A piece of the franchise pie

The pizza industry is no stranger to franchising—a great wayto expand a brand’s reach, maintain consistency with currentpractices, and leverage the time, money and motivation of newpizzeria owners. How does your business model stack up whenit comes to franchisability? Answer the 10 questions in this
Franchisability Quiz and use the easy-to-follow point systemto determine whether your pizzeria is ready to franchise—andwhat steps will help you get there.

1. Do you have an operating prototype?

No: 1 point

Yes: 10 points

We’ll start with the biggest question first. If you do nothave an operating prototype, there is nothing to replicate.Having an operating prototype in place allows youto prove that your business is profitable and helps workout any kinks in your operation. When buying a franchise,franchisees are looking for existing brands withexperienced operations that have been tested in themarketplace. Your pizzeria prototype and location(s) areprimary tools to generate inquiries from customers—potential franchisees—who may be interested in your restaurantand are looking for the ideal center for trainingnew franchisees. Having a prototype is the initial proofof concept required for establishing franchisability.

2. How many units do you operate?

Assign 1 point per unit (up to 10).Before franchising begins, the number of units in operationcorrelates with the franchisability of the operation.If your pizzeria has more than one location, youhave already proven that your concept can be replicated.Multiple buildouts, hiring new staff, multiunit POSsystems, and increased management responsibilitiesare factors associated with the practice of duplication;this makes expansion easier down the road. A pizzeriawith one location may be as franchisable as a pizzeriawith 10 locations, but additional units aid in the salabilityof the franchise, the strength of the brand andthe refinement of the concept. Most businesses turnto franchising because of limitations in the owner’s oroperator’s capital, time or access to people. Dependingon the investment of opening another unit, it may bemore cost-effective to franchise than to open anothercorporate-owned location.

3.How long has it been since you first opened your business?

Not in operation yet: 0 points
Less than six months: 2 points
One year: 4 points
Two years: 6 points
Three years: 8 points
Four years or more: 10 points

Understandably, being in business for a longer periodof time allows you to establish your business’ conceptin the marketplace, develop a brand and create a trackrecord of success. Additionally, more time in business istypically associated with greater systemization, althoughthis is not always the case.

4. To what degree is your businessdistinctive from its competitors?

Not very: 0 points
Somewhat:3 points
Very: 7 points
One-of-a-kind: 10 points

Your degree of uniqueness is not solely based on yoursauce, dough or style of pizza, but on your systems ofoperation, as well. More importantly than the product,what makes your pizzeria unique can be customerservice, culture, aggressive advertising, catering tolate-night crowds, ready-to-serve pizzas, a drive-thruwindow, or a distinctive feel or theme running throughthe restaurant. Surely you have been to a large pizzachain and felt that your product is better, but thesystems of operation are what separate successful andunsuccessful franchise companies.

5. How much would it cost to open oneof your locations, not includingfranchise fees?

$400,000 or more: 2 points
$200,000 to $399,000: 4 points
$100,000 to $199,000: 6 points
$50,000 to $99,000: 8 points
Less than $50,000: 10 points

Logically, the lower the initial investment neededto duplicate your pizzeria, the larger the pool ofprospective franchisees. As you continue to expand,you can help reduce the initial investment in severalways. Landlords are eager to fill empty space, and youmay be able to negotiate a significant amount of tenantimprovement dollars to offset leasehold improvementinvestments. Equipment vendors are frequently ableto offer discounts and special leasing arrangements forincreased volume. Pizzerias may also create differentbusiness models to meet different investment levels. Alocation that is full-service or carryout/delivery-only,for example, may be ideal for specific demographics orinvestment levels.

6. The market for your business is:

Local: 0 points
Regional: 3 points
National: 8 points
International: 10 points

This question is centered on the potential for yourproduct, not your current market. The great thingabout pizza is that people eat it everywhere. Specifictoppings may vary in specific markets (sardine pizza,anyone?), but the product itself should be applicableto any market in the world.

