For those about to enter the world of franchising, the leap may seem daunting. After all, you are about to enter into an entirely new business – the business of selling and servicing franchises. And, just like the franchisees you are hoping to sell to, you will be going in blind – not knowing what you do not know. But not to worry. Just as your future franchisees can turn to you for advice on how to run their new businesses, there is a cadre of experts who can help you with the various aspects of becoming a franchisor.
The First Steps Toward Franchising
The first advisor you may want to consider hiring is the franchise consultant. Franchise consultants can play a vital role both in your decision to franchise and in your ultimate franchise plan. The first and most important role of the franchise consultant should be to provide you with objective advice about the franchisability of your business, an assessment of whether franchising is the best option for you in particular and an understanding of the process involved in franchising, so you can make an informed decision on whether franchising makes sense for you.
Should you decide to franchise, good franchise consultants will be able to help you with a wide array of your initial franchise needs, ranging from the development of your strategic plan, quality control tools and marketing strategies and materials. Strategic planning is perhaps the most important role of the consultant. Many of the key decisions you make in the initial phase – territory, support, royalties and fees – will have a profound impact on the long-term health of your franchise organisation. To get you the best answers to these questions, franchise consultants will complete competitive analysis, examine industry best practices, develop structural and staffing recommendations and subject all your decisions to sophisticated financial analysis. Bear in mind that a 1% error in your royalty structure can easily translate to millions in lost profits, so these are not decisions you should take lightly.
Another key to successful franchising involves quality control. A well-rounded consultant will be able to help you develop the tools necessary to maintain the brand: operations manuals, site selection manuals, field consultant manuals, training programmes and even training videos should be a part of your quality control arsenal, and the more aggressively you are growing, the more of these tools you are likely to need.
Of course, you cannot be a franchisor without selling franchises. That means your consultant should be able to advise you on the best methods for generating franchise sales leads.
Some consultants will also be able to offer their expertise in implementing your franchise marketing – developing marketing plans, brochures, Internet sites and videos on your behalf. Again, the difference of just one incremental franchise sale is likely to mean hundreds of thousands of rands over the years, so if your consultant can help you sell more aggressively, it is money well spent.
In evaluating potential franchise consultants, you should look for two things: integrity and expertise. Be very cautious of any consultant who says you should franchise before thoroughly evaluating your business, your goals and your resources. Franchising is not right for everybody, and those who would tell you that it is may be more concerned with their own welfare than yours.
In evaluating any potential advisor, be sure you understand the qualifications of every individual who will be working on your account. If you are a start-up franchisor, you are well advised to work with people who have built businesses from the ground up. Many franchise consultants may have spent their entire careers working in large franchise organisations, which might be a great match for larger franchisors, but a poor match for the new franchisor. And don’t rely on client lists alone – if you are working with a rookie employed by an experienced firm, you are still working with a rookie. Be sure you examine each individual consultant’s bio.
You should also look for breadth of expertise. The franchise consultant will be providing you with advice on a wide array of issues. The more brains the firm has to put on your engagement, and the more areas of expertise, the more value you will get. While sole practitioners may have a good deal of experience, if you go in that direction, be careful to work with someone who is committed to consulting as a career, not someone filling time between jobs.
Franchise Attorneys and Other Professionals
An equally important decision for the new franchisor is the choice of a franchise attorney. As a new franchisor, you need an attorney to draft your franchise agreement and offering circular, apply for trademarks and prepare your state registrations.
In making your choice of a franchise lawyer, it is again vital to find someone with the right experience. When it comes to franchise law, having franchise experience is not the same as specialising in franchise law. Many lawyers who claim to have franchise experience may simply have worked for franchisees in evaluating franchise agreements. Franchise law is a highly specialised field that is constantly evolving based on changes in legislation. You need an expert who works with franchisors for a career – not as a sideline.
While your franchise consultant can recommend good franchise lawyers, beware of consultants who want to do the legal work on your behalf. First of all, these ‘consultants’ will require you to hire a second attorney to review their work, in an attempt to avoid charges of the unauthorised practice of law. Aside from the fact that you now have to pay for your legal documents twice, there are significant problems with this approach.
The issue here is one of conflict of interest. When you hire an attorney, the attorney is obligated to represent you. When you use a consultant’s attorney, the attorney represents the consulting firm. If the consultant tells the attorney to push through as many documents as fast as possible in an effort to increase their profit margin, then that is the attorney’s responsibility. If the consultant will also sell franchises on your behalf, another conflict arises. The easiest way to sell franchises may be to draft a watered-down agreement that may not be in the franchisor’s best interest.
