Criteria #6
Do You Have the Money to Package and Launch Your Franchise Prototype?
You won’t know the estimated cost of converting your independent business into a franchise system until you can piece together all these criteria and determine the packaging costs. The areas that will need funding include, but may not be limited to, the refining of your concept to prototype status, preparation of legal documents, initial sales and marketing of the prototype and hiring of miscellaneous personnel. Expect to spend anywhere from $50,000 to $100,000 for a modest franchise expansion venture.
Criteria #7
Do You Have Working Capital?
Above and beyond your research and development costs, you will need a safety net of funds to keep you afloat during the early stages of the franchise launch. Give yourself a good 6-9 months before you sell your first unit and then another 3 months in between each sale. With the help of an experienced accountant who understands the financial dynamics of franchising, you can arrive at a realistic working capital figure. Most experts suggest twelve to eighteen months of working capital to get you through the hump to your first paycheck.
Criteria #8
How Much Will Your Franchise Concept Cost?
The turnkey cost of a typical franchise unit needs to be determined prior to the promotional launch of the franchise system. A starting point would be to look back at the start-up costs of your own business, less working capital. Your goal as a franchisor is to duplicate the same business model at the lowest price possible, add a mark-up, and then define your selling price. When compared to what you spent, the selling price of the franchise should be equal to if not slightly more than what it cost you originally. At the same time, you should be competitive with similar concepts in the market. What can set you apart is the quality of your offerings, the training experience, and the support system you plan on offering to your franchisees.
Criteria #9
Who is Going to Comprise Your Management Team?
Criteria #10
Is Your Market Growing, Shrinking, or Flatlining?
Conclusion
These ten criteria are a starting point to determine if you have the makings of a winning concept that can be rolled into a potentially successful franchise system. These are not guidelines or steps in a process, but points of reference as you delve deeper into the research and development process. Your next step is to determine if you want to break ground on your own or hire a franchise consultant who will cover all these bases for you. If you do the latter, there are many franchise consultants always looking for the next greatest concept. If your pockets run deep, they can take you from phone call to launch day without you having to do much work; on the other hand, their services can be purchased a la carte as well. Your favorite franchise directory should have a section listing franchise consultants in your city or state.
