Latest News

Start-Up Franchisors

The 1st priority for a start-up company [a company just beginning to franchise] is a commitment to become a World Class Brand using franchising as its primary growth strategy.

Putting together a really competent team to advise and guide the young franchisor through the preparation to franchise phase and the first 24 months of franchising is essential to the success of the company.  This team needs to include:

• The team of the entrepreneur,
• Franchise law firm with depth in other areas of corporate law,
• An experienced franchise consulting company with knowledge of organizational principles,
• A creative company capable of positioning the new brand from the beginning so it appears to be a national brand, and
• A technology company capable of bringing real time information to the young company so it can make informed business decisions.

Having a fundamental grasp of and understanding of both the mechanics of franchising and the dynamics of franchising is necessary. The mechanics of franchising include processes, procedures, policies, and programs, both organizational and legal. While the dynamics include correctly identifying and structuring the philosophies and relationships the franchisors’ team will have with the franchisees, its customers, and its strategic-partner vendors.

Creating and documenting the Operating Systems of both the franchisor and the franchisee’s business model is mandatory in order for the franchisees to implement the franchisor’s systems. 

These systems include:

1. A Customer-Centric Culture,
2. Strong enterprise wide business and financial planning,
3. Focused performance improvement consultants to the franchisees,
4. Excellent franchisor-franchisee relationships,
5. Balancing financial and ratio metrics with customer and team member metrics [The Balanced ScoreCard] to ensure you have the right measurements to operate the business,
6. Technology to manage information and make decisions,
7. Effective training and people development programs,
8. Effective pre-opening and operations manuals,
9. A system to grant franchises to qualified individuals and entities, and
10. Superior leadership.

The entrepreneur franchisor needs to understand he/she will no longer be able to change the direction of the company based on new ideas they hear or read about.  “Letting go” is the hardest challenge an entrepreneur must learn to do.  If they fail to “let go” and delegate decision making, the franchising efforts will languish, fail, or be significantly less successful than it could have been.

Being committed to a well planned development strategy is crucial.  It needs to be executed;

• Slowly,
• By placing your first 20-30 franchised locations within your existing markets and in other markets contiguous to your existing markets within driving distance, and
• Being open to converting your company locations to franchised locations.

Your initial operations must be able to perform financially and the test of this is if you can use your existing locations’ financial information to construct a viable Franchise Disclosure Document [FDD] and an Item 19.  If this cannot be done, you are not ready to franchise.

You must have enough cash to invest in the business to ensure your franchising efforts will succeed. Never depend on Initial Franchise Fees to pay for your franchising efforts.  The Initial Franchise Fees will enable you to recover, over a period of 2-5 years your initial investment but you must have the cash upfront to develop and staff the first few years of establishing and growing the franchise company.

Keep in mind people are becoming your franchisee because they want to improve their income, lifestyle, wealth, equity, and become debt free, NOT because they believe your business is “the greatest thing since sliced bread.”