An attorney who represents you directly will have no such conflicts. Equally important, often the best and most experienced lawyers will gravitate toward working in an independent practice or for a law firm, as this will allow them to build equity in their practice. Consultants who provide legal work may attract entry level attorneys new to franchising – so if you are thinking of going this route, be sure to ask the attorney who will be drafting your contract the tough questions about how long they personally have been practising franchise law. Franchise law is simply too complex to trust the development of your franchise legal documents to an inexperienced attorney.
Other Professionals Who Can Play a Role
As you get ready to implement your franchise programme, there are a number of other professionals who can help. Depending on how aggressively you choose to franchise, the management recruiter specialising in franchising may be one of your first calls.
For companies looking to grow aggressively, one of the best ways to do so is to bring on management talent with franchise specific expertise.
As a new franchisor, it is unlikely that you can identify, let alone enlist, this level of talent without the assistance of a recruiter. These recruiters (who seem to know everyone in franchising, especially those who are looking for a change) can often find the perfect person and help convince them to join your young franchise team. At the same time, they can be an invaluable resource to you in helping you gauge proposed compensation packages and personnel needs.
Another invaluable resource is a PR firm specialising in franchising. Few things will propel your company to the top as fast as favourable publicity. Others who will be part of your early network of advisors will focus on sales and lead generation. There are currently over 70 websites that act as franchise advertising and lead generation portals. There are networks of franchise brokers who will also assist with franchise lead generation. And the latest trend is hiring franchise sales outsourcing organisations that can provide you with a professional alternative to the traditional in-house franchise sales organisation.
As a new franchisor, you will be meeting many and perhaps all of these experts – but be cautious. To some extent, you will be putting the future of your business in the hands of these professionals. Just as you would advise your prospective franchisees, be sure you choose wisely. Experts are not created equal, but with the help of well-chosen professionals, you do not have to go it alone.
How Strong Is Your Franchise’s Quality Control?
Your key objective as a franchisor is ensuring every one of your locations maintain the same quality standards. Why?
If you’re concerned about brand consistency as your footprint grows and you acquire more franchisees, listen up. While growth is good, keeping tabs on the quality franchisees are providing versus your company-owned locations’ efforts is difficult, but not impossible.
“McDonald’s is among the world’s most quality-oriented brands, but the value proposition and price point aren’t appropriate for steak and lobster,” says Mark Siebert CEO and Senior Franchise Consultant at iFranchise Group, an author of Franchise Your Business, The Guide to Employing the Greatest Growth Strategy Ever.
“There are, however, high-end franchise brands known for detailed attention to quality. Quality is not about what’s on the menu; it’s about consistency of the operation.”
Inconsistency ruins things
Many franchise brands risk failure by not establishing and maintaining quality for each outlet under the network’s guidelines. Regardless of whether a store is run by your company or a franchisee, if there’s glaring inconsistency in service and product quality between different locations, it’s likely to harm your brand’s reputation.
To establish the strength of your quality control standard, ask yourself the following questions:
1. Is your operational training procedure customisable?
Acquiring new franchisees is a chance to cement your training and quality processes and establish if these can be standardised, or if customisation is necessary.
“Training is equally as important as franchisee selection when it comes to maintaining the brand. The best franchisors routinely provide the most – and the most comprehensive – training to their franchisees,” says Siebert. “If standards aren’t rigorously enforced from day one, chances are these standards will continue to slip, and in the process, they’ll become more and more difficult to maintain.”
Because different locations present varying climates and market preferences, remember to customise your training materials based on respective franchisees’ markets, keeping in mind to remain consistent with your brand’s core identity.
2. Have you provided the right tools in the franchisee manual?
Duplicating your franchise’s success relies heavily on mapping out the roadmap for your franchisees and their employees to follow. The right tools will most likely yield the same results you have achieved.
“Documenting systems of operation lend a big hand in a quality control,” says Siebert. “A robust manual has multi-fold benefits and not only serves as a blueprint for operation, but as an ongoing piece of reference for even the most established franchisee, becoming the default go-to in most every scenario.”
3. Do you understand the role of supporting each franchisee?
Whether you choose to conduct on-site field visits, offer master classes like Nando’s, or check in via email or phone monthly, the ultimate goal should be aiming for higher-quality and more profitable franchisees through ongoing support and reinforcement of brand standards.
Quality control is all about commitment. For a good franchisee, that commitment comes naturally. For the franchisor, it comes at a price. But franchisors who are willing to pay that price will find their ability to build a quality brand greatly enhanced,” says Siebert.
Could Semi-Absentee Franchise Ownership Be For You?
Ready to become your own boss…for only 15 hours a week? Yes, you can become a franchisee while still clocking into work. Here’s how.
If you want to keep your current job while owning your own franchise, you may want to look into semi-absentee franchising.
