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Three questions to ask before turning your business into a franchise

Three questions to ask before turning your business into a franchise

Business owners need to take a hard look at their operations before launching into the world of franchising.

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Owning and operating a successful business is one thing; being responsible for the success of many others under your guidance is another. At some point, every franchise founder has decided to take their business to the next level, but how do you know when your business is actually fit to become a franchise?

I started SpeedFit with a co-founder, Roland Safar, who is now one of the top franchisees in the business while I am the CEO and run the overall business. I mention this because the two of us approach business in different ways and ultimately that led to where we are today; Roland as a multi-studio franchisee, and me as the CEO and overall owner, responsible for all facets of the business.

We started in 2013 after spotting a gap in the Australian market for a quality EMS (electronic muscle stimulation) fitness brand and initially grew quite quickly, going from one studio to six in a short period. As you can imagine, this starts to stretch not only the founders but also the team. You need to recruit and train a certain number of people to work in the studios while doing all the administration and backend activities to keep the business running.

I started to see how the systems could be replicated, guided by an overarching operations team but managed by each individual studio, and therefore felt that six studios was just the beginning. We decided I could take the brand further, that it had potential to become an Australia-wide franchise. We had the model, we had the momentum, so we just needed franchisees – and we had interested candidates lining up already.

1. Is the business model replicable?

Franchises need to have a unique selling proposition to show their value to prospective franchisees but also need to have a replicable business model for consistency, and so suitable candidates have the best chance at succeeding when they buy a franchise.

Some businesses are just not suitable to be franchised. Those that are unique or rely on hard-to-obtain equipment or rare resources are hard to replicate, as are businesses that revolve around a particular individual or someone with highly specialized skills, especially those who have limited time or capacity.

“I have a confession: initially I was not keen to franchise the business”

For us, our proposition is a combination of our specialized machines – rare enough in Australia but which we readily source from Germany – and the way we select and train our team members. Our studio design, the recruitment and training of team members, as well as our marketing to, and onboarding of, clients is replicable. Once we refined these systems, it was clear that we could franchise the brand.

2. Do you have interested franchisee candidates?

If you remain company-owned, it means that everyone working for your brand is your employee, whereas franchisees are very much business owners in their own right. Creating a franchise enables these people to ‘own’ part of the organization and effectively run their own business while you retain control over the brand as a whole. If you’ve ever wanted to work ‘on’ the business rather than ‘in’ the business, running a franchise is a great option. Being able to harness franchisees’ skills, ambition, capacity and experience can give your franchise a boost that employees can’t.

In a country like Australia, franchising also gives you the geographical reach more readily than if you grew through company-owned studios alone. Coming from Perth, we knew the East coast would be difficult to grow without key people with skin in the game in the cities we wanted to expand into.

Many franchise owners start to entertain the notion of turning their business into a franchise when people ask about investing in a piece of the brand. We had early interest but in the beginning, we decided to keep the studios company-owned because we were still making sure our model was solid and the right people were on board.

Since the first franchisee was my co-founder, we had a soft entry to figuring out the franchisor-franchisee relationship, then as the number of studios increased we started to field interest from trainers and clients who could see themselves running a studio.

3. Do you have the capacity to lead other business owners?

I have a confession: initially, I was not keen to franchise the business. But once we solidified our operations I realized that done right, franchising is the best way to grow the business and leverage past lessons and experiences for the betterment of the brand.

This made me realize that it was not just about building the business but also guiding and mentoring the people in it. And when you’re a business leader, it makes sense that you are guiding and mentoring other business owners who can likewise contribute to your brand.

There’s a story we like to tell about one of our former team members, Amy, who was ready to step up and become a studio owner but didn’t have the initial funds required to start a franchise on her own. She’s now one of our other top franchisees.

In this case, it made sense to help her ‘own’ a piece of the brand by co-funding her location and providing her with an option to buy us out in the coming years. The alternative might have been that we lost her instead and I saw far too much ambition and passion in her to let that happen (at least without knowing I tried!). I’m so happy and proud of franchisees like Roland and Amy who are building their own businesses and creating so much value.

We’re now seeing a more defined pathway for people who start as instructors and then who might become studio managers or franchisees. It’s a really great way to reward, upskill, and uplift people who have a service mentality, who want to help people and the community, but might not necessarily have the business skills yet. Buying into a franchise means having that support – the marketing, the operations and the business acumen – as they learn and grow.

If you’re at the decision point between turning your business into a franchise, asking yourself these three questions will help you evaluate whether your brand is ripe to grow into a franchise network.

A clear ‘yes’ to these three questions means that not only is the business model suitable for franchising, but you also have both the external interest to grow it and the capacity and capability to lead a cohort of business owners to a successful and satisfying role.

THE AUTHOR

Matej Varhalik is the co-founder and CEO of SpeedFit, Australia’s first and largest EMS (electronic muscle stimulation) personal training fitness franchise.

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