The Founder Mindset
Founders can take what appears to others to be nothing, and turn it into something! They have the natural talent to take a concept and transform it into a successful business. This entrepreneurial gene is uniquely creative, innovative, and highly energized. These traits, combined with an enormous work ethic and a firm commitment, are the ingredients that produce new franchise enterprises. However, it is equally important to also acknowledge that these strengths can sometimes become the “Achilles tendon” that blocks you from achieving your long-term business goals. Knowing “who you are” and “where you are at” is your first step in getting to “where you want to go.”
The first step toward “where you want to go” is to find a strategic partner for a person-to-person, open and honest discussion of your strengths and weaknesses, to analyze your current position, determine what you want to achieve, and the steps you will take to get there. This stage examines your concept or industry, and equally important, whether you are personally and professionally ready to franchise your business. This phase of our service to you is free of charge and a prerequisite for any further expenditure of your hard-earned money, and your much needed and valuable time.
The second step of this journey is to lay out a plan; a “roadmap” to lead you to the place where you want to go. To build a high-performance franchise company, requires personal and business goal setting as an essential part your strategic plan. We help you to determine your overall goal, and then to establish the personal and business markers that will take you there.
Once you have decided to franchise your business, we will offer you, in further stage-specific and comprehensive discussions, the techniques and proven planning strategies to guide you through. We believe running a business is a lifetime learning process, but it cannot all be learned at once. It must be separated into logical steps, or “stages,” one stage leading logically into the next stage, and so on, until the goal is reached.
Corporate vs. Franchise
Many founders of concepts are premature in their decision to franchise, while others miss the window of opportunity. This idea must be factored into the results of a proven and tested corporate business model. Once we evaluate your unique business systems and how well these are working and documented, we will help you compare the financial and operational choices and then decide A) whether to open corporate locations B) when to start your franchising program or C) whether to discontinue your franchise expansion strategy. A combination of corporate and franchising growth is virtually impossible in the early stage of franchising. The human and capital resources, including the management complexity, are why the vast majority of franchise companies are pure franchisors.
The reason many franchise consulting firms suggest an investment up to $250,000.00 to franchise your business is because you will invest up to $150,000.00 for their consulting services. The remaining $100,000.00 is to pre-capitalize your initial start-up costs. The goal is not how much you invest to start your franchise company, but how you utilize the current financial and human resources that are available to you. The human resources may already exist in your corporate locations and you are in a favorable position to internally capitalize your franchise company organically on a much smaller budget. Protecting your working capital and making stage appropriate “start-up” decisions has a much higher return on investment, which secures a stronger foundation to build a long-term franchise company. We can provide you many examples of why this cost-effective strategy has proven to be more conservative and profitable from the starting point. Unfortunately, so many new entrepreneurs are so excited about franchising their businesses, they get caught up in the hype of investing a large sum of money right at the beginning. It is usually two or three years later when they realize (if still in business) they could have invested 50% less for a more strategic and profitable outcome.
Your decisions on how much it will cost to franchise your business should not be plugged into a standard pricing model of a franchise consulting firm. Our 12 Comprehensive Learning Modules will allow you to evaluate strategy, and yet receive the training tools to internally franchise your business for much less of an investment. Our goal is to protect your working capital. You will need it!
There is nothing more rewarding than “giving back” and sharing your entrepreneurial spirit and business idea with new franchise partners. You are their business partner, mentor, and coach. Your primary responsibility as CEO is to teach your franchise partners how to be profitable in running their new business. As a result, you will offer them the opportunity to:
The final financial benefits will also be lucrative for you! As your franchise units and system sales increase, you will also be increasing your initial franchise fee income, royalty income, and internal distribution profit center sales. Once you reach the regional and national spotlight, you will have many opportunities to evaluate strategic growth and equity strategies to maximize shareholder value.
