Franchisor Secrets

Article written by Lynne Shelton
success

Over the decades, through study and observation, we have noticed that many successful franchisors have a lot in common. To ensure that our franchisors have the best opportunity to become one of the best businesses in their field and make the most of their hard work, we are happy to publish this helpful guide. Although nothing can replace a full strategy session with an experienced franchise attorney, we hope this list will give some guidance as to some critical issues to consider.

  1. Consistency. One of the most important aspects to a successful franchisor is consistency. You must create a system wide ”norm”. Have you ever noticed how a Whopper sandwich tastes the same whether you are eating it in Budapest, Hungary, Los Angeles, or in Botany Downs, Auckland? Most have not given it much thought, but that is what is expected from a franchisor. After all, the whole premise behind franchising is to take a successful system and have franchisees duplicate it for a profit. In order to do this, the attractive and successful aspects of the system must be able to be copied in other locations. In order to achieve consistency, you must be able to conquer tip #2.
  2. Discriminating Selection Process. Do not underestimate this tip. Selecting the right franchisee to expand into a new territory is critical. Avoid the ‘breath test’. Just because a prospective franchisee can create fog on a mirror, thus proving they are alive with money should never be enough. If you would not trust the prospective franchisee to run your business, then you should not consider them a good candidate for expanding your franchise successfully either. Patience is key. You should find a prospective franchisee that is financially, intellectually and emotionally qualified to work the desired territory. Depending upon your brand, it may be possible to move a prospective franchisee to areas that match their demographics better. For example, a young energetic business man might do better within a heavily populated college area rather than a predominantly rural area.
  3. Expand Thoughtfully. Give thought to your expansion model and tweak it as necessary. Almost every franchisor would love to have franchise in every state and in every country. However, that is not necessarily a profitable goal. Be wise about how you expand. Use marketing to assist in developing a comprehensive plan for expansion of your franchise. While developing the plan, give serious thought to what areas you can easily market to, provide assistance and control over and become registered in easily. You want to be careful not to spread your marketing dollars or your personnel too thin. Once all of the areas are identified, then choose where your products are most likely to be needed or desired. It is wise to sell your most profitable and successful franchisees first. They will become your best spokespersons, the solid numbers and percentages for impressive financial representations within the FDD and allies to assist in any tweaking the system may need to roll out to larger targets.
  4. Standardized Process. It is important to create a streamlined process of application forms, evaluation forms, timelines, and checklists for your franchises. Ensure that no prospective franchisee is rushed through the system to approval. Do not skip steps. Handle all franchise inquiries exactly the same way to ensure nothing falls through the cracks. This is important for legal purposes and for psychological purposes thereby creating accountability and consistent answers. Make a single person responsible within the franchisor for responding to franchise inquiries. Once a franchisee is in the system, they will be talking to each other, therefore it is important that they all feel as valuable and as scrutinized as other franchisees.
  5. Brokers. Once you have a solid system in place, use franchise brokers. However, ensure that the Franchise Brokers are registered in the states as may be required. Usually these brokers have previously handled large franchises, thereby adding credibility and sales power to your franchise system. In exchange for increasing the number of franchises sold, you will typically pay them a percentage fee of the total franchise fee collected.
  6. Services & Income. A successful franchisor must also look beyond the initial franchise fee. You should not count on the franchise fee to be your income base. Most of the franchise fee typically is reinvested into franchisee training, marketing and personnel. Instead look to multiple revenue arenas. What products or services can you, as Franchisor, offer the franchisee in exchange for their investment? What additional services can you continue to add to the system to improve the franchise, including: real property management, manufacturing or packaging product, or negotiating for better pricing from an approved vendor based upon the purchases the whole system is using from that vendor? Oversee or start a franchisee cooperative for advertising; or perhaps hold an annual seminar with additional training and round table discussions to hear what the franchisees feel they need more assistance with. There are many different additional services you can provide to let your franchisees know that you are still interested in them long after the initial sale. A weekly or monthly teleconference could do wonders to synergize your franchise system.

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Lynne Shelton is an attorney uniquely suited to assist with all of your franchise and business law needs.