Should 2014 Be The Year You Franchise?

06/25/2014 09:00 am ET | Updated Jun 25, 2014

For many small businesses, the recession was challenging, even devastating. But for those that made it through, it was also an undeniable proof-of-concept. After all, if your business could survive the worst economic turmoil in a generation, what can't it do? If your company weathered the storm, now that conditions are more stable, you may be asking yourself one of the of the biggest questions a business owner can ever face: Is now the time to expand?

Not every business can benefit from opening a second location (or a third, or a fourth ... ). Expanding because "it's what successful companies do" is a mistake that can easily overwhelm a young business. I could write a book on the particulars of figuring out if it makes sense to open multiple locations -- the market analysis, number-crunching and risk assessment that are absolute musts. But let's assume you've already done your homework and determined that, yes, the market wants more of what your company has to offer. It's time to expand. What's the best way to go about it?

There are numerous methods for expansion, and no one option is going to be right for every business. The best place to begin is by researching other successful multi-unit companies in your field -- how they grew, whether one method was widely favored over another, and if so, why that might be. Then you need to figure out of the same reasoning makes sense for your unique business model. Should you follow their established example, or break away from the pack?

That was the question I grappled with when I decided to expand my company. Franchising is not terribly uncommon for real estate companies nationwide, but among the major firms in New York City, it was all but unheard of. Franchise? And have to split those juicy NYC commissions with one more person? Not a chance. Better to open corporate-owned branches and install top agents as managers. Pay them a salary, keep the owner's share of the commissions.

That was the common thinking, and I admit, that's the way I was looking at it, too. But it wasn't just about giving up the commissions, it was about giving up control. Like a lot of small business owners, I had built my company from the ground up. It was my baby; how could I possibly give ownership of its offices to other people?

Then I realized there was another common element in the stories of how these big New York firms expanded: those managers they appointed had a habit of leaving to start their own competing companies.

By franchising, I could offer my top agents the opportunity open their own offices while still keeping them in the family. Yes, it would mean giving up some of the commission and, even harder, giving up some control of the brand I had created from scratch. But after doing my research, I knew it was the right call.

Rapid Realty NYC opened its first franchise in 2009, right in the middle of the recession. Within four years, we'd opened over sixty more. Now we have franchises opening in new cities all across the country. When I look back, there's no question that franchising was right for my company. But is it right for yours?

The ability to expand quickly and aggressively is one benefit of franchising that makes it ideal for companies looking to boost their brand recognition. Because franchisees provide their own capital and assume much of the liability for their individual units, your company can add stores swiftly with minimal cost and risk.

That's not to say that franchising is for cheapskates. While the per-unit cost for franchisors may be lower than it is for chains, initiating a franchise program for your company can cost tens, or even hundreds of thousands of dollars, depending on your location, the size of your expansion plans and the complexity of your business.

If you're planning to expand your business, ask yourself these questions to see if franchising may be the route for you:

  • Do I plan to have a large number of stores, or would I be happy with just a few?
  • Could I easily teach someone else to run my business like I do?
  • Could I put all of my company's practices and procedures into writing?
  • Would my business be successful if it was located in another city? Another state?
  • Can I afford a substantial investment into legal work, accounting, and marketing?
  • Am I willing to trust others with my company's clients and reputation?

Of course, a short questionnaire can't possibly determine the best course of action for your company. But if your small business made it through the recession and emerged ready to grow into something more, this could be a good place to begin.

And if you do decide to franchise, there's another benefit you should know about, and it's actually my personal favorite: you get the joy of helping other people become small business owners, too.

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