“A semi-absentee model allows you to work on the franchise for ten to 15 hours per week while continuing full-time employment. Then when the time is right, you can exit your day job to focus entirely on your business,” explains Jim Judy, a consultant at Franchoice.
When you have a capable manager to oversee the daily operations of the business, you have the flexibility to work your full-time job and ownership of a fully-fledged business. But first, the following considerations need to be made:
How will the decision affect your finances?
While being a semi-absentee franchise owner may require less from you in terms of time, the financial commitment is the same as investing in a franchise as an owner-operator. The decision to become a semi-absentee franchisee should not be made before examining your needs, goals and expectations of the business. Asking yourself the following:
- Do I want to become a franchise empire builder?
- Would I like to build numerous concepts?
- How much capital do I have to invest?
Keep in mind that semi-absentee models may take longer to turn a stable profit if you’re not giving it your full attention due to spending less time working on the business.
“Semi-absentee business models are also expensive,” says Heather Rosen, president of FranNet of Virginia, a franchise advisory firm. “Because the owner must not only rent the space but hire a competent manager.”
Do you have the necessary skillset?
The key to managing a franchise while at you have a full-time corporate job is having impeccable people management skills. This is because having a manager run your business while you oversee them requires you to be comfortable with delegating and trusting that they will handle the day-to-day operations of your business.
In addition to people skills, you may think certain talents are required before calling yourself a business owner, but each franchise is different.
“Some franchisees find that the available training and the business concept allows them to use their particular talents and skills to enter semi-absentee franchising without management or business ownership experience,” say experts at Franchise Direct.
Can you balance your schedule adequately?
Even if your plan is to one day leave your job and become an owner-operator of your franchise, while you’re still on your employer’s payroll, you will need to work out ways to handle your nine-to-five tasks with your business’ success. This is an important aspect of choosing the kind of franchise to purchase. While most semi-franchisee suitable options are in retail or the service industry, ensure you’re able to keep track of the business remotely and can periodically check in on how things are going.
Insights On Recruitment That Could Affect Franchise Performance
A critical aspect of operating any successful franchise chain is getting the right franchisees on board.
You’re facing a lot of competition as the franchising industry continues to grow. International brands, local giants, and new innovative entrants to the market require you to step up your game. Not only are you geared for growth, but you need your new locations to compete with the best.
“One of the success factors for franchise systems is market penetration which is often achieved through expansion, by opening new stores with quality standards that match the brand – through franchisees,” says Ethel Nyembe, Head: Sales Optimisation and Planning at Standard Bank Group. “The wrong fit, however, can seriously set a franchise’s growth back many years or cause irreparable damage to its reputation.”
Besides the challenge of trying to make your brand more appealing to franchisees in a competitive market, acquiring the right candidates to join your franchise requires the following:
1. Draw up (and adhere to) a checklist
Not all franchisees are created equal, and even a candidate with previous franchising experience may not be the right fit for your particular brand. Alternatively, you can decide to train a potential franchisee if you see potential.
When narrowing down your list of franchisee candidates, consider the importance of this:
- How important is prior experience in terms of the franchisee’s ability to become profitable in their first year?
- Does he or she have the necessary resources to train and support the franchise?
“You need to be clear about what you want; don’t compromise on your required skills, priority traits and qualifying requirements,” advises Nyembe. “There’s too much at stake financially and reputation-wise to settle for second best.”
2. Network in the right circles
Sometimes, if the talent doesn’t come to you, it’s beneficial to seek it out physically. Industry events are a great place to come into contact with people aiming to own and run their own franchise. If not, your presence at these functions will expose your brand to more potential people to do business with.
“During key annual industry conferences and trade shows (such as The International Franchise Expo), make a point to send attendees, to sponsor or to exhibit in order to increase brand visibility,” advises Nyembe. “Also consider participating in panel discussions.”
3. Get to know your new brand representatives
While personality tests and numerous meetings can give you an idea of whether you’re choosing the right candidate, it’s important to consider taking a more advanced approach to franchisee recruitment.
“Selecting the right candidates to represent your brand is critical to your operation’s ongoing success,” says Sue McConnachie, Vice President, Quality Credit Services Limited. “These franchisees will be the face of your company and you need to trust that they will maintain your brand image.”
The selection of franchisees is crucial because, as it carries both long- and short-term implications, including:
- Reducing franchisee failure and turnover, while increasing success and profitability
- Protecting and developing your brand’s reputation
- Focusing your resources on business planning and management instead of problem-solving
- Decreasing exposure to legal implications when a franchisee’s conduct is negative or their franchise is unsuccessful
- Minimising legal and collection claims against delinquent franchisees.
Selecting your next set of franchisees requires establishing a checklist before viewing any CVs, dedicating time to seek out potential franchisees, and ensure you’re choosing people who will take as much pride in your brand as you do.
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