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franchising my businessAre you thinking of franchising your business?

Your business is your baby and it is growing.  You've decided that franchising your business is the best approach to expanding your brand, but you're not sure how to get there and what you need.  So how can you find the right company to help you move forward to reaching your goals?  Well, you are actually looking for a franchise development company like ours.

There are many firms like ours throughout the U.S. some good and some not so good.  When interviewing franchise development companies, we recommend that you ask these following question

1. Where is your office located?  If the consultant is working from home, then they are not a legitimate business.  A stable franchise development company has employees and a physical address.

2. How do you charge for your services?  Some companies have an a la carte approach to pricing, other companies charge by the project.  The most important question to ask every prospective development firm is, "What exactly are the deliverables?"  A complete franchise system will have franchisee training and support programs, all the necessary legal documentation, on-the-job training for employees, marketing plans and strategies for franchise sales, and franchisee relationship management.  Ask to see their work.  As they say, "The proof is in the pudding."

3.  Does your company focus on franchise development or does it sell franchises?  There many different types of services in the franchise industry.  There are franchise brokers, franchise consultants and franchise advisors, who help people find the right type of franchise to purchase.  If you come across a company that is more into the selling of franchises, then that might not be a good fit for you.   You really need a franchise developer that is committed to building you a complete, comprehensive franchise system.

4. Are franchise documents prepared in-house or outsourced?  One of the most important legal documents that you will need is a Franchise Disclosure Document that complies with the Federal Trade Commission.  Some companies take the easy route and use a template, a one-size-fits-all approach, then charge you an arm and a leg.  Every business is unique so therefore your FDD must reflect your business model.

5. How many franchise systems have you built?  Ask to speak to their existing and past clients.  Invest some time visiting the actual franchise businesses.  Are the franchisees satisfied and do they feel that they were adequately trained to operate their franchise.  You will be amazed at how much information you can receive from franchisees.

As with any business relationship, you need to trust the company that you are working with.  Ask for references from their vendor list.  The way someone treats their vendors is a pretty good indicator of their character.

We take a customized approach to franchising your business.  The process is not easy, but we try to make it fun, affordable and prosperous.

 

franchise your businessWhat Are Key Processes and How Do They Relate to a Franchise Business?

When you franchise your business, the power comes in the creation of repeatable processes that are replicated in the same manner across the franchise system.  When we speak of Key Processes we refer to a collection of related, structured activities or tasks that have a significant impact on the overall success of your business.  The father of Total Quality Management, Dr. Joseph M. Juran, defines a process as, “a systematic series of actions directed at the achievement of a goal.”

Key Processes can cover a wide array of activities and all Key Processes are inextricably tied to the delivery of your company’s end product or service. Key Processes are vitally important to the success of a business; they reflect those business practices that ensure an organization retains its competitive edge. When you franchise your business, the Key Processes become the backbone by which the franchise system training program is developed.

There is almost an infinite number of processes in the business world today.  Each business has established a set of practices that they use to ‘manage the business’ and achieve a positive and hopefully repeatable outcome.  The nature of your key processes will naturally depend on the type of business you operate and the systems you have developed to manage daily operations. 

Key Processes for Franchise Systems

For a more simplistic approach to building Key Processes for franchise systems, we use these following categories:

  • Universal Processes - These processes cut across all hierarchies within an organization and must be adhered to achieve a consistent output or outcome.  An example of a Universal Process is customer service.
  • Management Processes - These are business-wide processes that are fundamental to how an organization is managed.  For example, purchasing, inventory management, managing the books, etc.
  • Operational Processes - These are processes that represent the day to day activities that your organization performs to accomplish your goals and mission.  Customer intake process, opening & closing procedures, the front of house and back of house procedures for restaurants are good examples of Operational Processes.

Most organizations that we work with have a good understanding of their Key Processes and how their processes impact their business.  In many cases, the processes are ingrained within the institutional memory of the organization and the steps of these processes are taught through a combination of informal instruction and hands-on involvement.  However, in very few cases are these processes actually written down and if so, they are often nothing more than a pile of notes, instruction sheets and articles pertaining to the topics at hand.

