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.
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.
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.
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.
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.
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.
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.
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.
Every franchisor should embrace the Optimist Creed and we believe that Christian A. Larson got it right:
The Optimist Creed
Promise Yourself ...
Optimism helps your franchisees get through those tough times; sales slumps; frustration with employee rentention; and personal situations. A little optimism can go along way and builds healthy relationships. Each and every day we hope that your Optimism shines through….