Could your business be a successful franchise?

Sylvia Pennington

Business is brisk, you’re stashing the cash – and lately you’ve been wondering whether your company has the potential to become the next Boost Juice, Grill’d or other runaway franchising success story?

It’s much harder than it looks, cautions Michael Sherlock, former CEO of the Brumby’s Bakery chain and an adjunct professor at Griffith Business School’s Asia Pacific Centre for Franchising Excellence.

Profitability, scalability and sustainability are the keys to turning a small business into a thriving franchise chain. Entrepreneurs who don’t do their homework or rush in too quickly can trash their brand and devalue their original, successful enterprise in the process, Sherlock says.

Want to know whether you’ve got the profitability detail sorted? Take yourself out of the equation temporarily and see how well the boat floats. You may appear to be minting it but is it down to you busting your boiler doing hundred hour weeks, or having family members cover expensive Sunday shifts in the shop?

Profitability, scalability and sustainability are the keys to turning a small business into a thriving franchise chain.

Consider the scalability question next, Sherlock says. Your knife grinding stand in a busy retail hub might be going gangbusters – but is there sufficient ongoing demand in your city or state for dozens of others like it?

And can new people read your operations manual and hit the ground running without specialised qualifications or months in training? If the answer’s ‘no’ then replicating your formula in multiple locations is likely to be fraught.

“You need to be able to hand your systems to an untrained person and have them make money,” Sherlock says.

Should you happen to convince a handful of hopefuls to buy in to your concept, it’s there the hard slog really begins.

You need to be able to hand your systems to an untrained person and have them make money.

While the sale proceeds and levies paid by franchisees may appear to be a windfall, you’ll need to keep ploughing resources into systems and marketing, if your empire is to be successful and sustainable long term, Sherlock says.

Maintaining the standards that made your original business model a winner can be an ongoing challenge and founders who aren’t tough on operators who cut corners can find the reputation of the entire organisation takes a dint.

And expand beyond a handful of outlets and watch your overheads soar as your payroll swells to include marketing manager, field rep and the other corporate apparatchiks needed to keep things ticking over, Sherlock warns.

“Everything is not rosy in franchise land,” he says.

“Be prepared for lots of hard work. It looks glamorous if you’re [Grill‘d founder] Simon Crowe and you get to the end of it, but overnight success takes five or ten years. It sounds attractive but it’s a very long haul.”

Sylvia Pennington

Sylvia Pennington is a Brisbane-based freelance journalist who writes about small business, information technology and personal finance.

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