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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

 

 

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

Your Franchise’s Competitive Advantage

Prospective franchisors ask us all the time: What is the most important competitive advantage: Cost, Product, Niche?   I believing achieving competency is the most important competitive advantage.   Competence is the only path to excellence, and it’s really excellence that is the ultimate competitive edge.   A franchise is often called an ordinary business run extraordinarily.  Here are the essential elements needed to run your business extraordinarily.

The path to competence (Competitive Advantage):

Knowledge: Learn and know the best practice of your industry.

Education:  Learn how to execute best practices.  That will take talent, and skills to hone that talent.

Hire the best possible:  By understanding the best is the best way to identify skills, talent and excellence.  Don’t take the word or paper of the have them show you.  For example- bring a line cook into the kitchen and have him/her create a simple dish

Train:  Keep up skills and knowledge- keeping updated will keep your franchise competitive.

On-going improvement: Setting goals without the ability to achieve is useless.  Make sure you are giving the tools to succeed.   “We’ve always done it this way” is unacceptable.

Awards and Recognition:  Strive to be the best and let the world know.  The only way to win is to have the drive, talent, skill, knowledge to WIN.

Competency is not “the minimum level, it’s the maximum level”.  Excellence is achieved by the competent with drive.  Be aware of the level of excellence and keep raising the bar. The bar is always going to be raised, those with competency have the ability to keep up.  Once competency is your competitive edge, then excellence will be easier to achieve.

It is the franchisors responsibility to offer three things: growing the systems, support and training.  Being conscience that your training is part of your obligation, and using that path to competency, will lead to excellence and become your franchises competitive advantage.