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What makes the Most Profitable Franchise in Today’s Franchise Market?

The Franchise market in the U.S. alone boasts over 3,500 franchises and in many states, the true number of franchise opportunities is unknown.  For a buyer working through the decision making process as to what the best franchise investment might be, this can be a daunting task.

 

It starts with determining your own skill set and abilities, what have you done in the past that could be leveraged in a new franchise business, what skill sets are you strong in and could be a benefit in the new business, what would you like to get out of a franchised business investment?  In most cases, it makes sense to ask someone else to provide an assessment of your abilities, it can be difficult in most cases to be honest and without bias.  There are great tools out there which can provide a personality test or professional skills review for you.

 

Once you have your personal assessment together, you can begin to research which business models fit your profile best.  Some franchise businesses require salesmanship and the ability to be comfortable prospecting for customers while others need an owner operator who has been in retail and managed staff effectively in the past.  If your evaluation is accurate, you will be able to narrow down your selections of franchise industries and be able to determine which categories might make the most sense for you.  When looking for the most profitable franchise, it is important to recognize that the franchise itself does not inherently produce profitability, regardless of how great of a business model it might be.  It is the combination of a good market, good business model and a good operator that makes franchise systems profitable at the unit level.

 

Now that we have narrowed down our industries, it’s time to review the market segment.  There are several ways to look at “market”, one is the area where you would be operating the business from and what customers you would be providing the goods or services to.  You should do extensive research on your area and determine whether that market has the right demographics, income levels and population density to support the franchise businesses you are considering.  Use online data to start your research, sites like www.Score.org are a good start, then get specific with direct research by interviewing business owners and professionals who would have relevant experience related to the business in that market.  The second “market” is the overall industry you are considering entering with the franchised business, food service, cleaning or accounting would be considered in this category.  You now need to research the potential growth for your industry, competition, market trends….how will technology affect this industry?  All of these elements could make your franchise more or less profitable and if you don’t do the planning prior to your franchise purchase, you could unknowingly be making the wrong move.

 

Now it’s time to research the franchises themselves.  You should have a list of at least three concepts that interest you and warrant additional research.  Start by researching any available data on the franchise brand, what has worked, what hasn’t, why have there been failures in the market, why have some franchises succeeded?  Review the FDD in detail, read all 23 Items and the exhibits to the document including the Franchise Agreement and Financial Statements.  Ask the franchisor about every question that comes to mind and take good notes.  Towards the end of the FDD are other franchisees who are either in the system or have left the system, take the time to call and interview them about their experience with the franchise brand.  Go visit the franchisor AND franchisees, interview them in person and ask detailed questions.  Compile your data and compare the brands to one another, then do the gut check as to which franchisor you feel the most comfortable working with and who you could envision yourself “married” to.

 

At that point, you have most likely discovered the Most Profitable Franchise.  I’m sorry it isn’t a one word answer, but if you take the time and invest in the process of researching the right franchise, you certainly have the best opportunity to realize a good return on your franchise investment.

 

For more information on how to buy a franchise, Contact Us:

Info@FranchiseMarketingSystems.com

 Entrepreneurship With a Safety Net: Owning a Franchise

Owning a franchise can be a great way to start a business with less risk or to invest in businesses with proven scalability.  Owning a franchise requires an understanding for what a franchise offers and the benefits vs the negative components the come with franchise ownership versus entrepreneurship.

 

First, a large percentage of franchisees are made up of new business owners, people who are starting a business for the first time.  This is one of the driving forces behind franchising is that the franchisee is provided the tools, systems, support and training to increase their odds of success as they start a new business.  What I have found in my time in the franchise market is that many franchisees do not understand that this still means a lot of hard work, dedication, hours and time to make the franchise business work.  The franchisors role is not to run the business for the franchisee, but to support and provide guidance.  My advice to a franchisee is look to your franchisor as you would a business coach or advisor, not an employee.

 

Second, franchising is not a sure bet, there is still a considerable risk in starting a new business.  Although owning a franchise drastically increases your success rate, you still can fail as a business owner.  Knowing this going into the relationship should help you plan, research and get to know the market prior to making a franchise investment.

 

There is an extremely large percentage of franchise owners who own multiple units of one or more brands and focus on finding franchise systems which have the systems and market opportunity to scale.  These franchisees are looking for unit economics, system validation and management team resumes.  Multi-unit and master franchisees invest in franchise brands because they see long term value in where the business is headed and value in the franchise structure they pay for.

 

Regardless of what is driving you to consider owning a franchise, you should understand the inherent risks associated with starting a business first, then get to know the franchises you might consider.  Review the franchisors track record, speak with franchisees, take time to understand the FDD and go into the business relationship with appropriate expectations.

 

For more information on how to franchise your business, contact Chris Conner:  Chris.Conner@fmsfranchise.com

 

Christopher Conner

Cell:  770-519-3910

Fax:  800-625-8530

How to Franchise:  Managing the Franchise Development Process

When you take your business into the franchise market, there are a multitude of responsibilities, requirements and strategic initiatives that must be addressed in order to make this transition work.  One of the key elements of a successful franchise expansion model is understanding the franchise marketing and franchise sales process that will work for you and your business model.

