Cash Flow and Profitability

The first point to clarify is the business must be in operation. To contemplate developing a franchise system for what is nothing more than a well developed idea is not a sensible decision. A proven cash flow and profitability will be a sign that the business is operational and the end consumer has consistently demonstrated the business has sustainability and relevance.

A Burning Desire to Grow

This is one of the most important attributes that defines the franchisor. A person who is not content to operate one, two or three locations, or operate in one state. My experience of people such as Janine Allis (Boost Juice), Simon Crowe (Grill’d), John O’Brien (PoolWerx), Katherine Sampson (Healthy Habits), Jack Cowin (Hungry Jacks), Peter Irvine and Nabi Saleh (Gloria Jeans) to name a few, is the desire to grow significant businesses across Australia and beyond.

People Challenges

Do you have a strong foundation to the business that is delivering more work than you can find people? Is there another level of expansion or performance possible to leverage the brand and core operations if the right people could be found? Do you have a churn of people that is creating a quality issue with your consumers? How much of the company time is tied up with people issues?

All of these are issues that in my experience have been a catalyst for people considering franchising as a strategy.

Capital

The development of the franchise program is the foundation of the franchise system. It is an area where expert advice should be sought to ensure the franchise system is developed to a quality standard that will provide the foundation of the business. The development of a franchise system can take many months and a sizeable investment. Do you need to go to these lengths to develop a franchise system? This is a judgement of the individuals concerned but research of the most successful franchise systems will unearth a common trend that clearly indicates the importance of a quality foundation to the franchise system.

Given the development required it is important to consider the capital base of the business and understand the necessary investment and impact on working capital. The majority of emerging franchise systems are funding the development from working capital or debt.

To contemplate a franchise strategy without the necessary capital will force short cuts to be taken that will produce a predictable outcome. It is very simple. If you want to develop and adopt a franchise strategy an investment of time and dollars is required. My advice is either do it properly, consider alternatives, or stay away from franchising so as to avoid the headaches or disappointment at a later date.