Advantages to You

Franchising offers the following advantages to you, the franchisor:

  • Control – less than company owned – generally greater than independent dealers
    • The franchisor does not control the day-to-day management of the franchisee’s location
  • Franchisor sets brand standards
    • Products and Services
    • Consumer Relationship
    • Brand ManagementMarketing
  • Unit Investment and operating costs are transferred to franchisee
    • Accelerates expansion
    • No contingent liability on expansion capital
    • No contingent liability on real estate
    • No equity dilution
  • Market Penetration
    • Increased brand recognition as more and more locations open
    • Ability to serve smaller markets that might not be attractive for corporate development
    • Accelerates market dominance over local competitors
    • Improves acceptance and terms from landlord
    • Increases value of the brand
  • Collective buying power
    • Reduces cost for products, equipment, etc., because of system purchasing capacity
    • Shared Resources
      • Warehouses, production, and distribution
        • Leverages purchasing power
    • Brand Marketing through system marketing fund
      • All contribute to more professional advertising and marketing programs and materials
      • Ability to maintain web presence
    • Franchisee manages the day-to-day activities of their local business to system standards
      • Labor
      • Inventory
  • Franchisee responsible to execute to brand standards
  • Reduces per unit cost of support for franchisor
  • Franchisee liable for local operations – substantially reduces risk of vicarious liability
  • Franchisee motivated to succeed
  • Knowledgeable about local markets

  • Source of new product and service ideas
  • Franchisee at risk for unit performance
  • Generates revenue
    • Fees – initial and ongoing
    • Rebates
    • Franchisee purchases

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Advantages to Franchisee

Franchising offers the following advantages to individual business owners (franchisees):

  • Use of franchisor’s brand
  • Use of franchisor’s operating system
  • Initial Assistance
    • Business establishment and start-up
    • Site selection and construction assistance
    • Training Staffing and hiring guidelines
    • Market introduction assistance
  • Ongoing Assistance
    • Business consultation and guidance
    • Reduced cost of goods
    • Marketing assistance
  • Ability to be a part of a larger whole

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Overview of the Franchise System

What operating systems should you have in place to operate your business?

Customer Experience
You must deliver the customer experience on a consistent basis:

  • Product/Service
  • Preparation of Product
  • Location Criteria (site selection, lease negotiation, and legal review) • Build-Out and Décor
  • Labor and Scheduling Requirements
  • Equipment
  • Vehicle Requirements
  • Ingredients, Products, Supplies
  • Advertising
  • Customer Service
  • Pricing
  • Inventory
  • Suppliers and Vendors
  • Training
  • Can be codified into Operations Manuals
  • Can be operated by a trained manager

Training Programs
You will need the following training programs in place:

  • All positions in the business
    • Franchisee and their staff
  • Whys as well as Hows
  • Consistent results
  • Required skill set to be hired
  • Specialized backgrounds
  • Time to achieve proficiency

Marketing & Advertising Programs
You will need the following marketing and advertising programs:

  • Brand Identity and Development
  • Pricing Philosophy
  • Local Market Adaptations
  • Advertising and Marketing Materials
    • Assist franchisees to introduce the concept or the brand into a new market
  • Corporate Identity

Legal & Regulatory Requirements
You will need the following legal and regulatory requirements in place:

  • Federal Level
  • State Level
  • Local Level
  • Licenses and Certifications
  • Franchise Ownership

Acceptable Return on Investment
Is there the opportunity for an acceptable return on investment?

  • No Guarantees
    • Franchisors and franchisees can and do fail
  • Opportunity for an acceptable return based on economic modeling
    • Franchisor
    • Reasonable time and growth rate
  • Franchisee
    • Earn a living or build a business

Your Company & Franchising
You must identify whether your company culture lends itself to a franchising model:

  • Franchises are governed by the contract but managed by relationships
  • Do you care what others think?
  • Can you enforce standards against a “friend”?
  • Can you follow the requirements of the contract?
  • Can you comply with franchise regulations?

Products & Services
You must be able to supply products and services to your franchisees:

  • Suppliers’ relationships in place
    • Are your current suppliers positioned to grow with you?
    • Do you have the ability to protect your “secret sauce”?
    • Will your suppliers work with you while you grow your franchise system?
    • Do you have backup suppliers identified?

Competitive Franchise Offer
You must identify how competitive your franchise offer is:

  • Pool of prospective franchisees
  • Affordability of the franchise
  • Other terms of the agreement
    • Operating standards
    • Territory
    • Fees and required purchases
    • Other rights/obligations
  • Ability of franchisees to obtain financing

Franchise Expectations
You must consider how realistic your franchise expectations are:

  • Growth of franchise network
  • Ability to provide opening and ongoing support
    • Actively evolve and manage the brand
    • Provide management tools to franchisees
    • Enforce standards
  • Financial investment required to begin franchising
  • Expected revenue from franchising

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Setting the Expectations

You are embarking on a new exciting voyage, and in your initial optimism you might not anticipate the potential storms to come:

At some point your growth will plateau! Whether you hit this growth barrier at 10, 30, 60, or 90 operating units, the solution to achieving a breakthrough begins in asking the right question. We are tempted to ask the wrong question first, “How do I get my franchise system to grow?” The right question is, “What is preventing my franchise system from growing? What is my Achilles’ heel?”

It is essential to recognize your specific Achilles’ heel and take proactive measures to prevent plateauing. The five major Achilles’ heels to every franchisor are: Leadership, Management, Operational Performance (Franchisor/Franchisee), Administration, and Financial Management.

You need to think about your exit strategy. Will you sell the company, go public, leave it as a legacy for your children, hire a professional management team so you can retire, etc.? These are important decisions to be made before we can properly design your franchise company. You must keep the end in mind so that your franchise company is built on a foundation to achieve this goal.

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Your Role as a Leader

There are a number of components essential to your success, growth, and profitability. More than likely you will delegate many of these; nonetheless, you maintain ultimate accountability. The following factors are necessary to build a solid base for a franchise company:

  • Leadership
  • Management
  • Operational Performance (Franchisor/Franchisee) • Administration
  • Financial Management

As your strategic partner in franchise system development, Franchise Growth Partners holds itself responsible to growing with you through novice, apprentice, journeyman to master-level CEO leadership skills.

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