In our series on using the franchise model to power rapid business growth, we’ve interviewed Joe McCord of The Franchise Doctor for his advice and insights. If you are a prospective franchisor, you’ll find Joe’s advice on how to see if your concept is viable and if so, how to accelerate sales of your franchises.
Perhaps you have a concept that you think will work but [quotes]want to know if there are any alternatives to franchising.[/quotes] You’ll find Joe’s discussion of the alternatives will dispel many myths and put you on the right track to growing your company.
Despite having the very best concept, outstanding training, help and manuals, some franchisees will struggle. It’s a fact all franchises must deal with. Joe gives some excellent advice on ways you can help turnaround a troubled franchisee.
How do I know my business should be franchised?
- Have you had anyone ask if your concept is a franchise?
- You have established a stable and profitable operation.
- There is growing demand for your product/service and the demand is widespread not just your local market.
- You feel the need to expand to handle the demand.
- Customers from outside your territory are asking when you are coming to their area.
- You have worked to put documented systems in place that have simplified the operation.
- You can deliver a consistent product/service to high standards.
- You do not need to participate in your operations day and night to insure the customer satisfaction and product quality.
- You have developed a training system for new employees.
- You have a product/service that is in demand.
- You have established points of separation from your competitors.
- You know the demographics it takes to support a location.
- You have developed a marketing strategy that works.
- You have a marketing strategy to introduce your concept in a new area.
I have a franchise concept ready to launch or in the early stages of growth. What do I need to know to accelerate sales of units?
- You must get exposure. You can have the greatest franchise but if no one knows about it, then you can’t sell it.
- Use all the tools available: Internet, social media, advertising, franchise brokers, email marketing, text marketing, public relations (some tools will work, some will not; always measure results).
- Try to get in the news anyway you can. Compete for local “The Best of” honors; community service is also a great way to get noticed.
- Join professional/civic associations to promote your franchise. Your Chamber of Commerce has a monthly “meet and greet.”
- Networking is the key.
- Be very discriminating on choosing your franchisees. Do everything you can to help them be successful. They are your validation.
- Monitor your franchisees’ operation through Key Performance Indicators.
- Establish a business plan to launch your franchise. Get a board of advisors that can be your sounding board.
Franchisor woes, how to help your unit franchisees succeed
Are there alternatives to franchising that might be better, like licensing?
Possibly but they may involve more risk, such as, joint venture, partnerships, etc.
[quotes]Licensing is simpler but you lose control over the concept.[/quotes] Many licenses are franchises in disguise. Get professional advice. I recently had a potential client come to me wanting me to help him market his concept. He was licensing the concept not franchising. It had all of the elements of a franchise: control, initial fee, weekly royalty, etc. I explained to him that he was really franchising and he should have a Franchise Disclosure Document. He refused. I could not represent him.
Because you can run into significant legal problems if you are using licensing to propagate your business to others, [quotesright]you can end up with a “Dear Felon” letter from the FTC or state regulator. [/quotesright] Many that have skimped on competent legal advice and tried licensing have found themselves embroiled in an expensive legal battle.
[quotes]Get this right, you’ll be glad you did.[/quotes] Consult with a competent franchise attorney; “Uncle Joe” or your divorce lawyer likely doesn’t have the expertise to fully advise you in this highly regulated industry. (Yes, it’s regulated at the federal and state level.)
If you don’t, you may find you’ve lost control of your concept and are spending a fortune on attorneys. Prevention is in your best interest. Get an attorney.
Do I have a business where adding an in-store franchise would pay off double?
This has been tried a lot but I do not have any evidence regarding success. Good questions to ask: [quotes]Is it complementary?[/quotes] Would it erode my current offerings? A supplemental franchise in your existing business will probably not make you a destination for that offering. An example could be offering a branded coffee, such as Starbucks or Dunkin Donuts, which would allow you to charge more per cup than before with a higher perceived value. That might be worth a consideration. (You must also consider the brand.)
Consider the usual way of increasing sales: raise prices, up-sale so you get a larger average ticket, increase the frequency of your existing customers and bring in new customers. For instance, Cinnabon goes into a lot of foodservice venues. It may be a way to increase the average ticket. The concept that offers Cinnabon may get more sales and not erode its existing sales. Customers probably don’t go just to get Cinnabon, so it may not be expanding the customer base but it could be an excellent add on and your core customer may visit more frequently.
Another example, many interstate service plazas have a burger franchise co-located with the gas and convenience store side of their operation. You’ll find restaurants co-located with interstate truck stops too.
The key is to look for something that could expand the customer base or has a high rate of same customer sales potential.
- by Joe McCord, The Franchise Doctor