The Advantages of FranchisingFranchise Development Program
Volume I, No. 1
INTERNATIONAL FRANCHISE ASSOCIATION
®
Franchising offers the following advantages to you, the franchisor:
• Control – less than company owned – generally greater than independent dealers • Thefranchisordoesnotcontroltheday-to-daymanagementofthefranchisee’slocation
• Franchisorsetsbrandstandards • ProductsandServices • ConsumerRelationship • BrandManagement • Marketing
• UnitInvestmentandoperatingcostsaretransferredtofranchisee • Acceleratesexpansion • Nocontingentliabilityonexpansioncapital • Nocontingentliabilityonrealestate • Noequitydilution
• MarketPenetration • Increasedbrandrecognitionasmoreandmorelocationsopen • Abilitytoservesmallermarketsthatmightnotbeattractiveforcorporatedevelopment • Acceleratesmarketdominanceoverlocalcompetitors • Improvesacceptanceandtermsfromlandlord • Increasesvalueofthebrand
• Collectivebuyingpower • Reducescostforproducts,equipment,etc.,becauseofsystempurchasingcapacity • SharedResources • Warehouses,production,anddistribution • Leveragespurchasingpower • BrandMarketingthroughsystemmarketingfund • Allcontributetomoreprofessionaladvertisingandmarketingprogramsandmaterials • Abilitytomaintainwebpresence • Franchiseemanagestheday-to-dayactivitiesoftheirlocalbusinesstosystemstandards • Labor • Inventory
• Franchiseeresponsibletoexecutetobrandstandards
• Reducesperunitcostofsupportforfranchisor
• Franchiseeliableforlocaloperations–substantiallyreducesriskofvicariousliability
• Franchiseemotivatedtosucceed
• Knowledgeableaboutlocalmarkets
• Sourceofnewproductandserviceideas
• Franchiseeatriskforunitperformance
• Generatesrevenue • Fees–initialandongoing • Rebates • Franchiseepurchases
Advantages to You
Franchisingoffersthefollowingadvantagestoindividualbusinessowners(franchisees):
• Useoffranchisor’sbrand
• Useoffranchisor’soperatingsystem
• InitialAssistance • Businessestablishmentandstart-up • Siteselectionandconstructionassistance • Training • Staffingandhiringguidelines • Marketintroductionassistance
• OngoingAssistance • Businessconsultationandguidance • Reducedcostofgoods • Marketingassistance
• Abilitytobeapartofalargerwhole
Advantages to Franchisee
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The Advantages of Franchising
The Advantages of Franchising
Whatoperatingsystemsshouldyouhaveinplacetooperateyourbusiness?
CustomerExperience You must deliver the customer experience on a consistent basis:
• Product/Service • PreparationofProduct • LocationCriteria(siteselection,leasenegotiation,andlegalreview) • Build-OutandDécor • LaborandSchedulingRequirements • Equipment • VehicleRequirements • Ingredients,Products,Supplies • Advertising • CustomerService • Pricing • Inventory • SuppliersandVendors • Training • CanbecodifiedintoOperationsManuals • Canbeoperatedbyatrainedmanager
Training Programs You will need the following training programs in place:
• Allpositionsinthebusiness • Franchiseeandtheirstaff • Whys as well as Hows • Consistentresults • Requiredskillsettobehired • Specializedbackgrounds • Timetoachieveproficiency
Marketing&AdvertisingPrograms You will need the following marketing and advertising programs:
• BrandIdentityandDevelopment • PricingPhilosophy • LocalMarketAdaptations • AdvertisingandMarketingMaterials • Assistfranchiseestointroducetheconceptorthebrandintoanewmarket • CorporateIdentity
Legal&RegulatoryRequirements You will need the following legal and regulatory requirements in place:
• FederalLevel • StateLevel • LocalLevel • LicensesandCertifications • FranchiseOwnership
AcceptableReturnonInvestment Is there the opportunity for an acceptable return on investment?