It is important to do a self-evaluation as a business owner and soon to be franchisor, how good of a salesperson are you?  As a new franchisor, even with the support of a franchise development team and franchise brokers, you will still be a key element of the franchise sales process.  The franchisee ultimately buys into a franchise system because they believe in and connect with the owner of the company.  Particularly with a new franchisor, the owner’s involvement in the franchise sales process is critical.  So if you take a look in the mirror and decide that you aren’t the right person for the job, then it might be an opportunity to bring in a franchise development manager.

Then it’s time to consider franchise marketing and lead generation.  The franchise sales process requires a strong and consistent inbound marketing effort in order to generate franchise sales.  Luckily, there are countless ways to generate franchise leads and get your brand out in front of potential investors. It starts with the Internet and utilizing franchise portals or franchise lead directories, these are simple and easy ways to generate franchise leads quickly for a brand.  In most cases these leads are looking at a variety of brands at one time, so the lead quality isn’t the greatest, but you will get consistent lead flow and candidates from these sites.  You then need to consider driving traffic to your corporate site through SEO, Pay Per Click and direct marketing methods, this can be more expensive, time consuming and long-term, but worth the effort to build traffic for your specific franchise.  Franchise Public Relations work can be extremely effective to find franchise buyers through building your brand awareness through news, articles and other PR sources.  In addition there are countless franchise tradeshows in virtually every market across the United States.  The key is always lead volume….getting enough candidates to speak with to find the right buyer for your franchise model.  Generally it requires about 150 leads per franchise sale.

Once you have your marketing process defined, it’s time to get a good franchise sales process in place.  A solid franchise sales process should be enticing to the buyer to get into the sales funnel and also one that qualifies the buyer carefully to make sure that it will be a good match.  You should have a franchise CRM in place to manage the leads and be able to report on leads as to where they are in the buying process.  There are countless, affordable franchise CRM’s on the market.  A franchisor should have a caller or someone who is tasked with tracking down the candidates and doing the initial calls to get people engaged in the sales process.  Good franchise sales people are great at developing activity and making a high volume of calls each day.  Email marketing, lead nurturing programs and other sales techniques can supplement calling.  Once you get franchise candidates deeper into the sales process, you will want to invite them to a discovery day to experience the franchise model in person.  Here is where you as the owner, or your Franchise Development Manager needs to shine and really connect with the buyer, it is the point in the process where the actual sale takes place.

Many different businesses have successfully utilized franchising as a growth mechanism, it can be done successfully with different personality types, industry segments and business models.  The key is to have a good understanding as to what is required to make this model work and then plan appropriately.

 

For more information on how to franchise your business, contact Christopher Conner:

Chris.Conner@FMSFranchise.com

The Chick-Fil-A Franchise Story

Chick-Fil-A Franchise

 

Chick-Fil-A is an extremely successful and consistent franchise system.  The privately held chain did over $2.5 billion in systemwide sales in 2009 from over 1,300 franchised stores in the U.S.

Chick-Fil-A franchise

The founder of Chick-Fil-A, Truett Cathy, 88, credits the company’s success to over 1000 franchisees and over 600 employees who are unusually dedicated in an industry known for grumpy operators and high turnover among hourly workers. The turnover among Chick-fil-A franchise operators is an extremely low 5% a year.  Among Chick-fil-A hourly workers turnover is 60%, compared with 107% for the industry.  Chick-fil-A focuses on hiring and bringing in franchisees who are looking for lifetime commitments to the company.

That’s not the only company mandate. Chick-fil-A’s corporate mission is to “glorify God.”  It is the only national fast-food chain that closes on Sundays which allows franchise operators to go to church and spend time with their families; franchisees who don’t go along with the rule risk having their contracts terminated which is unusual in today’s “bottom line” approach.  Chick-fil-A’s approach is to balance life with work which seems to be working.

truett-cathy-chick-fil-a

Many of the Chick-fil-A franchisees have come from the foster homes run by a nonprofit organization Chick-fil-A funds, the WinShape Foundation.  The upfront franchise fee for a Chick-fil-A is only $5,000. Most franchise systems require net worths in excess of $500k and upfront franchise fees of $35k or more.
The structure of the Chick-fil-A franchise from a business model is unique also.  Chick-fil-A pays for the land, the construction and the equipment, they then rent everything to the franchisee for 15% of the restaurant’s sales plus 50% of the pretax profit remaining.  Operators are discouraged from running more than a few restaurants will typically take home about $100,000 a year on average from a single outlet.

Chick-fil-A Franchise

 Truett Cathy is extremely particular in who he selects as franchise operators.  He wants married workers, he would like them to have attended Christian-based relationship-building retreats and Chick-fil-A will even interview family members of prospective operators.  They would like to learn more about candidates and their relationships at home. “If a man can’t manage his own life, he can’t manage a business,” says Cathy.
How is this legal and why does it work so well for Chick-fil-A?  The structure is based on core beliefs and principles which are consistent throughout the franchise system.  Whether it is legal is open for debate, but the bottom line is that in franchising, the rules are different than in employment law. There is much more freedom in who is selected and why as opposed to hiring an employee where religion and marital status are to be left off the table.