Top 10 tips for a fantastic franchise
Sure, you have a great idea and a successful business and would love to grow your company into hundreds of locations across the country. The idea is certainly appealing: reap the benefits while others execute your model, but is your company appropriate for franchising? And more importantly, are you ready for franchising? Before you jump in, here are several key points to consider:
1. Is your concept franchisable? A successful franchise requires a product or service that can be replicated without the founder or CEO’s constant presence. There must be a barrier to entry, meaning your concept has a competitive advantage in some regard. Additionally, the concept must be capable of offering continual content in order to justify ongoing royalties.
2. Is franchising right for you? You may have started your business and enjoy running it because of passion for the product or service. However, running a franchise company is an entirely different animal. You are no longer running a company centered on your passion — you are running a company centered on franchising.
3. Type A is good – have a system for everything. From how you greet the customer, to what color paint to use on the walls, to how many pieces of turkey to place on the sandwich. If you don’t have a specific system in writing that is easy to follow, things will unravel with growth. Consistency is key for a successful franchise. One underperforming location can dilute the company’s image or products.
4. Set up an infrastructure that will support growth. Franchisers need a strong operations person as well as someone to handle training and compliance in order to uphold the quality of the brand. Make sure your team is in place and solid before hitting your growth spurt.
5. Secure capital. Overnight you could go from buying 30 exercise mats for one location to 5,000 mats and paying to manufacture, ship, store, and inventory them as well as paying someone to process orders. Your costs grow exponentially – usually more quickly than expected – thus you must be financially prepared to handle whatever comes your way.
6. Hire a good franchise attorney. You absolutely need an attorney who knows the ins and outs of franchising and can look out for you – don’t try to navigate it on your own. The franchise requirements vary by state and are completely different than those for licensing. The expense of a knowledgeable attorney is well worth it.
7. Be extremely detail-oriented and keep track of everything. Franchising is heavily regulated and requires loads of annual detailed paperwork. If you don’t keep track of the details during the year, April is a very rough month.
8. Be aware of the filing states. There are 14 “filing states” that require extra financial reporting and registrations and are a bear to deal with. You could choose not to franchise in these specific states but you’d be bypassing strong potential markets, such as California, Washington and Illinois.
9. Befriend other franchisers. Only fellow franchisors truly understand the world of franchising and the relationships involved. Find a mentor to learn from, to share experiences and war stories.
10. Choose franchisees carefully. Do not take everyone with a pulse and a check. If you find the right people to represent your brand, you will experience a phenomenon that is impossible to achieve on your own and is quite honestly pretty amazing.