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Franchise Sales in the First Year

Written by: John Power

Article Overview: Franchisors should carefully consider how and where they are going to sell franchises in the first year that they offer franchises.

Franchise Sales in the First Year

Business owners frequently want to begin selling franchises because they have had friends and customers express interest in owning and similar business and have been asked if franchises are available. The first few franchise sales may already be"lined up" by the time that the company is ready to begin selling. These first franchisees may be customers of the business, or friends of the business owner,and may have been favorably impressed with the operation and market position. One of the advantages of dealing with an emerging brand is that the franchisee's communication is likely to be with the founder, and this may give the franchisee increased confidence that they will be supported, and can be successful. They may have become acquainted with the business owner and feel that they would like to work with him/her.

It is true that many potential franchisees are drawn to brands with which they are familiar. But sometimes hat the well-established brands are very restrictive operationally, and may have very few good territories available. This may lead franchise buyers to consider an emerging brand that could yet have many desirable territories to choose from.

We recommend that new franchisors focus on making sales within a distance that they can adequately serve, support, and assist. If the franchisor is located in San Diego, making the first sale on the East Coast will make it difficult to "drop by" for additional training. Initial franchise expansion might best be accomplished in the shape of a spiral, curling outward from the franchisor's home location, so that the support system can be built as additional sales are made.

It is also important to consider the cost and limitations of selling franchises in registration states. Some of the registration states, including California, New York, and Illinois, are also some of the most populous states. It is difficult to ignore inquiries from them, but we recommend approaching registration states on a targeted basis: once you are approved in a registration state you should put some effort into specifically selling franchises in that state.

Some consultants and franchise attorneys recommend that once the franchise documents are complete, that the new franchisor apply to all registration states at the same time so that sales can be made in any state from which inquiries are received. This may seem like a good idea, from a marketing standpoint, but the cost of doing this, for preparation costs and state application fees, will be somewhere between $20,000 and $50,000, depending on who you use to make the applications. Then the annual renewal costs are likely to $10,000 to $20,000. You should carefully consider how many franchises you are likely to sell in registration states, in the first year, before applying to all registration states at once.

By carefully planning your expansion, and making sure that you can support new franchisees wherever they may be located, you will be in a better position to develop a successful franchise system.

More information can be found at: www.biltmorefranchise.com

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Article Tags: additional training, business owner, business owners, confidence, east coast, franchise buyers, franchise expansion, franchise sales, franchisee, franchisees, franchises, franchisor, home location, initial franchise, inquiries, market position, nbsp, populous states, san diego, spiral



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