Leadership and Management
A franchisor’s organizational chart is vital to the success of its strategic business plan. In the beginning stage, the founder will be involved in all aspects of franchise sales, marketing, training, operations, and administration. The key to early success and profitability will be how well thought out these tasks are managed and organized throughout the business franchise.
Franchisees are your friends, customers, investors and partners. They write your paycheck. Becoming a caring and service-oriented CEO is essential to your leadership. Remember, you are serving your customers and franchisees. They are not serving you!
The most common mistake of a franchisor occurs in the first stage (1-8 years) and the second stage (9-18 years). The corporate overhead continues to expand with the growth of franchise units coming into the system. It is a natural tendency with growing franchise fees and royalty to add “employee after employee” until you realize your royalty revenue does not adequately cover your monthly overhead. By this time it is too late. YOU ARE A FRANCHISOR DEPENDENT ON A NEW FRANCHISE SALE EACH MONTH TO COVER YOUR OVERHEAD COSTS. In 25 years of franchising, I have met just a handful of CEO’s who have avoided this catastrophic mistake. We will ensure you avoid this huge mistake. It starts with you acknowledging that everybody at your corporate office is responsible, however one person must be accountable for the profitability of each franchisee. This breakthrough will transform your thinking and how you efficiently train and support your franchisees. Once you learn this formula, your royalty will cover your monthly overhead and your franchise fees will become your contribution to profit.
Franchisor, middle and senior-level executive compensation formulas can be traditional and non-traditional. What percentage of this compensation is fixed versus variable corporate overhead? This has a dramatic effect on increasing productivity and profitability. I have hired and trained local junior franchise sales executives and paid franchise recruiters to secure senior-level franchise sales executives. In both cases, the compensation, salary, commission, bonus, and benefits had very little if any effect on the number of franchises they sold in a given year. An excellent franchise sales executive can sell regardless if they are straight commission, or salary plus commission. It is important to understand all types of unique compensation strategies within each department to create an incentive-based corporate culture. It is more common for young franchisors to give away productivity and profit by not exploring alternative compensation models proven and tested to be more profitable.
Responsibility vs. Accountability
Your leadership strives to create a culture of consensus and communication. Founders and CEO’s are so busy “doing and learning” in the early stages that responsibility and accountability seldom do not exist or slowly drift into a divided corporate culture. Gradually over time there are two departments, each pointing at the other for lack of franchisee success.
The franchise sales department blames the operations department for the failure of the franchisee. In return, the operations department claims they were under-qualified. This divided culture transcends into the overall health of the franchise system wide. Each department must have performance metrics and reports by department, which contributes to the companies’ profitability. We have developed each of these internal reports which can be customized to fit your franchise company. Hopefully, you are developing manual and computerized reporting systems to guide your franchisees at the local level. Your franchisees are your strategic partner. It is important to genuinely care for their personal and financial well-being. I truly believe that when my franchisee says "jump", I ask "how high?" After all, my franchisees write my paycheck.
We will work closely with you to quickly departmentalize and develop the internal reports necessary to monitor profitability within your corporate franchising company. Each franchise sale will vary on the cost per sale depending on whether this sale is made from a live telephone inquiry, internet inquiry, or consultant referral. By understanding these internal percentages that calculate the real cost of marketing and making a franchise sale, you will be able to determine what percentage of your franchise sales should be performed from your in-house franchise sales department versus other forms of outsourced – trade shows, consultants, and referrals. The accuracy of these percentages will contribute to our goal of generating 30% profit (salary and net income) on each dollar of revenue.
The total cost to train and support each franchisee is essential to both monitor and report "hours and dollars", so you are not spending too little or too much to support the franchisee. The most common mistake franchisors make is to simply choose a royalty percentage without calculating the actual cost of training and supporting a franchisee at each stage of their respective development. This occurs as a result of simply hiring new employees and giving them a salary and job title with a job description. We have learned that our process to train and support is what yields profit and loss. We have developed a proprietary web-based support management solution, which calculates the cost of each hour used to train, support and service each franchisee.