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In their book Franchise Bible: How to Buy a Franchise or Franchise Your Own Business, authors Erwin J. Keup and Peter E. Keup detail both the basics and the finer points of this popular means of expanding a business. In this edited excerpt, the authors describe how to determine if your business would benefit from franchising.
To be successful, a potential franchisor must have built their own business on a sound foundation that includes well-trained personnel, good marketing techniques, and an adequate working capital structure. The same foundation blocks apply for a successful franchise operation, but as a franchisor you will need to view them from a different perspective and utilize different skills.
Your success really lies in your ability to recognize the business insight necessary to operate a smooth-running, successful franchise. To help you do this, carefully review your current management, marketing, training, advertising, and sales personnel. Where they are found lacking in franchise experience, they should be properly trained in franchise operating and marketing techniques.
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Staffing a well-run franchise operation with knowledgeable, competent personnel can be achieved at a reasonable expense in one of four ways.
Educate current employees. First, if current personnel are not only capable of performing franchising duties, but also available for such duties without overextending themselves, franchise-oriented business seminars and literature should be sought out as educational tools. Many such courses are offered by specific professional business symposiums or community colleges and take one or two days. Courses and seminars are usually individual efforts presented by specialists with hands-on experience in their particular franchise fields and should not be confused with the all-purpose franchise consultants discussed later in this section.
Check the business opportunities section of your local Sunday newspaper regularly for listings of upcoming business events and seminars. These listings often contain goldmines of information for new franchisors and their inexperienced staff. The International Franchise Association in Washington, DC, can also provide you with a wealth of information regarding franchising.
Hire experienced franchise personnel. Review each applicant's franchise expertise, character and knowledge of current franchising laws. Hiring additional experienced franchise personnel can be costly and may not be necessary if you are a smaller franchisor. In many cases, you will handle the operation's the administrative, management, and marketing functions, at least initially. Therefore, if your plan is to start with a small or medium-sized franchise system, you may prefer to train current personnel.
Related: Tips for Hiring the Best Employees
Subcontract franchise functions. Subcontracting specialists in law, training, advertising, public relations, and marketing is a highly recommended way of educating yourself and your staff on the business aspects of franchising.
An experienced franchise attorney who understands both franchise law and the everyday business is crucial. Talk to the attorney's past clients about legal expertise and hands-on knowledge of franchising. When selecting an advertising agency, make sure it specializes in franchising as well as general business. The same holds true with financing and marketing specialists. Carefully check each specialist's references.
Retain an all-purpose, package consultant. These entities provide the franchisor with the entire package, from legal work to marketing and advertising, all under one roof.
A multi-purpose consultant offers complete services, including preparing disclosure and other legal documents at costs ranging from $37,500 to $200,000 or more. They may require that clients separately retain their own counsel to review the legal documents and secure any state registration.
Individual franchise consultants who provide various specific services--such as training, marketing, advertising, sales, business planning, or financing--can be more organized, and informed, and less costly and faster than an all-purpose, high-priced consultant. If you go the way of a consulting firm, compare the costs of all-purpose consultants with those of individual specialists in the legal and marketing franchise field.
Never retain a consultant solely because they were once a franchise executive; many are out of work because of their lack of expertise. Evaluate the consultant's versatility. In a new and diversified industry, such as computer software and hardware franchising, the experience required might not be compatible a consultant with a career in the restaurant business.
Some franchisors, including Domino's Pizza, won't sell a franchise to anyone who hasn't worked for them for at least one year. However, if you aren't in a position to do so, you must incur the cost of identifying potentially good franchisees and establishing communications with them.
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You need to formulate a profile of the type of franchisee who would have the best chance of succeeding in selling your product or service. A good franchisee is hard-working; follows instructions; will enjoy working in that type of business and has a suitable background; has adequate financial resources, and has a family who supports the new venture.
Look for the same qualities that made you successful in operating your retail business. Good common sense and an objective view of what is necessary, as determined by your past experience or your operational personnel, might be the ticket to determining the best profile for the ideal franchisee.
This article is an excerpt from Franchise Bible: How to Buy a Franchise or Franchise Your Own Business available from Entrepreneur Press.