7. Competition for the products orservices you sell is:

High: 1 point
Moderate: 5 points
Minimal: 10 points

In the pizzeria business, competition is always high.The ingredients in your pizza and the style in whichyou present it can make a difference, but the industryis very localized and inhabited by both large chainsand small independent operations. Customer service,loyalty cards, community awareness, price, take-and-bakeoptions, buffets and supporting menu items areall ways of differentiating your product in the market.

8. How systemized is your business?

Not very: 0 points
Some policies and/or handbooks: 2 points
Very wellsystemized and documented: 6 points
Highly systemized and computerized: 10 points

The more operational systems your pizzeria has inplace, the easier it is to create consistency amongyour franchisees. These systems include recipes, POSsystems, websites, hiring and firing procedures, evenschedules for cleaning the bathrooms. If executed fully,even the simplest tasks can help establish a system forsuccess. The more holes that exist in your systems ofoperation, the more gaps that franchisees will need tofill on their own. While certain issues may seem likeno-brainers to you, a new franchisee may address asituation in a way that can dilute or negatively impactyour brand. Think of your operational manual asthe answer key for your franchisee when a problemor question arises. The best way to start off withsystemizing your concept is to document everythingyou do. Doing this will help you realize where youmay be inconsistent in certain aspects and help youaddress any problem areas before they are replicatedin a large franchise system.

9. How long would it take to teach someonehow to operate your business?

Special certification needed: 1 point
Two to six months: 2 points
One to two months: 4 points
One to three weeks: 7 points
One week or less: 10 points

The shorter the training period for a new franchisee,and the easier it is to learn your system of operation,the faster a franchisee can be become operational andprofitable. This is not to say that if it requires fourmonths of training to be an effective operator, youshould find a way to whittle this down to two weeks.The most important aspect of training is ensuring thatyour franchisees are familiar with all of the detailsof running their own locations successfully. As anorganization grows in complexity, not only is theregreater room for error, but the franchisee requiresadditional working capital, as he’ll need to pay his ownsalary while training

10. How do your business sales comparewith those of comparable businessesin your industry?

Much lower: 0 points
Somewhat lower: 1 point
About the same: 3 points
Somewhat higher: 7 points
Much higher: 10 points

Comparable sales are an important factor in determiningyour franchisability, because they demonstrate yourcompetitive advantages in the marketplace. This isalso an indication of how well you run your restaurant,the strength of your brand, and your ability to adaptto a constantly changing competitive environmentAdditionally, system-wide sales and profits helpdetermine the capitalization a franchisor willhave for advertising and growing his franchise.Undercapitalization can have dramatic effects onmarketing, innovation and the ultimate success of yourfranchise growth. While you are legally prevented fromtelling a prospective franchisee how much he can make,limiting your ability to market this issue, franchiseeswho are happy and run profitable businesses can discusstheir individual sales and profits. These franchisees arelikely to promote and endorse the franchise to others andpurchase additional units. However, comparable salescomprise only a portion of determining franchisability.Many franchisees also place emphasis on support,training, systems, marketing, branding and other relatedbenefits when deciding to purchase a franchise.

So how do you measure up? Compare your scoreagainst the following scale to see if franchising is a good fitfor your business:

0-39: Not quite ready. Continue building while keepingthe overall goal of franchising in mind.
40-59: Close, but the likelihood of your success is inquestion, perhaps due to capitalization.
60-79: Chances appear quite good. You should take aserious look at utilizing franchising for expansion.
80-100: Outstanding potential for franchising. Go for it!

While this quiz is not a foolproof formula for determiningfranchisability, this guide will help you make an educateddecision when evaluating the future growth of your business.Consult an industry expert to learn more about franchising andfor further analysis of your concept and systems in regard tofranchise expansion.

David Wild is the vice president of Francorp, which for 36years has been the world’s leading franchise consultingfirm, specializing in assisting businesses of all levels inintegrating franchise growth models into their currentbusiness systems.