Franchise Blog

1. Vision. This is no big surprise for most business leaders, if there is any misdirection or haziness about a company’s vision the boat will not be sailing straight. It is up to the Franchisor, the leader of the company to define that vision. What are the goals for the company overall, what are the basic principles that will guide this franchise company into the next year, five years and decade? A good franchisor has a GREAT vision with honorable intentions. The franchisee cannot be laid to waste in the wake of a franchisor working to achieve a goal, it is accomplished in unison.

2. Relationship Management. I have worked with many great franchise companies. Many amazing and dynamic leaders have passed through the halls of my office and gone on to achieve fantastic results. Some of these leaders have been extremely intelligent, able to compute extensive algorithms in their heads to the likes of a Bill Gates. Others have been uncanny sales people with the deal-making abilities of a Donald Trump. Other successful franchisors have found solace in their ability to manage with the prowess of a Jack Welch, always delivering results. The one common factor in all of the hundreds of top echelon franchisors is their ability to manage a simple relationship. It is very easy to like a good franchisor. They make a franchisee feel comfortable, they are honest, accountable and straightforward. The franchisee knows what they are getting from the relationship up front and the promises made are delivered throughout the relationship of the franchise. Good Franchisors are great at managing relationships.

3. Ability to Delegate. I have worked with a lot of different franchise companies, all shapes and sizes, there is rarely a case or instance where a type of business owner comes to me to build a franchise system that Francorp has not encountered at some point in time. Many entrepreneurs are what I affectionately refers to as “White Knuckle Operators”. The terms describes some business owners inability to let go of the day to day tasks. A franchisor will never get any bigger than they allow themselves to be, the franchisor has to trust the fact that after training the franchisees and instituting the systems in the franchise operation that the franchisee can run the business successfully. Without this ability, the franchisor perpetually handicaps its own expansion. I work with these types of business owners, and the biggest obstacle in achieving substantial growth is teaching the franchisor how to overcome themselves!

4. Ability to Teach. Great franchisors are always the best teachers. They have a way about them, it effuses a combined sense of “cool as the other side of the pillow” and “it’s okay, you’re doing a great job”. The exceptional franchisors that I have taken to market have a somewhat professorial air about them. They come across as great parental figures, you feel a sense of comfort when in their company. A franchisor has to teach, the value in a great franchise system comes from the franchisors ability to transmit their knowledge and experience to the franchisees. Great franchise systems are built by fantastic educators. I focus on this education function through a series of training classes and modules focused on franchise sales, franchise marketing, franchise management and franchise support. Perpetual education is a good thing that holds true in franchising as well.

5. Adaptability. It is imperative that new franchise companies have this essential structure when entering the franchise market. What has made many franchise companies reach the upper echelon of success is the franchisor and franchise system’s ability to adapt. The one constant in business is CHANGE! Every day we have new market factors and trends that as business owners we need to accommodate in order to keep growing. The same is true in franchising! What works in Illinois, may have to be altered to some extent in California. Again, the key is that you start with an exceptionally sound baseline service delivery system, then provide for the fact that every business must “shimmy” a little. A good franchise model is designed somewhat like a sky scraper, it is structurally defined and very solid, but it sways with the wind to accommodate for its environment.

6. Communication. I never will condone an “Ivory Tower” style of franchise management. What this refers to is that as a franchisor, the role shifts from a “doer” to an “educator”. Part of a good educator is to communicate effectively. The great franchise systems that Francorp has put together thrive on the fact that the franchisee has open lines of communication with the franchisor. Ideas, strategies and feelings are exchanged openly between all parties. Ultimately the franchisor makes the final decision on all business directives, but a franchisor will not succeed if they operate like a dictator. Alternately, a good franchise system for clients that is more similar to a Democracy with control and veto power lying in the hands of the franchisor. Franchisees should feel like they are involved, and many times they will contribute the success and well-being of the franchise system overall. It’s worth listening to the people who are the lifeblood of your franchise business.

Christopher James Conner
Vice President
Francorp, Inc.
http://www.francorp.com

If you already run a successful business, you need to congratulate yourself as this is certainly no easy task. It takes a lot of hard work and determination to ensure everything runs smoothly. You need to create effective marketing campaigns that will attract new customers and encourage sales, prepare realistic budgets, hire and train reliable employees and conduct detailed accounting and financial reports to monitor how well the business is performing.

