Considering Jumping Into Franchising? 6 Things To Think About First!
So, business is booming and you’re starting to wonder how you can continue this hot streak. You could open another location, but the thought of all the sleepless nights and long hours makes you shudder. Yeah – maybe not.
Well, what about franchising? While franchising may seem like a great option, there are a few things to consider before jumping right into finding franchisees. I’ll go over six things to consider before beginning your journey to becoming a franchisor.
1. Are You Ready to Let Go?
Now, before I get into all the areas you should think about, I want to be completely honest here. Not all franchisees are created equal. Even the BEST, most organized franchisors have sh*tty franchisees sometimes. Think of it as a rental property – you must learn to take the good with the bad.
Once you make the decision to franchise, your fate isn’t just in “your” hands anymore. Your brand is their brand. Luckily, I’ve provided you with some areas to think about when creating your franchise agreements and creating guidelines for your franchisees.
2. Operations
This is a HUGE area to consider – you really gotta think about your day-to-day operations and exactly what is mission-critical. This area will take you a long time to nail down because creating systems is not an easy process. The more time you take here to really figure out what your brand is all about, the easier your experience with your franchisee will be.
Here are some questions to consider:
What is required daily? Weekly? Monthly?
What systems are being used? Are they required? Can you duplicate them?
What technology is in place?
Are certain methods being used? Are they required?
3. Human Resources
Company culture is a large part of your brand, and a lot of it comes from how you manage your teams. Creating standards in this area is difficult because some states may interpret the standards set as an employment contract, but you should have guidelines in place to honor your brand and company culture.
Here are some questions to consider:
Do you have employees?
Do you have job descriptions?
Are there formal policies in place?
Is there a dress code? Specific schedule?
Are you planning on implementing a training certification for management?
4. Advertising
Branding is more important now than ever, and consistency is key. Many franchisors negotiate rates for advertising for their franchisees or help establish standards that they must abide by to ensure consistent branding. You’ll also want to make sure your entire brand package is complete: website, logo, anything that you can think of that is part of your brand “image.”
Here are some questions to consider:
What advertising will you provide?
Will you provide any branding materials for free?
Will you require certain vendors for marketing materials?
What resources will you provide for your franchisees?
5. Financials and Reporting
Money! That’s what this is all for right? That and your passion for creating this awesome concept! In this section, I highly recommend talking to an accountant – they will be your best bet in finding exactly what information you’ll need from your franchisees to calculate royalty payments. Royalty payments are what you’ll be making your $ from, so this should be high on your list.
Here are some questions to consider:
What reporting will you require?
How often will you ask for these reports?
How much will you require for royalties?
How will Royalties be used to support franchisees?
6. Compliance and Responsibility
You’ll want to think about your responsibility as a franchisor and what items you will provide for them. For example, some companies dedicate a portion of their royalties to give to franchisees for a marketing budget – or provide marketing for them. What about when they don’t follow the rules? Setting up exactly what will happen when your franchisees violate their agreement will save you time, money, and heartache later.
Here are some things to consider:
What is required of your franchisees?
What will you provide to them?
What is optional?
What are the fees and/or penalties for non-compliance?
Making the decision to franchise your business idea is a HUGE growth step. When you consider each of these areas, always consult with experts to help guide you in creating your franchise agreement. You’ll also want to make sure you have an attorney review your franchise agreement to ensure you’re protected against those bad franchisees I mentioned earlier.
Do you have questions about anything I covered here? Shoot me an e-mail at joa@prismconsultingva.com!
