Posts

HOW DO I BECOME A FRANCHISOR?

 

HOW DO I BECOME A FRANCHISOR?

You have a great idea and your company is growing so fast you can hardly keep up, clearly, the market wants more of what you have to offer. There aren’t enough hours in the day to meet the demand and if you had more locations, you could sell a lot more of your product or service. You need and want to grow your business, but the difficulties related to raising capital, hiring large amounts of staff and operating a large entirely corporate-owned chain is cumbersome. 

It could be time to franchise your business, but how do you become a franchisor?

You will need help.  Like any new endeavor, the process of becoming a franchisor has potential risks associated and the business model is unique when compared to other growth models.  Good franchise systems have excellent models in place to benefit all parties involved and that doesn’t happen by accident. 

Franchise consultants exist who can facilitate your becoming a franchisor.

 

To become a franchisor, there is a significant amount of planning, strategy and simply put, paperwork to do.  Experienced franchise consultants can help with this franchise development process every step of the way. The key to choosing the right franchise consultant can be broken into three categories to help franchise your business:

First, does the franchise consultant have a team behind them to support all aspects of the development process?  Make sure the resources and experience exist to support the franchise development process from beginning to end.

Second, do the team of franchise consultants have experience working with start-up franchisors who are new to the market and are working on selling their first 5 units.  This is a unique part of franchise development and requires special processes.

Third, are the franchise consultants compensated on performance and results of the franchise roll out?  You will want people who are vested in your success and have a reason to make sure that the franchise model is effective. 

 

Franchise consultants will help evaluate the franchisability of your business which must be repeatable and have opportunity for scale. They will identify your competition and research where there is opportunity for competitive advantages in the market.  The first step is the franchise Strategic Plan where franchise consultants would help you determine the numbers and structure of the new franchise model. As a new franchisor, you will need guidance in determining what a realistic franchise fee should be for your business; what royalty could be expected as a new franchisor; what kind of territory should be identified; what kind of training you will provide; what the franchisee will need to run the business; what the initial investment will be for the new franchisee along with other key aspects.

 

As franchisor, you will need to create a new and separate entity that will be the franchise business. After the initial planning stage, there is the Franchise Disclosure Document, also known as the FDD. That is the legal document that is presented to prospective buyers of the franchise in the pre-sale disclosure. Some states require that the FDD be registered before you can sell your franchise concept in that state. You should retain a good franchise attorney who can guide you through this process and develop the FDD with proficiency.  This document has 2 main parts, the first part discloses what you as franchisor agree to do for franchisees in plain English. The initial investment is stated again along with franchise fees, royalties, advertising requirements, a P&L, territory, duration of the agreement, trademarks and the training program. The second half is the franchise agreement which outlines the agreement between you the franchisor and your new franchisee. After the FDD, your franchise consultant should help the new franchisor create an Operations Manual for the business. The manual outlines the steps a new franchisee will follow to have a business continue to be as successful as what you, the franchisor, have created. Other franchise consulting services provided to ensure a successful new franchise include a marketing plan and some creative artwork for the logo, a good franchise website and effective advertising.

 

After the paperwork is done, your franchise consultant should carry the staff and the procedures to guide you in the right direction to start selling the concept for you, the new franchisor.

 

Trisha Conner

Franchise Consultant

Franchise Marketing Systems

Trisha.Conner@FMSFranchise.com

 

 

How to Create a Franchise Evaluation Form

The franchise evaluation form is a critical part of the franchise sales process which is not only necessary as part of the sales process, but is critical in order to make good business decisions as to who should be allowed into your franchise model. So what makes for a good franchise evaluation form and how do you build your franchise evaluation model so that you are screening out the poor performing franchises and accepting only the top potential franchise candidates? To Franchise a business successfully, you need great franchisees. It is much easier to weed out franchise candidates up front before they get into your system then it is after they’ve bought and you realize they don’t have the skill set or the money to do the business.

1. Start with your franchise buyer profile and understand clearly who you want to target and what qualifications that buyer should bring in order to qualify for your franchise opportunity. Know the characteristics, traits and capital needed for them to be able to open and start your franchise.
2. Develop a franchise sales process that takes into account these requirements for franchise buyers. The advertisements, messaging and overall franchise presentation should echoes the target buyer profile and incorporates as many qualifying factors into your messaging as possible.
3. The franchise sales personnel should know and understand the franchise evaluation form and incorporate this tool into their sales process. It should be used as a qualifier not only to determine whether the buyer has the capability to open the business, but also whether they are engaged enough in the sales process to fill out the form and return this to the franchisor. We generally recommend that there should be a hard stopping point in the sales process where the franchisee is not permitted to move further into the franchise sales stages until they complete and return the form.
4. Forms can be electronically sent and many times can be incorporated into your website to achieve the same results as you would if sending via a PDF.
Examples of Franchise Evaluation Forms in both formats, the PDF download/print/fill out form – (http://www.theazarigroup.com/pdf/azaripm-franchise-evaluation-form.pdf) and the electronic form that is filled out directly on the site – (http://franchisinginformation.dunkinbrands.com/apex/DUNKIN_Opportunity_Interest?Cntry=&Brand=)
5. Franchise Evaluation Forms should ask the obvious question of how much money a particular buyer has to be able to invest in the franchise business, but should also take the questions deeper. As a franchisor, you should want to know the candidate’s background, experience, work history, where their capital is (retirement, stocks, bonds, home, etc). You want to have some aspects to the application that are open ended and allow for the buyer to tell you about themselves and their reasoning for being interested in your franchise brand.
6. Franchise Non-Disclosure Agreements are typically included as part of the Franchise Evaluation Form as well and can be incorporated into the franchise sales process. You should ask your franchise attorney how this is permitted to fit into your sales model dependent on your state or market and what franchise regulations may exist.
7. Keep your evaluation forms on file. These can be used for reference for both good and bad franchisees to help determine more accurately who you should and who you should not be focusing your franchise sales efforts on. Also, in cases of franchise litigation or lawsuits, you will be able to use these forms as evidence that you qualified a franchisee before awarding the franchise to them.

All together, the franchise evaluation form needs to be an important part of your sales process and overall recruitment strategy. Be critical of the candidates who are coming into your system, they are being provided an opportunity to grow and build a business using your system and intellectual property. It is their job to convince you that they have what it takes to add value to the company and the family of franchisees you are building.

For more information on how to develop your franchise sales processes or how to develop great franchise evaluation forms, contact us:
info@FranchiseMarketingSystems.com