The very first step in the establishment of a franchisor feasibility study is to determine the feasibility of developing a potential or existing business into a franchise system. The feasibility study should contain that information in the following five areas which will help the franchisor make a "go or no-go" decision:  (1)  marketing, (2)  management, (3)  accounting, (4)  finance, and (5)  legal.

For the franchisor this will allow them the opportunity to put in writing the vision and dream which they have been developing. The franchisor needs to properly determine and analyze their position to know if they will be able to:

(1) properly administer the franchising program, 

(2) to support the franchisees through administrative and marketing functions in a profitable fashion, and 

(3) will or will not benefit by franchising the business setting. 

When these questions are answered affirmatively by the franchisor, then the franchisor needs to take the next step in deciding to become a franchise organization.

The franchisor and franchisee will both deal with the market place. The franchisor must recognize, though, that they have two distinct target markets: 

(1) franchisees and 

(2) consumers. 

The franchisor, therefore, needs to develop a feasibility study that will show them: 

(1) if the prospective franchisee will or will not be profitable, 

(2) if the proposed product or service does or does not have sufficient "utility" or customer demand to develop profits, 

(3) if the business operation is sufficiently attractive for the consumer public and 

(4) if the prospective franchisee will be more successful developing a business through this franchise unit than through an independent business. 

When all these questions are answered in the affirmative, then the franchisor has the strong possibility of developing and succeeding when building a franchise organization.

The feasibility study should show that it is, or is not, beneficial for both parties to enter the franchising arena. If the plan shows that it is beneficial to only one of the two players, then the franchising program will not succeed in the long run and neither the franchisor nor franchisee should become involved. It is important to understand that the failure of one unit generally results in the failure of other units for similar reasons.

The well prepared franchising feasibility study addresses critical areas found in most business plans. However, this "Franchisor Feasibility Study" contains certain elements that are not found in any other business plans. The franchisor feasibility study contains six content sections including:

(1) executive summary, 

(2) marketing, 

(3) management, 

(4) finance and accounting, 

(5) legal aspects, and 

(6) appendices. 

Each of the five "substantive" areas (items 2 through 6), explain the franchising approach that will be followed in your particular franchise. These areas will indicate the prospects for success or failure when properly developed. This business plan will allow the franchisor to see in writing the vision and direction that they have been dreaming about. The feasibility study is the "plan for success."