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The following excerpt is from Rick Grossmann’s book Franchise Bible. Buy it now from Amazon | Barnes & Noble | IndieBound
Following are some tips and strategies you can apply to build a thriving franchise organization and community.
Related: What Franchisors Need to Know When Drafting Their Franchise Agreements
Company infrastructure
As a would-be franchisor, you must realize that your current management, operating and marketing techniques probably are insufficient in many ways for a successful franchise operation. For instance, a good computer sales employee isn’t necessarily a good computer franchise salesperson. A good field manager isn’t necessarily a good franchise manager, particularly when it comes to supervising multiple, independently operating franchisees. Company managers who have trained company employees informally, one on one, might not be qualified to adequately train a group of potential franchisees who have a significant amount of their savings at stake.
In addition, present advertising media suitable for selling a product or service at the retail level isn’t necessarily suitable for attracting qualified people with adequate capital interested in purchasing franchises. In short, your previous experience and knowledge of your business may not necessarily be the same experience and knowledge required to successfully operate a franchise business.
To be successful, a potential franchisor must have built their own business, no matter what size, on a sound foundation of well-trained personnel, good marketing techniques and an adequate working capital structure. These foundation blocks are the same for a successful franchise operation as well, but as a franchisor, you’ll need to view them from a different perspective and utilize different skills.
What makes your franchise special? Why would people want to invest their hard-earned money to buy your franchise over the others? These are questions to get you thinking about your franchise offering. You’ll want to offer your franchise owners training, support and tools to make more money and spend less.
Buying power, approved suppliers and other revenue sources
One common benefit that will impress and help franchise owners is your ability to save them money for products, supplies and services. This is an example of collective buying power that a franchise organization can offer.
This usually comes in the form of discounted pricing that you can pass through to your franchisees from the approved suppliers you’ll specify in your franchise disclosure documents and operations manual. You may be surprised to learn that your suppliers may be willing to offer better pricing once they’re notified that you’re franchising your business. Your suppliers will benefit by selling more as your franchise network grows, so they should be willing to work with you to keep your relationship. If they’re not, it’s a good time to shop around for suppliers.
Related: The Pros and Cons of Franchising Your Business
Facility evaluation and selecting your central office
A common challenge for new franchise organizations is their first impression to prospective franchise owners when they’re just starting out. Most “early adopters” understand that a new franchisor is in their growth stage and may not have a big impressive headquarter. Once you’re ready to start planning your first franchise “discovery day” events, you’ll want to evaluate your current facilities. Your prospective franchise owners are going to invest their hard-earned money to buy your franchise, and they have to feel confident when they meet with you and your team.
In many cases, one of the first things new franchisors do is commit themselves and their new franchise company to a costly new office showplace. This can be fatal. Instead, you should establish a highly capable, efficient organization at the lowest cost possible. You should have a pilot unit of the operation you’re intending to franchise. Often, you can initially work from this location for company tours and training and use offsite facilities for meetings and presentations.
Cooperative workspaces such as executive offices and incubator or accelerator facilities are also a good option for emerging brands. These buildings usually offer office space, meeting rooms and other services such as front desk reception, and allow your company to grow to a larger space as you onboard more franchisees and staff.
Growth and staffing plan
You’ll want to create a business growth and staffing plan that includes a budget. One common mistake new franchisors make is adding too much, too fast when it comes to overhead. This includes labor dollars in the form of salaries for executives and support staff. You may need to work on a skeleton crew budget until you have enough revenue from franchise fees, royalties and other franchise income to justify the added cost of more staff.
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 to determine whether you should provide franchise management training, engage specialized consultation for present personnel and/or hire new personnel. The capabilities of current personnel should be carefully reviewed and, where they’re found lacking in franchise experience, they should be properly trained in franchise operating and marketing techniques.
Staffing a well-run franchise operation with knowledgeable, competent personnel can be achieved at a reasonable expense in one of four ways:
1. Educating current personnel.
In many cases, current employees may be a great fit for the franchise team you’re going to build. You’ll likely be able to identify key staff members who can fill franchise roles as you grow. Consider the following tips:
- Be sure you have a real need for the positions. Don’t create positions for people just to accommodate them if it’s not a benefit for the company.
- Create a job description for each position and interview individuals for each.
- Be sure the candidates are enthusiastic and qualified for the respective positions.
2. Hiring experienced franchise personnel.
Your second option is to hire experienced personnel who’ve worked for other franchisors. You should thoroughly review not only each applicant’s franchise expertise but also their character and knowledge of current franchising laws.
Hiring additional experienced franchise personnel can be costly, and it may not be necessary if you’re a smaller franchisor. In many cases, the smaller franchisor will handle all the administrative, management and marketing functions of their new franchise operation, at least initially. Therefore, if your franchise plan is to start with a small or medium-sized franchise system, you may prefer educating current personnel about franchising rather than hiring high-priced new personnel with prior franchise experience.
Related: 3 Key Questions That Will Help You Decide If Your Business Can Be Franchised
3. Subcontracting for franchise functions.
The third and highly recommended way of educating yourself and your staff on the business aspects of franchising is to subcontract the job to individual franchise specialists in the fields of law, training, advertising, public relations and marketing. These consultants will evaluate your needs and, instead of providing a complete package, will give you only what you actually need.
4. Retaining an all-purpose franchise consultant.
This can be a very efficient solution, especially in the case of a small company with very little existing infrastructure. The consultant will usually be able to offer structure and support as well as advice and direction to enable you to build your company. Make sure they have a track record of successful franchise clientele. In addition, the all-purpose consultant may provide services for the creation of your operations manuals, video training platforms and feasibility market and business plan assistance.
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