How do all of these franchise organizations manage their franchise sales process? It is remarkable how many franchise systems out there, in the United States a new franchise is opened every 8 minutes of each business day, that is an amazing rate of growth! So franchising works, I get it. How do you find franchisees once you have gone through this process of franchising a business though?
When evaluating franchise sales, it is critical to first identify who the franchise buyer is and who we are working to sell the franchises to. Franchise sales encompass a large array of different types of franchise offerings. The traditional franchise is the owner operator model where typically a moderately well capitalized individual buys into the rights to run and manage a single location of the franchise offering. This franchise sales approach is most effective when using a sales presentation that evokes an emotional response. For example, "Be in charge of your own financial future, become the captain of your OWN ship!" Presenting the franchise to the buyer is not about the financial details, the minutia of the business offering or other particulars, it becomes an emotional decision for the buyer to get into business on their own with your help. Franchise sales is about creating that emotional connection with the buyer, similar to the process of selling a home, the buyer falls in love with the idea and the notion that they will be in that house, neighborhood, they picture their family being raised in that home and envision the future they will have there. The individual franchise buyer is typically not a former executive or highly educated individual with millions to invest, it typically is just someone who wants to get into business for themselves and they know they need someone's help doing it.
The franchise sales process is typically a 30-120 day process with a potential candidate, some take much longer. The evaluation process takes place on both sides, the buyer judging whether the franchisor has the support, training and overall package to truly support them and the franchise sales person gauging whether the franchise buyer has the capital, experience and wherewithal to be a franchisee.
The second type of franchise sales is to sell to a multi-unit franchise owner. This franchise offering is someone who has much more capital and experience. In this franchise sale, the buyer purchases the franchise rights to a much larger territory with a larger responsibility. They then are put on a performance schedule by the franchisor who establishes how many units the multi unit franchisee will be opening. This franchise sale is a different sale than the individual franchise. This buyer is highly sophisticated and has most likely been in franchise development before. They look over the financials and make an investment decision based on the ROI and how quickly they will see a return on the investment. In order to make this franchise sale the franchise system probably needs to be somewhat mature and have a really professional package to offer the franchisee, they are typically being courted by many franchise systems. The offering needs to make sense, in many cases the only realistic way to attract this buyer is to present earnings claims and business plans, these people are making an investment when they buy into the franchise, not buying into a lifestyle.
When approaching the process of franchise sales, it is critical to have people, consultants and a system in place. The first step is planning out the stages and carefully preparing for how to manage the influx of leads and responsibilities that come with franchise sales. The beauty and excitement of franchising is that with each franchise sale a company is expanded into a new market, the franchisor gains the valuable work ethic and commitment of a vested owner operator and the franchisee gets the training and support needed for them to become their own business owner.
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Tuesday, March 31, 2009
Thursday, March 26, 2009
Franchising Your Business in a Recession Might Be Your Best Move
Franchising a business in a recession may make sense for several good reasons, first and foremost of which is this: You can use other people's money to expand your business nationally, even internationally! At a time when it's difficult to borrow money from banks, or to raise money privately or publicly, using other people's money to expand your business may very well be the best reason to franchise your business today. But it can't be the only reason. If it is, you'll likely fail as a franchisor.
Franchisees pay upfront fees when they acquire a franchise business, and those fees help franchisors expand, along with other money that's invested to start up the business, i.e. to lease a property, to buy equipment, to secure inventory, etc. Franchise fees generally range from a few thousand dollars to $50,000 or more. International master license fees typically start at about $75,000 and may be $500,000 or more. These are serious sums of money, for which a franchisee expects to receive an opportunity to build a thriving, satisfying enterprise.
So how do you know if you can franchise your business and deliver a thriving, satisfying enterprise opportunity? Here are six points to help you decide:
1. Your existing business must be successful, that is, profitable. Franchising an "idea" isn't such a good idea. That's not to say it hasn't been done successfully, but today's franchise buyers expect to "see it" and "experience it" before they invest in it. If your business isn't profitable, you should first work on making it profitable and franchise it later.
2. Your business must be replicable. In other words, if it's an exclusive, one-of-a-kind enterprise, you probably can't franchise it. If you're the only person in the world who can make the business work, it's probably not going to work as a franchise. Most businesses, however, are replicable.
