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Not all businesses are suitable for franchising, traits of a business which can be franchised include:
- A great system of operation - the key to a successful franchise is having a well defined system of operation
- Sustainable profitability - your business must have been profitable for a long enough period of time to predict continuing success. A franchisee should be able to earn a decent salary comparable to what they would earn if they were the manager plus approximately a 15% return on their capital.
- Simple and efficient method of doing business - your business must have a simplified, standardised or uniform method of doing business which is efficient and can easily be duplicated and taught to a reasonably intelligent person in a relatively short space of time.
- Transferable to other markets - your business must have broad geographical appeal and be easily transferable to other markets within New Zealand and even overseas.
- Distinctiveness - is there something unique or unusual about your business that gives it a point of difference? For instance; the way you do business or your product or service.
- Branding - your business must have a brand which is distinctive and has a reputation in the market
- Long term trends - your business must be sustainable in the sense that it is not built on short term fads but long term trends.
- Inexpensive to operate - your business must be relatively inexpensive to operate.
- Financiable - the easier the franchisees are able to get finance to purchase the franchise the easier it will be to sell franchises.
Characteristics of a business which may not be suitable for franchising include:
- Limited marketability - the product or service is likely to have a market for a short time
- Gross Margins too low - the gross margins are too low to offer a return on the franchisees investment
- A limited geographically defined market - the market for the product or service is likely to be limited to a certain geographical location and it is unlikely that this will change
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