When building a franchise organization, there is a transition process that takes place within the management ranks of the business. As a franchise organization matures, say with 60 or more units, depending on the business, there will be a portion of the management team that is devoted specifically to the management of the franchisees. People and positions that are entirely focused on building, managing and overseeing compliance of franchisees.
Initially, when a franchise network begins to be developed, the resources and people within the corporate business will be tasked with also managing the operations of the franchise organization. This of course is not efficient after several franchise units have been sold and takes some serious juggling when first building a franchise expansion model. In a well-managed organization, we have worked with franchise businesses where internal staff have managed as many as ten franchised locations before the need to hire additional staff has become too pressing. Because franchisees are independent business owners and hopefully have been qualified to the point where they are appropriate for the franchise organization and have the skill set, capital and business mindset to follow the system and operate the franchised business according to the franchise operations manual – they don't need the same level of hand holding and management that company employees or managers would require.
When considering whether to franchise your business, this transition period is a critical time to consider and plan how to manage. What do you do with cash flow when the business needs additional resources and management to oversee the new franchisees, but the revenue from the franchise system isn't producing enough volume to substantiate a large salary? This is where some franchise consultants can come into play as a good “go-between” to help bridge the gap from the initial start up of the franchise organization and the adolescent stages of the business. Franchise consultants will most often work with several franchise systems which allows them to work for less than say a full time employee on salary because they have multiple clients they manage. There are many independent franchise consultants who provide these franchise consulting services and have many years of experience working in the franchise industry, most will provide services at reasonable monthly prices of $1,000 to $5,000 per month to support and help with sales. By having lower overhead and costs to manage the franchise growth, this allows businesses to get to the point where they could then justify a $50,000 per year salary to a franchise director or franchise field support professional to go on site visits and assist with franchise training.
Franchise Consultants are like any service provider. They bring expertise and specialized focus in a particular field of work. In this case, franchise development. The reasons that businesses hire specialists are many, but in any particular case, there should be a cost vs. value proposition analysis by the business owner in hiring a franchise consultant. If the cost or investment is lower than the value proposition, the strategic partnership should be formed…if not then it may be best to go it alone. Franchise consultants will not know your business better than you do, but they should deliver valuable insight into how to package your business as a franchise opportunity.
Franchising is a very regulated process, a business owner launching a new franchise system should be aware of the regulations and rules they must abide by to be considered compliant as a franchise organization. In addition, like any new venture, franchising has its own industry processes and methods to it that can only be discovered through experience.
How to sell a franchise? How to walk a potential franchisee through the FDD? How to file the FDD with a state? How to determine franchise fees and franchise structure? These are just some of the key elements that can make or break a franchise system as a success or failure. Typically, by having a qualified franchise consultant working with a new franchise organization, these issues can be alleviated and the opportunities can be brought to the forefront.
When you franchise a business, you take it through an evolution process. It is a direction and strategy that commits both you and your business to growth and new market expansion. Franchising is not an end result…it is important for any business owner to remember this, it is a vehicle to expand a brand, system and capture market share through the combined strengths of a group of entrepreneurs working under a unified system. The most successful franchise organizations we have worked with have committed to this process and identified new markets that would benefit the brand and create market opportunities for the company.
This guest post is courtesy of Alan George, Franchise Marketing Systems.