You’re probably familiar with the idea of franchise ownership, but have you ever heard of a conversion franchise? A conversion franchise is when a franchisee joins their independent business with a franchisor in the same industry.
For example, let’s say the owner of a small hardware shop leaves the business to his kids. It’s possible that the kids won’t be as passionate about independently running the shop as their dad was – especially if business is tough to operate. It might make more sense to convert the business into a well-known franchise location (such as Ace Hardware) and then continue running it as a franchisee.
This type of partnership is a win-win since the franchisor can expand its network while the franchisee benefits from adopting an established brand with its trademarks, marketing programs, successful operating procedures, and more. Industries that are better suited for the conversion franchise process include:
- Real estate
- Dental and medical clinics
- Hardware stores
- Professional services
- Home services
- Auto mechanics
In the world of franchising, there’s something for everyone. If conversion franchising doesn’t apply to you, check out this blog about other franchise types: 5 Different Types of Franchises.
However, if you currently own your own business and are thinking about converting it to a franchise, then keep reading to learn more!
4 Benefits of Conversion Franchising
There are several benefits to Conversion Franchising worth considering:
- Streamlined Process – Franchises come with standard operating procedures that have already stood the test of time, which might come as a relief to an independent-business owner trying to figure things out on the go. The franchisor also benefits from not having to start the location from scratch.
- Lower Capital Requirements – The costs for converting a business to a franchise will be significantly lower than a new franchise location because the infrastructure is already there. This is financially beneficial to both parties.
- Lower Risk – When franchisors have the opportunity to add locations, it allows them to serve different communities in various places. This distributes their risks, which increases their probability of success. It’s also less risky for the franchisee since franchise systems offer a business model that’s been proven to work.
- A Symbiotic Relationship – When a franchisor converts an independently-owned business into a franchise, they gain the wealth of knowledge that the shop owner already has about the local customers. Additionally, the newly converted franchisee will receive a blueprint for how to run the business along with invaluable training and support from the franchisor.
Difficulties of Conversion Franchising
A couple of potential difficulties to consider when thinking about conversion franchising include:
- Balancing Standard Practices vs. Local Expectations – It’s expected for a franchisor to enforce standard practices in each franchise location, but it’s also important to customize aspects of the business to accommodate the local context. This is especially true when acquiring an already existing business with an established customer base.
- Franchising Isn’t For Everyone – One of the challenges of negotiating a deal for a conversion franchise is aligning everyone’s interests. It can be difficult for a small business owner with a profitable company to sign on to paying franchise fees and royalties, which will cut into their profits. Additionally, some entrepreneurs’ personalities won’t easily give up the flexibility and freedom they have running their own small business.
Looking Into the Prospect of Franchising?
Are you interested in owning a franchise? FranNet is here to answer your questions and help you get the information you need to succeed. Schedule a free consultation today and learn more about your opportunities for franchise ownership.