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Creating a Franchise

Written by: Colin Mackie

Article Overview: The first question that an individual or company needs to ask before taking the franchising route to growth. Is franchising the best method of business expansion for you? Do you have the personal attributes to be a franchisor? What are your motives for contemplating the utilisation of a franchise system?

Creating a Franchise

Creating a Franchise

The first question you have to ask if you are considering creating a Franchise system is “why?”

“Why?” is the most underrated question in the world, regardless in what language it is asked. We often blindly follow paths that are firmly worn into the fabric of society, by those who have gone before us, under the unqualified assumption that this is the “right” path or the “only” path.

Building a Franchise system should not be embarked upon lightly. It is not an easy path and not always a profitable path. It’s a pathway that picks up people, their partners, children and associates, along with their individual dreams, goals, and aspirations and, as an undoubtable requirement on any journey, their baggage.

As a Franchisor you have to be strong of character and also be prepared to help those less courageous than you are. People who buy a Franchise are braver and more courageous than those who never go into business, but they are not as brave as you, the creator of the Franchise. You will need to be firm, but understanding. You need to be a leader but not a boss, open minded but focussed, altruistic but protective of what is yours.

Franchising is the finest system of business growth for many businesses, but not for all. Other methods of expansion can be much easier and more lucrative. A whole range of considerations need to be investigated besides the obvious legal and accountancy fields.

Your own attitudes, aptitudes, commitment and psychological make-up cannot be determined in a spreadsheet, nor in a Franchise Agreement. The process that is used to select appropriate Franchisees also needs to uncover all of these personally traits; picking the wrong Franchisee can spell disaster for him and his family. This error would be at the minimum end of a collateral damage scale, with the failure of the full system a possibility, at the other end of the scale.

Most franchise consultants and advisors come from a legal or accountancy background and are focused on these areas of building a franchise system. Obviously, getting the legal structures in place and guaranteeing that the legal requirements will stand any attack is of major importance. But a franchise system is not a legal system; it is a business system that operates within strict legal parameters.

Other franchise consultants may also come from a limited business background with very little breadth of experience or knowledge. Others may have taken a course or two in franchising or marketing but, again, their breadth of knowledge may be lacking.

Establishing a franchise system needs to be considered carefully from a wide variety of perspectives. There are a large number of people who will be affected if you win or fail and these must be taken into consideration before commencement. A good franchise system must be a truly symbiotic relationship between the Franchisor, the Franchisee and the consumer. If one party is succeeding, or suffering, the system is doomed to disaster.

It is very important that one always examines “The Worst Case Scenario” in every endeavour. Be honest and look at the ‘WCS’, not only from your personal perspective, but also from that of those who will also be affected in some way by the, hopefully, fictitious disastrous worst case event. Once you have examined this carefully and come up with a contingency plan that will mitigate the fallout, you put this piece of paper in a drawer and never have to look at it again. You will now know that should the worst happen it is not a life-threatening event for any of the potential victims.

Most franchise developement and consultants will have had many years of experience in working with individuals and companies in developing Franchise systems. The decision to go Franchising is not theirs; it is you, the client, who will make that decision but it is the duty of the consultant to ask their clients to be aware of the consequences of their actions in a franchise environment.

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  Franchising with all its Success
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  Why Use a Franchise Consultant?
  Did you know: NIIT Franchise was present in Malaysia in 1997?

Article Tags: aptitudes, assumption, attitudes, boss, business growth, collateral damage, disaster, easy path, fabric, failure, franchise agreement, franchise consultants, franchise system, franchisee, franchisees, franchisor, goals and aspirations, journey, pathway, spreadsheet



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Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
how much for a franchise fee? - Dear Colleague There is no easy answer to this question. Things to consider: [list=] The sizeof the Franchise Clent base Expected Turnover Intellectual Property costs (recoup) Number of Franchises Number of employees Original Set up costs Franchise admin costs An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000. Hope that this gives you some idea Take care Ian[/list]
Re: Franchise Surveys - Another good tool to researching a franchise is to speak with their existing franchisees. This contact information is included in most Franchise Disclosure Documents. In order to get a Franchise Disclosure Document or FDD as it is often referred to, you will have to complete a basic franchise application. The franchisor will then usually provide you with the FDD at that time. Included in that book of information is a list of the existing franchisees, the contract, the investment information etc... This information is required by Federal Law to be disclosed to your prior to making a purchase. So be sure to do your research and start with the Franchise Documents to get the initial information.
Re: Info for would be franchisers... - [quote="Sebastien":2gam0klq][quote="BuzzAroundBooks":2gam0klq]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to.[/quote:2gam0klq][/quote:2gam0klq] That is really what I look for in any industry publication. We lead busy lives and when people fill their magazines with fluff, not only does it benefit no one, but it makes us truly appreciate those that don't. Thanks!


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