While this approach may work well for the individual business, it frankly is not good enough for a franchise system.  When franchising your business, you need to put yourself in the shoes of a franchisee.  A franchisee expects more from a franchisor, after all, they will have paid a significant sum to learn your ‘secrets’; a franchise owner expects to see a formal curriculum that is backed by knowledgeable people.

In an effective franchise system, the training on processes is codified and includes formal instructions and curriculum.  Best in class franchise systems will also provide structured On-the-Job Training curriculum with an evaluation of comprehensive and competence.  

We refer to the difference between how an organization codifies their processes currently versus what will be expected by a franchisee as the Process Gap.  This is the Gap we fill; it is the problem we are uniquely geared to solve for our clients who are looking to build a responsible and comprehensive franchise.

We tackle the hard job of making the small, new franchise entrant appear as they have been in business for decades.  We help level the playing field by identifying, developing, and documenting an organization's’ key processes so that franchisees can be effectively trained in the company’s approach and methods.  This is the essence of what we do and it makes a difference for the emerging franchise system and their franchisees.

Franchise or Organic Growth?

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Colonel Sanders said this, "I could see it wasn't going to be easy. I couldn't give a franchise to any old greasy spoon. And I knew the chicken had to be cooked the way I told them to cook it if it was going to be as popular as it could be."

Obviously, the Colonel figured it out.  There are nearly 4500 franchise units in the US.

Yet, should you franchise your business?  There two paths to add new locations beyond your existing store. The first is by organically growing where you expand by building new locations using your time, money and energy.  The next option is by developing a franchise system.  When you franchise your business you sell the rights to use your business name, logo, products/services, trademarks, and business model to an owner-operator, also known as a franchisee.  Franchisees use their capital to purchase these rights and build their own storefronts.

There 7 good reasons why many businesses prefer to franchise as a means for growth.  The primary reason is the opportunity to expand rapidly without investing a lot of capital.  Unit buildouts and grand openings are incurred by the franchisee.  And, since the design of the store matches that of your original store, the buildout time is less and so is the expense.  Here are some other good reasons why franchising is the best way to grow your business.

  • Staffing is performed by the franchisee -- Recruiting, hiring and training practices of employees are designed by corporate but executed by the franchisee.
  • Greater brand recognition -- Rapid growth allows for greater brand recognition.
  • Higher unit sales potential – Franchisees have vested interest to succeed and compete in the marketplace.
  • Group buying power – With increased buying power within the franchise system, comes leveraged contracts
  • Access to better talent – Most franchisees are successful professionals with a high business acumen, highly competitive and driven by $$$’s.
  • Promotes the ‘American Dream’ – Everyone should have the opportunity to achieve success and prosperity. By purchasing a ‘business in a box’ a savvy person can achieve their dream of owning their own destiny.

Click here to receive your free whitepaper on Franchising vs. Organic Growth.

If you are an entrepreneur thinking about expanding your business, then we can help.  Not every business can be a franchise.  We can help you assess which path is best for you.

Understanding the costs involved in developing your franchise system is an important step in evaluating the right path when selecting a franchise development team.  There are many phases when it comes to franchise development and no two companies are the same.  Some offer only the necessary legal documents and others provide full-service from development to sales.  To truly compare franchise development companies, you must insist on a detailed proposal from each firm, so you know exactly what you are getting for your dollars.

You also need to take into account the type of business you own.  Full-service, sit down restaurants are the most expensive businesses to franchise.  There are a lot of moving parts and costs involved with restaurants; inventory, recipes, point-of-sales systems, kitchen equipment, cleaning procedures, back-of-house and front-of-house policies, etc.  If you are in the service industry where a potential franchisee can work from home, then the cost to franchise this business is much less.  When looking at pricing a franchise system, we take into account the all the moving parts and costs involved with your business.

Prior to even talking about the price though, we make sure your business is franchisable.  Not every business model can be franchised.  We have a vested interest in your success and we want to see your model succeed.  We take the time to learn about your business and get to know you, too.

Our goal is to build complete, responsible franchise systems that become enduring brands where all parties benefit; you, your franchisees, your vendors and most importantly your customers.