Once you have mastered these tasks, you may reach the point where you would like to expand your current business. You can always hire additional employees, market more aggressively or expand your current product line. However, there is another very viable alternative you should definitely consider – franchising your business! I’m going to discuss some of the important elements of franchising to help you decide if this is the right route for you.

Types of Franchises

There are basically two different types of franchises. You can purchase the rights to one location of a successful existing business. Another option is to purchase a master franchise. This enables you to develop businesses in multiple locations. You can then choose to sub-franchise these within a specific geographic area. You need to decide how much time, money and energy you wish to devote to the expansion process. This will help you determine which type of franchise is most suitable for you.

What the Franchisee Will Receive

If you are planning to buy a franchise, you are known as the franchisee and the owner of the successful established business is called a franchiser. The joint venture or contractual relationship that is formed during the franchising process includes a copy for sale and lease of the existing business. This document contains all of the key elements that contributed to the success of the original business. As a franchisee, you will need to pay close attention to these elements in order to establish successful businesses in one or more new locations.

The copy kit you will receive should contain many pieces of valuable information:

• Package of leasehold improvements

• Sub-lease for a location

• Initial inventory package

• List of changes to the exterior of a building that will be instantly recognizable

• List of fixtures and furniture that includes any relevant trademarks and logos

• Initial training package

• Ongoing support system including marketing, general business management expertise and accounting

What the Franchiser Will Receive

In return for providing the copy kit and support for franchising a turn-key business, the franchiser will receive a franchise fee. This varies depending on each particular franchise so you need to discuss the amount beforehand. You will also be required to pay the franchiser a royalty so this individual can receive a percentage of the daily profits of the new business. Depending on the type of business you are purchasing and the degree of involvement required by the franchiser, you can expect to pay from 2 percent of the gross sales revenue to 50 percent of the net profits.

Some franchisers may also require you to pay from 3 to 5 percent of your revenues to assist with national or international marketing and promotion efforts. This helps cover the cost of expenses such as signage, logos and products required to establish a corporate identity for the business. Some franchisers will also charge you a service fee to provide you with the required stock and inventory for your new business.

Although you will own the business when you become a franchisee, the franchise contract ensures you follow a standard set of procedures. If you are a very creative individual who wants to maintain full control over your business, you need to consider this. You will have to sacrifice some creative freedom for an opportunity to purchase a business that is already successful. Now that you know more about how the franchising process works, we suggest you read our article on finding a franchise to buy .

If you are reading this, then you are likely engaged in the first step of finding some franchises for sale. Franchise information is plentiful online, with sites like “Entrepreneur” publishing articles about franchising and sites like “Franchise Gator” listing all franchises available. When starting a new franchise, you’ll need to research things like name brand, location, competition, supporting services and franchise fees. Finding the right opportunity may be tedious but it will save you from wasting unprecedented sums of money and experiencing the heartache of failure.

One way to find a franchise for sale is to check out an exposition. For international franchises, you will want to head to Washington DC (March 20-22) for the 2009 International Expo of franchising. The same group also holds similar events for national franchising opportunities with the West Coast Expo (October 2-4, 2009) in Los Angeles, the Expo South (January 9-11, 2009) in Miami and Franchise & Financing Expos in Atlanta, Boston, Atlanta and North Texas. Before you attend one of these expositions, decide how much you have to invest, which type of business is right for you and consider your own personal background or skills.

When you get to the event, you’ll be able to peruse a number of different franchises for sale all in one place. Be sure to ask the franchisor questions like: “How long have you been in business? How many franchised outlets exist and where are they located? What is the initial franchise fee, start-up costs, continued royalty payments and franchise tax? What support does the franchisor offer and what are the franchisor mandates?”

Be aware that exhibitors will try to entice you to attend promotional meetings, lunches and may offer you special deals. Remember, these people are highly trained in sales and are hoping you’ll choose them. Don’t give in just for a free dinner or prize. Legitimate franchises will never lay high-pressured pitches on you, but rather will assume you will make some comparisons before coming back.

Once you narrow down the franchises for sale that you are interested in, you’ll need to meet with franchisors and see how the franchise business is run. You’ll also need to pick up a copy of the Uniform Franchise Offering Circular (UFOC), which is an invaluable free resource that by law must be provided by the franchisor at least 10 business days before a franchise agreement is signed. In this docket, you’ll receive company information, fee summaries, required purchases, trademark rights, earnings claims and statistics. You’ll have access to a franchise directory of past and present owners too. With this information, you will have the tools you need to make an informed decision.

