on investment?’

Without understanding the numbers and what’s required to operate a franchise model, it can lead to the downfall of the very business you’ve created, or the downfall of your franchisees’ business. Consider for a moment that this can put  families into financial ruin. Caution must be taken, and you must take the time to run a thorough financial and operational analysis. If you are not great with numbers, that is ok. There have been many successful entrepreneurs who aren’t, but they surround themselves with people who are - let them do it!

Economies of scale play a big part

When franchising, both you and your franchisees are taking a cut from the business. Therefore the business model must be stronger than an independent model. Enough additional value must be created to offer a greater opportunity than just starting an independent business. Economies of scale often play a big part in this.

The next question you need to ask yourself is ‘how many franchisees, stores or locations can I sell or are possible?’ This will help to understand the viability and business model that you are creating. For example in Australia, I personally would never recommend anyone franchising a fast food concept if they couldn't open up more than 30-40 stores. Generally speaking if you’re building a strong team in your support office, you won’t show a strong profit until greater than 20 stores. If your product or concept is so niche that you can only open 5-10 locations, then own them yourself and grow a little slower. If you need to, raise capital and dilute part of your shareholding in order to achieve success - whatever that looks like to you.

So, when you or someone you know says those words “I want to franchise my business”, you are now armed with a little extra knowledge to help make a decision that can save you a lot of time and money.

If you want to read more about this topic please send a message and let me know.