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Look Both Ways Before Franchising

Written by: Ed Teixeira

Article Overview: Many entrepreneurs consider franchising as a way to grow their business. Franchising is an attractive business model, based in part upon the fact that the capital of individual franchisees can help fund the growth of the business. However, its important for those business owners who may seek to utilize franchising, to implement their franchise program the right way. This article describes the approach to take in order to avoid costly mistakes.

Look Both Ways Before Franchising

Frequently, I receive telephone calls and e-mails from existing business owners who are considering franchising their business. Some of these individuals share in the desire to do most of the franchising work themselves, whether due to a lack of capital or an unwillingness to spend the money. Some have gone so far as to try and write a franchise agreement. Although I applaud their enthusiasm and self-confidence, I must admit that this approach will typically lead to problems.

First of all, franchising involves a contractual relationship between the Franchisor and franchisee utilizing a number of complex documents, including the franchise agreement and disclosure document. The content and use of these documents must conform to regulations of the Federal Trade Commission and a number of State Agencies.
Failure to comply with Federal and certain State regulations can result in substantial fines or worse.

Secondly, having all of the franchise tools in place including, the most effective franchise terms, operations manual, marketing materials, website, franchise sales processes and how to deal with requests to negotiate the franchise agreement, takes expertise and experience.

Finally, launching a new franchise program goes beyond simply having the right tools. It involves knowing how to use these tools. I often tell clients it’s akin to giving someone the tools to build a house when they don’t know how to use the tools. For example, knowing the most effective way to generate franchise leads and sell new franchises requires competency and coaching.

Another situation that arises is when a business owner has their franchise documents constructed by a competent franchise attorney and then they decide to do the rest of the work themselves. These are the franchisors that have trouble selling a franchise and they can’t figure out why. In many cases they advertise on various Internet sites or in print media. They often receive a good amount of leads but “can’t get past first base.”

Although the Internet represents one of the greatest technological achievements in history it sometimes makes us think we have all the answers. From diagnosing a medical condition on line to gathering information about franchising a business, we sometimes think we can do it all. Its good to establish a knowledge base but to act upon this information can be a mistake if we don’t have the right information and the correct tools.

I’ve had business owners tell me that they wanted to franchise their business but weren’t quite ready because they didn’t have sufficient capital. I commend them for making the right decision. I’ve taken the time to explain to them the important steps for successfully franchising their business. This enables them to understand what has to be done, the approximate cost and how to set a realistic strategy for the future.
Understanding how to deal with franchisees when problems arise is an integral part of all successful franchise programs. Just like other aspects of franchising, maintaining and promoting positive franchise relations takes savvy.
Establishing a franchise program the right way takes time, effort and capital. There is unanimity among franchise consultants that the cost to franchise a business will range from $50-$75,000 and this doesn’t even include advertising, new staff and other expenses.

My Advice:

Look for the right amount of capital to franchise the business correctly.
Look for the proper advice and guidance if you want to do some of the work yourself.
If you can’t do either don’t cross the street to franchising until you’re ready, otherwise you could end up in trouble.

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  What is franchising? My personal definition!
  I Want to Take My Business to the Next Level
  Newsworthy Trends in Franchising
  Franchising Is a Better Path to Success than Opening a StandAlone Business

Article Tags: attractive business, business model, costly mistakes, franchise program, franchisees



Related Forum Posts
Re: Re Franchise etc - [quote="bmueller47":e0j0nu4t]Can you see a shift of various types of franchises? What I am thinking about is that today it is more difficult to create franchises, that has great appeal. More and more people want to have their business, but no interference of someone else.[/quote:e0j0nu4t] Not sure what you mean exactly but it is certain that more and more people want to have their own business but not more and more people know what they really want to do, or how to do it. And that's what franchising is all about. Franchising is not for an entrepreneur. An entrepreneur will do his own thing. People who buy franchises want a turn key business, with a proven model. Franchising in the US had never been that good. I don't have the exact numbers in mind but I know for sure that franchising is growing more and more as people are getting more and more aware of this business model.
Franchising vs. Licensing? - What is your opinion on Franchising vs. Licensing? Which is better?
Nominations for a new Franchising Moderator! - Is there anyone you'd like to nominate as our Franchising Moderator (or volunteers for the position)?
Great Article, chock full of info. - Ian, Thank you for linking your article regarding Licensing vs Franchising. Its a good read.
Re: Hello from Captain Franchise - Hi BuzzAroundBooks, I actually found the site in my search for franchise networking. We're looking to make connections and also inform the general public about franchising. Franchising is often misunderstood because of the lack of knowledge. We're here to help and learn as well! Thanks!


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