Since its inception, you have been involved in the day-to-day management and marketing of your business.  It's your baby and we understand.
Building a franchise system is no walk in the park.  There are many hours involved meeting with your franchise consultant, discussing operational procedures, meeting vendors, and reviewing operational materials.  All this happens before you sell your first franchise.  Once you begin selling franchises, you will be working with franchisees on site selection, buildout of their store, plus delivering training and support programs.
The point we want to make is, now is the time to begin the search for your replacement of the day-to-day management of your business.  It will always be your "baby", but you may not be able to devote the hours as you once did.  Your franchise is your second baby!
The most important aspect of growing your business nationwide is trademarking your name.  If you are currently operating a successful brand locally as opposed to nationally, other businesses may be able to establish themselves in a different area of the country using your brand name.
Registering a domain name in Go Daddy does not prevent other businesses from using your brand name. Under the Fair Trading Act of 1986, the business's reputation in the market place determines the extent to which the business will be able to enforce their rights.  To avoid costly legal battles the best protection is by registering your brand as a trademark under the Trade Marks Act of 2002.
If you do not have a Trademark attorney, we would be happy to refer you to ours.
You may have intentionally created the culture of your brand or it may have evolved as you progressed.  Whatever the case, the culture of your brand needs to be solidified.  What are your values? What do you stand for?  What do you stand against?  What is the experience that you want ever customer to walk away with?  What is your Brand's mission?

By aligning franchisees and employees to your brand's mission, core values, vision and unique positioning in the market place, your customers will receive the consistent brand experience whether they are in Knoxville, TN or Reno, Nevada.

As John likes to say, "We are in the Cult business.  We create raving fans of your brand whether they are franchisees or customers."

Clearly defining your Brand Culture is an important factor to becoming a successful franchisor.

Every business has processes and ways in which they provide services. But are those processes consistent with all your employees? Whether or not you decide to franchise your brand, your business would benefit greatly by becoming more process focused.

As the founder and day-to-day manager of your business, you might sometimes work 'on the fly'. Let's say, for example, you own a sandwich shop. You recently hired an employee who has never worked in the food service industry. You'll have to train your new hire to utilize your systematic approach to building sandwiches. How to set-up the line prep area? How to avoid cross contamination between meat and produce? How to build a sandwich using your unique approach?

These processes must be consistent with all employees and the best way to do that is by systematizing your business processes. From opening your kitchen, customer service, and mixing your proprietary sauces to closing your kitchen, every process must be systematized and implemented to ensure consistency. So whether customers visit you for lunch on Tuesday or dinner on Monday, their brand experience is consistent.

Becoming a processed centered business is the first step to franchising your business.

How to franchise my business

Unique, Proven, Repeatable

Because, who wouldn’t want to own a franchise system?  It is a great way to grow your brand, get your ideas out there to more people, and leave behind a legacy for future generations.  Not to mention, with franchisees buying into and growing your brand, you can expand to a national or even global market with considerably less capital.

You may be saying to yourself, “Sounds great!  Where do I start?”  Well before getting started or going any further, take some time to examine your business for franchise-ability.

Is your business a unique concept?

According to franchise expert John Batcheller, “Going head-to-head in a saturated market is difficult and costly.  Emerging franchise brands with clear points of differentiation increases the opportunity of success.”  You need to have a clear idea of who you will be going up against.  If your competitors are on every corner in every town, what is going to set you apart?  What is your niche? Knowing your niche allows you to focus your time and energy, to know your competition, determine what you can charge for your product and what kind of profits you can expect.  Identifying and embracing your niche market is key to success in any business, and when it comes to franchising it is paramount. Identify Your Competitors to have a clear idea of who you will be up against.

Can you create a mirror image of your business in various cities and towns across the nation?

To build brand loyalty, you need consistent product. To be consistent, you need to have repeatable processes in place.  Baristas at a Starbucks in Texas can make you a drink that tastes exactly like the one you had in Seattle last week.  The success of Starbucks depends on this consistency.  Understand Your Operational Processes and tweak them if necessary.  Once processes are in place, examine if your business will do well in other areas across the nation.  Some businesses depend on the local environment, like a river rafting business.  Others depend on the specific demographics such as tourism, while yet others depend on the charm and pizzazz of a certain individual working at or running the location.  There also may be local constraints that can affect your ability to expand outside of your territory.  For instance, if you are thinking of franchising a store selling fireworks, you need to consider the various laws from state to state and even county to county.

