Confirm your Franchisability
MSA is fortunate to work with both start-ups and mature businesses in a variety of market segments. Our clients rely on us to determine with them if their business is “franchisable” and, if it is, how to properly structure their franchise offering.
Can you become a franchisor?
It’s important to recognize that almost any business can franchise, because the legal hurdles for becoming a franchisor are quite modest. What is essential in creating a sustainable franchise system is to first understand whether franchising is the right expansion strategy for your company.
We begin each engagement by reviewing the franchisability of your business with you, before you make the serious investment of designing and developing your franchise program. We do this through a process called the Franchise Feasibility Analysis (also referred to as a Threshold Analysis).
Franchise Feasibility Analysis
In our Feasibility Analysis, we help you take an honest look at where your business is today. We review your franchise-readiness and focus on a broad spectrum of important business factors in a systematic approach.
MSA’s broad practice capabilities enable us to work in a host of downstream expansion strategies in addition to franchising. If our Feasibility Analysis finds that you are not ready to become a successful franchisor today, we examine alternative growth strategies that may be more suitable for you now, and assist you in developing the necessary franchising qualifications you require for the future.
While each of our clients and the industries in which they operate are different, some of the relevant benchmarks we examine in determining clients’ readiness to franchise include:
- Products and Services: Is there sufficient consumer demand for the company’s products and services, and is that demand established or based on a trend that will keep the company’s consumer offering in demand for the foreseeable future?
- Management: Is management experienced and ethical with a history of financial and personal accomplishments?
- Commitment: Does the management of the franchisor have the necessary long-term commitment necessary for franchising?
- Adaptation: Does the company have the necessary resources, capability, and willingness to adapt its consumer offering to local market conditions (neighborhood culture, real estate, consumer preferences, local regulations, etc.)?
- Systemization: Is the business based upon a set of refined and unified operating processes that have been tested and proven in actual operating locations?
- Skill Transfer: Can franchisees, their management, and their staff be taught to operate the business in a reasonable period of time to meet brand standards?
- Support: Can the revenue stream generated by the franchise system give the franchisor the resources necessary to provide the support required?
- Expansion: Is there an adequate pool of franchisees with the willingness and financial capability to become franchisees?
- Differentiation: Does the consumer offering have competitive advantages or points of differentiation that make it attractive to consumers and prospective franchisees?
- Real Estate: Is there sufficient real estate available to support the system’s growth requirement that is both acceptable to the franchisor and available at a cost required to ensure franchisee profitability? Can the system’s real estate requirements be adapted to various market requirements? Is the cost of developing a franchisee’s location acceptable to prospective franchisees and bankable?
- Regulatory Requirements: Are there any significant regulatory barriers or personnel licensing requirements that would prohibit or limit the development of franchises?
- Economics: Will the franchise offering be affordable for the prospective franchisees? Does the franchisor have the necessary financial capability to establish, expand, and support the franchise system? Will the business, after fees, be profitable and will it meet the return on investment required by the franchisee and franchisor?
For a more detailed primer on franchisability, two helpful books are Franchising for Dummies, by Michael Seid, Founder and Managing Director of MSA Worldwide and Dave Thomas, founder of Wendy’s International; and Franchise Management for Dummies, by Michael H. Seid and Joyce Mazero.
Considering whether to franchise your business?
MSA Worldwide provides expert guidance on determining whether franchising is the right expansion strategy to grow your business. Contact us for a complimentary consultation.