3. Your business must operate by a system. And the system needs to be documented. If your business operates one way today and another way next week, and without rhyme or reason, you're not likely to succeed as a franchisor. Franchisees need to know what to do, day by day, step by step, and the system lays that out for them. You may not currently have a documented system for your business, but you will need one before you accept a fee from a franchisee.
4. You must be able to transfer the system to franchisees and do so quickly and efficiently. As a franchisor, you'll create a training program for your new franchisees. The trainer/s will teach franchisees how to implement the operating system for the business. Generally, franchise training programs last from five days to six weeks. Training is usually conducted at the franchisor's corporate offices, in a hotel, or at the franchisee's location. The upfront fee generally covers the cost of training.
5. If an owner/operator needs special education, training or a license to operate your business, that may be problematic, but it doesn't mean you can't franchise. Realtors are licensed and some of their businesses are franchised. Accountants require special education and training and some of their businesses are franchised. Many franchised businesses require the operator to earn a special license or certificate. The requirement may shrink your marketing pool, but it may also make it easier to sell franchises. For example, plumbing franchises must be sold to licensed plumbers, in most instances, and there are several major, thriving plumbing franchises today.
6. Are you ready to switch gears and become a franchisor? You've been working your business for possibly several or many years. But now you've got to stop operating the business and start recruiting, training and supporting franchisees. Are you ready to make that change? If not, then someone on your team must be willing and able to do so. You can also hire professional help to franchise.
Those six points are enough to get you started. Many business owners dream about expanding their enterprises nationally, even internationally. More than 2,500 businesses currently use the franchising model in North America. Perhaps you can, too.
Franchisees pay upfront fees when they acquire a franchise business, and those fees help franchisors expand, along with other money that's invested to start up the business, i.e. to lease a property, to buy equipment, to secure inventory, etc. Franchise fees generally range from a few thousand dollars to $50,000 or more. International master license fees typically start at about $75,000 and may be $500,000 or more. These are serious sums of money, for which a franchisee expects to receive an opportunity to build a thriving, satisfying enterprise.
So how do you know if you can franchise your business and deliver a thriving, satisfying enterprise opportunity? Here are six points to help you decide:
1. Your existing business must be successful, that is, profitable. Franchising an "idea" isn't such a good idea. That's not to say it hasn't been done successfully, but today's franchise buyers expect to "see it" and "experience it" before they invest in it. If your business isn't profitable, you should first work on making it profitable and franchise it later.
2. Your business must be replicable. In other words, if it's an exclusive, one-of-a-kind enterprise, you probably can't franchise it. If you're the only person in the world who can make the business work, it's probably not going to work as a franchise. Most businesses, however, are replicable.
3. Your business must operate by a system. And the system needs to be documented. If your business operates one way today and another way next week, and without rhyme or reason, you're not likely to succeed as a franchisor. Franchisees need to know what to do, day by day, step by step, and the system lays that out for them. You may not currently have a documented system for your business, but you will need one before you accept a fee from a franchisee.
4. You must be able to transfer the system to franchisees and do so quickly and efficiently. As a franchisor, you'll create a training program for your new franchisees. The trainer/s will teach franchisees how to implement the operating system for the business. Generally, franchise training programs last from five days to six weeks. Training is usually conducted at the franchisor's corporate offices, in a hotel, or at the franchisee's location. The upfront fee generally covers the cost of training.
5. If an owner/operator needs special education, training or a license to operate your business, that may be problematic, but it doesn't mean you can't franchise. Realtors are licensed and some of their businesses are franchised. Accountants require special education and training and some of their businesses are franchised. Many franchised businesses require the operator to earn a special license or certificate. The requirement may shrink your marketing pool, but it may also make it easier to sell franchises. For example, plumbing franchises must be sold to licensed plumbers, in most instances, and there are several major, thriving plumbing franchises today.
6. Are you ready to switch gears and become a franchisor? You've been working your business for possibly several or many years. But now you've got to stop operating the business and start recruiting, training and supporting franchisees. Are you ready to make that change? If not, then someone on your team must be willing and able to do so. You can also hire professional help to franchise.
Those six points are enough to get you started. Many business owners dream about expanding their enterprises nationally, even internationally. More than 2,500 businesses currently use the franchising model in North America. Perhaps you can, too.
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