Do you have a proven success record?

If your concept is unique and repeatable, is it also profitable?  Potential franchisees will be looking for a proven concept.  Low profit margins will scare investors off from the get go.  If you have consistently increased revenues year upon year you will catch the attention of savvy business people.  If margins are low, learn How to Increase Profit Margins to make your business more desirable to potential investors down the road.  In addition to numbers, investors will be checking your reviews.  Are customers raving about your product, or is there something left to be desired?  If people have asked you if you are a franchise or if they can buy into your business, it is a good sign that your business may be ripe for expansion through the franchise business model.

So, you want to franchise your business?  That’s great.  Make sure you have a unique and proven concept that is repeatable, and let’s talk.

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Expanding your Business:

With different available routes to expanding your business, you might be thinking, “which path should I take?”  Well, it depends on what you are expecting out of your growth, and how far you want to take your brand.  When it comes down to the choice between growing organically or through franchising, there are some key points to consider.franchising

Point one…

Expanding your business can be a costly and time consuming process.  Just finding the right location at the right price can be a headache.  To grow a business, an entrepreneur must have time to invest in this challenging search.  Once the location is found, large amounts of money are needed to pay for the deposit and lease, store build-out, equipment and products needed to run the business.

While growing organically means you get to keep all the profits, it also means you get to foot the bill for all of this.  Not to mention the tremendous amount of time and energy consumed in the process while still overseeing the operations at current locations (props to all business people who have grown this way!).  Unless a well trusted team and plenty of investors (or loans) are involved, this generally means one must expand at a slower rate since one person can only do so much.

In the franchise growth model, investors (franchisees) pay all the costs associated with each new location.  What is in it for those who invest in a franchise?  Franchisees get the rights to a turn-key business, with an easy to follow plan to guide the way.  Everything is meticulously put into place; location requirements are set and expert realtors are ready to help; architects already have a plan to expedite; vendors are secured.  As a result, a franchisee can have a new store up and running much faster and with less guesswork.franchise your business

Point Two…

There are geographic boundaries to consider with expanding your business.  What areas do you desire to expand into?  How far to you want your brand to reach?

Organic growth often limits expansion to areas somewhat near the flagship location.  This limited growth may be desirable for those looking to keep it local.  But if you want to reach a broader market, franchising may be a better option.  Once your brand is ready to launch, franchisees can open a franchise just about anywhere.  This allows for greater brand recognition and larger scale expansion, often reaching a national or even global market.franchise your business

Point Three…

Those expanding their business organically tend to get caught up in the daily hustle of opening a new store while tending to the needs of the already in operation location.  Often much needed processes are vaguely defined and sometimes just get put on the shelf.  With a well rounded franchise consultant and some dedication to detail, franchisors can protect their brand while providing clear instruction on daily operations and well defined HR practices.  All this is often overlooked with the daily hustle of organic growth, which can expose business owners to possible legal issues.

Point Four…

To grow organically one must hire and train a store manager and staff for each location.  Training staff (and management) is not as easy as it sounds if you are expecting uniformity in each location.  This will stretch your budget and time (and patience!) even thinner.  With franchising, the franchisees often are owner operators, eliminating the need to hire and train General Managers.  The franchisees are incentivized to make a profit and turn their investment into success, inspiring more effort and eagerness to follow proven methods of operation.  Franchisors provide training guides and mentoring to the franchisees, allowing for consistent training in all locations.  The franchisees in turn provide and pay for the training.

OK So, The Point Is…

Some entrepreneurs prefer organic growth.  There are advantages to this style of growth, most importantly keeping all the profits!  However, it ultimately requires a great deal of capital and time.  The rate at which one may grow as well as the market reached, may be limited. Franchising may not be appealing to some, and others may think it is not a viable path to growth.  However, if you are looking to expand at a faster rate and into a broader market, franchising can be a well paved path for expansion.

 


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