Franchising is an exciting business opportunity, but it is not without its challenges. Franchisees are dependent upon the knowledge, experience, and reputation of the franchisor. Many times franchisees hold franchisors to a high standard of accountability. Strasburger & Price talk us through some of the ‘do’s and ‘don’ts’s of a successful franchise.
An $800 billion dollar industry, there are almost 800,000 franchised businesses in the United States, accounting for over 8 million private sector jobs. The possibilities of franchising are limited only by the imagination. If a business can be replicated and scaled, it can be franchised that is the new blueprint for expansion.
Franchising is a vehicle for faster expansion of a brand with limited company resources, as compared to organic growth, because franchising allows the opportunity toexpand with someone else’s capital: the franchisee’s capital. The franchise model provides the franchisor the ability to establish a defined system and require compliance by franchisees, while the franchisee is a third party. And, the franchise model has withstood the test of time.
However franchisors are expected to deliver value throughout but may not be able to deliver at the rate the franchisee desires. Managing expectations and satisfying franchisees are skills a franchisor must master. Franchisors entrust franchisees with being the face of the brand, and there are obviously risks in having third parties represent your brand. The key to creating a win-win situation is anticipating as many issues up front and figuring out solutions in advance. This creates a solid foundation for a franchise system. When the franchise operations run smoothly the entire system benefits and thrives. On the other hand, when there is one bad performer in the system, that performer can have a negative impact on the entire brand.
Sound legal advice is essential for expansion with a sound agreement necessary to protect your brand. Franchising, regulated at the state and federal level in the U.S., has two types of regulations applicable: franchise specific regulations and business opportunity regulations; and two types of regulatory schemes: (1) registration & disclosure laws, governing the offer and sale of franchise opportunities; and (2) franchise relationship laws governing the ongoing relationship. Know the legal requirements before offering a franchise to avoid exposure to a range of legal claims.
Founded more than 75 years ago, Strasburger & Price, LLP has a long history serving clients, The Strasburger Way, a tribute to the vision and legacy of the firm’s founders and a great blueprint for expansion, embodies the principles of: Ethics, diversity, pride, excellence, dignity, respect courtesy, teamwork, commitment and investment.
Hints for Franchise Success:
- Be selective in granting franchises. The first few franchisees in a market are more critical to brand success than many systems realize. Everyone who can afford your brand may not be a good fit for the brand. Be selective. These franchisees can be great validators for the brand.
- Ensure your infrastructure is sound to support franchisees. Whether expanding domestically or internationally, infrastructure must be sound. Know the keys to success of the brand and ensure that your operations team is well versed in your system. If expanding internationally have a plan in place at least on paper, to support your international franchisees, well in advance of signing up the first one.
- Train Franchisees Well: Your training program should be second to none, as this is your first real deliverable to franchisees. Start off the relationship on a positive note. If there is a weak link in your training program, it will show up in operations. Remember, franchisees are looking to the franchisor as the guide. They don’t want to have to innovate and figure out solutions the franchisor should have mastered. Instead, franchisees want to execute what they have been taught by the franchisor. If you see recurring problems in operations, consider first possible holes in your training program.
- Monitor Compliance with Brand Standards: Your must have a system in place for monitoring compliance to ensure franchisees are representing your brand well in the market place. Be quick to offer assistance to franchisees who are out of compliance to ensure that small problems do not become systemic
- Regular Communication with Franchisees: Figure out your mode for regular communication with your franchisees. Stay engaged with your franchisees because this is how you build any relationship. If challenges arise in the relationship, you are much more likely to reach an amicable solution when you have a good relationship with franchisees prior to a challenge presenting itself.
- Continue to Improve the Brand: A franchise system is a dynamic model and requires change over time. Your system should be set up to permit the model to evolve. Include franchisees in this process as franchisees can oftentimes provide valuable input for brand success.