Franchising provides a tremendous opportunity to grow your business, so long as you understand the commitment that is required to make it work, says Sean Brauser, founder and CEO at Pizzafire, a fast casual restaurant chain selling franchises nationwide.
“You’re starting a brand new business,” Brauser says. “In the early stages, you have to manage all of it. You need a process to approve franchisees, manage them and make sure they are doing things correctly.
“When you do it right, you’re able to scale your business with limited cash and receive royalties based on the investment and effort of your franchisees, allowing you to grow faster than you could on your own. The key is your ability to create a system that can be easily duplicated and managed by your franchisees.”
Smart Business spoke with Brauser about what you need to know to franchise your business.
How do you know if your business has franchise potential?
You first need to have a successful business model that is making money, growing sales and maintains excellent cash flow. Without these attributes, nobody is going to want to buy into your concept.
Franchising is a financing model that allows you to duplicate your business in multiple locations. The key question you then have to answer is do you have a business that can be duplicated? Can it operate without you or is it completely dependent on you as the entrepreneur?
A franchise business must have an operations manual which details every activity that you do and how you do it. For a restaurant business, the manual would contain recipes for everything on your menu, details on how to open and close a store and a procedure for handling complaints.
This manual becomes the bylaw of your business and should be something that a franchisee can step in and use with minimal guidance. It’s a living, breathing document that constantly changes, evolves and improves. But it’s necessary in order to duplicate your business.
What adjustments are necessary as a leader when running a franchise business?
You lose a certain amount of control when you create franchise units. Even with the tightest franchise and operating agreements, you still lose some control in how other people will do things.
You need to protect your brand and have people in place who will make sure the brand is being used correctly and that everything is being done right. One bad apple can screw up the entire brand if they do something bad.
Utilize experienced franchise consultants who work directly with franchisees to help them do the right thing as well as take steps that will help them make more money and maximize the return on their investment.
It’s also important to understand how difficult it would be to manage company operations along with the franchise side of your business. If you want to focus on operations, hire somebody to run the franchise side. If you want to manage the franchise side, hire somebody to run operations.
Resist the urge to try to do both.
What compliance requirements come along with franchising?
You have to have a Franchise Disclosure Document (FDD), a standard form that needs to be provided to any prospective buyer who is looking at a franchise opportunity. It spells out in a standardized form how much the buyer is expected to invest, as well as how much to expect in both royalties and the marketing fund. It’s a detailed list so the prospective buyer understands what is required for each franchise.
What’s the timeline for success?
You’ll need to reinvest all of your cash initially to grow and get scale. Set up your infrastructure of people before you start selling anything and make sure everyone understands what needs to be done.
If you don’t have a good sales team selling your franchises, you won’t have any. Build a strong team and then trust the process, which can often take six months from first contact to signing somebody up.
The time and patience you spend building a strong infrastructure and bringing in solid franchisees will pay off when they become ambassadors to help you grow your business. ●
Insights Franchising is brought to you by Pizzafire