• NoGuarantees • Franchisorsandfranchiseescananddofail • Opportunityforanacceptablereturnbasedoneconomicmodeling • Franchisor • Reasonabletimeandgrowthrate • Franchisee • Earnalivingorbuildabusiness
YourCompany&Franchising You must identify whether your company culture lends itself to a franchising model:
• Franchisesaregovernedbythecontractbutmanagedbyrelationships • Doyoucarewhatothersthink? • Canyouenforcestandardsagainsta“friend”? • Canyoufollowtherequirementsofthecontract? • Canyoucomplywithfranchiseregulations?
Overviewofthe FranchiseSystem
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The Advantages of Franchising
Overviewofthe FranchiseSystem (continued)
Products&Services You must be able to supply products and services to your franchisees:
• Suppliers’relationshipsinplace • Areyourcurrentsupplierspositionedtogrowwithyou? • Doyouhavetheabilitytoprotectyour“secretsauce”? • Willyoursuppliersworkwithyouwhileyougrowyourfranchisesystem? • Doyouhavebackupsuppliersidentified?
CompetitiveFranchiseOffer You must identify how competitive your franchise offer is:
• Poolofprospectivefranchisees • Affordabilityofthefranchise • Othertermsoftheagreement • Operatingstandards • Territory • Feesandrequiredpurchases • Otherrights/obligations • Abilityoffranchiseestoobtainfinancing
FranchiseExpectations You must consider how realistic your franchise expectations are:
• Growthoffranchisenetwork • Abilitytoprovideopeningandongoingsupport • Activelyevolveandmanagethebrand • Providemanagementtoolstofranchisees • Enforcestandards • Financialinvestmentrequiredtobeginfranchising • Expectedrevenuefromfranchising
Settingthe Expectations
Youareembarkingonanewexcitingvoyage,andinyourinitialoptimismyoumightnotanticipate the potential storms to come:
Atsomepointyourgrowthwillplateau!Whetheryouhitthisgrowthbarrierat10, 30, 60, or 90 operatingunits,thesolutiontoachievingabreakthroughbeginsinaskingtherightquestion. Wearetemptedtoaskthewrongquestionfirst,“HowdoIgetmyfranchisesystemtogrow?” Therightquestionis,“Whatispreventingmyfranchisesystemfromgrowing?Whatismy Achilles’heel?”
ItisessentialtorecognizeyourspecificAchilles’heelandtakeproactivemeasurestopreventplateauing.ThefivemajorAchilles’heelstoeveryfranchisorare:Leadership,Management,OperationalPerformance(Franchisor/Franchisee),Administration,andFinancialManagement.
Youneedtothinkaboutyourexitstrategy.Willyousellthecompany,gopublic,leaveitasalegacy foryourchildren,hireaprofessionalmanagementteamsoyoucanretire,etc.?Theseareimportantdecisionstobemadebeforewecanproperlydesignyourfranchisecompany.Youmustkeeptheend inmindsothatyourfranchisecompanyisbuiltonafoundationtoachievethisgoal.
BreakingThrough GrowthBarriers
KeepingtheEnd inMind(ExitStrategy)
YourRole as a Leader
Thereareanumberofcomponentsessentialtoyoursuccess,growth,andprofitability.Morethanlikelyyouwilldelegatemanyofthese;nonetheless,youmaintainultimateaccountability.Thefollowing factorsarenecessarytobuildasolidbaseforafranchisecompany:
• Leadership • Management • OperationalPerformance(Franchisor/Franchisee) • Administration • FinancialManagement
Asyourstrategicpartnerinfranchisesystemdevelopment,FranchiseGrowthPartners holdsitselfresponsibletogrowingwithyouthroughnovice,apprentice,journeymantomaster-levelCEOleadershipskills.
3625ThousandOaksBlvd.,Suite228,WestlakeVillage,CA91361phone:800.471.1682•fax:805.496.4284•franchisegrowthpartners.com INTERNATIONAL FRANCHISE ASSOCIATION
®