It may surprise you to learn that you don’t need to be a computer geek to run a tech franchise. You also need not have a wad of cash in the bank to become involved in a sports apparel franchising business either. Fast food franchises can cost a bit of money to start but obtaining financing is much easier and the risk of failure is also much lower. While a small business startup results in failure 50-80% of the time, new franchises only fail 5% of the time. Before signing on the dotted line, you’ll be able to read detailed manuals outlining your responsibilities. The only question is what kind of franchise do you want?

Tech ones can be educational, creative or can provide troubleshooting services. In the educational tech franchise opportunity, your staff will teach consumers about software programs like Microsoft Word or Photoshop, typically through workshops or instructional courses. The creative franchise business helps customers create websites, set up email systems or develop e-commerce solutions for their businesses. Troubleshooting franchises fix hardware or software problems.

Food, either restaurant or fast food, is another type of franchise you might want to consider. In the Franchise 500, 7/10 of the top franchises are fast food franchises such as Subway, McDonalds, Pizza Hut and KFC. Restaurant chains also run very well independently, although they cost a considerable amount to start up. Some new franchises can cost from $80,000 to $2.3 million. While the responsibilities are plentiful, this type of franchising business can churn a decent profit. Many prefer fast food and restaurant franchises because they have trusted reputations and brand names that have existed for decades.

As with anything, there are downsides to buying a franchise. If you want to operate a store to show off your managerial skills or your creative flair for decorating, then a franchising will not be for you. Your building, location, uniforms, advertising pitches, products and services will all be dictated by the corporation.

They have a proven system that distinguishes their name-brand from the competition, so it’s essential that you adhere to it. Secondly, if you plan on becoming richer than your wildest dreams then the franchising business is not for you. The profit margin for fast food franchises or retail franchises is fairly low, considering all the expenses and fees, although you can certainly make a decent living from your investment. Lastly, if you’re not sure what kind of commitment you want, then you should probably try something else. Most franchise owners plan to run their business for at least 20 years.

Are you considering the world of food franchises as the empire you’ll preside over? Good thinking! Banking on household name recognition and a proven operating system is a wise choice for a new franchising business. However, there are many types of franchise opportunities in the food industry, running the gamut from fast food franchises or donut shops to gourmet steak-houses and fine dining establishments, yet there are pros and cons to choosing the food industry for your new franchise.

There are many advantages to buying a food franchise. The main advantage is that successful branding and business planning are already in place, just waiting for you to work their magic. You’ll have a very professional support staff personally invested in your success, since the triumph of a new franchise naturally means more capital and prestige for the corporate franchisor. Market research is easy since you can walk across town and inquire as to the success of other units.

You’ll also enjoy a low risk of failure, as only 5% of franchises fail (compared to 90% of new small businesses). Another advantage is that your food products will have demonstrated staying power in the market, guaranteeing you years of healthy business. It’s also easiest to get financing options for an industry characterized by high returns. Lastly, there is a certain pride in owning a food franchise, which has become a symbol of Americana and a staple of our cultural landscape.

However, there are some dangers in food franchises as well. First, you need to consider the labor challenges you may face. The high turnover rate of low-wage employees is often overlooked but it can have a dramatic impact on how well your business is run and how satisfied your customers are. Recruiting and retaining capable workers is more of a challenge with fast food franchises than restaurant franchises, but with the latter you’ll be paying higher wages. Also, the profit margins are fairly low for a fast food franchise because the prices need to be kept low to compete. With restaurant opportunities, you’ll be making more, but not by much because you’ll also need to be investing more to get gourmet products and quality workers.

So how do you know if food franchises are for you? After considering all the pros and cons, you may still feel uncertain. Shadowing a food franchise owner for a few weeks may be the best way to know for sure if you can hack the day-to-day operations. While this commitment may seem tedious, it’s an essential part of the process before investing your hard-earned money into a franchising business.

You are an executive who is being displaced or who is dissatisfied with the way you are being treated by your company. Recently you have been thinking about putting your resume on the street, but more often than not you have found yourself thinking about going into business for yourself.

Whenever you think about going into business for yourself, you think about the horror stories and statistics you read in USA Today and the Wall Street Journal about the failure rate of independent businesses. Those statistics dampen your desire to own your own business. (more…)

What is Business Franchising?

Franchising is a term that describes a particular way of doing business. Although there are various different types of franchise they all generally involve an arrangement in which an individual or group agrees to pay for the use of part or all of an existing company’s business brand and strategies. The franchising company is known as the franchisor while the buyer is known as the franchisee. Typically the franchise agreement allows the franchisee to use the brand name and sell the products of the franchising company in exchange for an initial fee and a regular share of the profits. (more…)

Every year thousands of prospective business owners want to buy a franchise business. Some franchises are very good, and others are scams. Below is some helpful information everyone considering investing in a franchise should know.

What is franchising?

A franchise is a legal and commercial relationship between the owner of a trademark, service mark, trade name or advertising symbol, and an individual or group seeking the right to use that identification in a business. Generally, a franchisee sells goods or services that are supplied by the franchiser or that meet the franchiser’s quality standards. McDonald’s, Service Master, UPS Kinko’s, Subway, and RE/MAX Intl’l. Inc. are just some of the well known franchises. (more…)

Over the past several decades, franchising has become not only a uniquely American institution, but also one of the leading doorways into small business ownership in America. Every year, thousands of individuals choose to get into business ownership via the franchise route.

But is going the franchise route really a better choice than starting your own business? That’s something you’ll need to answer for yourself. But it is worth the time and effort to find out. Making the right choice for your own situation, as well as determining which franchise to buy, requires careful research. It’s a big investment on your part, and you must investigate before you put up the money.

According to the International Finance Association (IFA), franchised businesses are growing at a rapid pace. Some 400,000 franchised businesses now employ nearly 10 million people with a payroll of $230 billion. There’s always a hot new franchise on the scene, Curves, for example, a network of franchised women-only fitness centers, grew nearly 38 percent in a single recent year. (more…)

- How much capital do I have to invest?
- What is the value of my liquid assets?
- Do I require a specific level of annual income?
- Am I interested in pursuing a particular field?
- Am I interested in retail sales or performing a service?
- Do I want a part-time or fulltime opportunity?
- How many hours am I willing to work?
- Do I want to operate the business yourself or hire a manager?
- Do I want to have employees?
- Do I want to have inventories?
- Do I want to have Accounts Receivables?
- Will franchise ownership be my primary source of income or will it supplement my current income?
- Would I be happy operating the business for the next 10 years?
- Would I like to own several outlets or only one?

Fifteen states have franchise investment laws that require franchisors to provide pre-sale disclosures, known as “offering circulars,” to potential purchasers. Thirteen of these state laws treat the sale of a franchise like the sale of a security. They typically prohibit the offer or sale of a franchise within their state until a franchise offering circular has been filed on the public record with, and registered by, a designated state agency. Two of the fifteen states do not require a filing of offering circulars, as noted in the list of state offices below.

These state laws give franchise purchasers important legal rights, including the right to bring private lawsuits for violation of the state disclosure requirements. We encourage potential franchise purchasers who reside in these states to contact their state franchise law administrators for additional information about the protection these laws provide.

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Introduction

Many people dream of being an entrepreneur. By purchasing a franchise, you often can sell goods and services that have instant name recognition and can obtain training and ongoing support to help you succeed. But be cautious. Like any investment, purchasing a franchise is not a guarantee of success.

The Benefits and Responsibilities of Franchise Ownership

To help you evaluate whether owning a franchise is right for you, the Federal Trade Commission has prepared this booklet. It will help you understand your obligations as a franchise owner, how to shop for franchise opportunities, and how to ask the right questions before you invest.

A franchise typically enables you, the investor or “franchisee,” to operate a business. By paying a franchise fee, which may cost several thousand dollars, you are given a format or system developed by the company (”franchisor”), the right to use the franchisor’s name for a limited time, and assistance. For example, the franchisor may help you find a location for your outlet; provide initial training and an operating manual; and advise you on management, marketing, or personnel. Some franchisors offer ongoing support such as monthly newsletters, a toll free 800 telephone number for technical assistance, and periodic workshops or seminars.

While buying a franchise may reduce your investment risk by enabling you to associate with an established company, it can be costly. You also may be required to relinquish significant control over your business, while taking on contractual obligations with the franchisor.

Below is an outline of several components of a typical franchise system. Consider each carefully.

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Deciding to buy a Franchise is a huge decision. Once you have convinced yourself that franchising suits your character and business aspirations, have identified the right franchise, done your sums, attended the initial training and perhaps paid an initial deposit you will be presented with a Franchise Agreement to sign.

Typically this agreement could run to 40 or 50 pages and can be a daunting read to those unfamiliar with commercial contracts. The very nature of a franchise business structure means that the agreement will be fairly complex. Remember that this document provides the framework for your business life over the next seven years or so.

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