Imagine the opening of 20 new local companies, without paying the bill for real property, equipment and development costs, or any of the risks. Even more, imagine finding managers to run all of those places that are just as committed to the growth of the company as you, and you do not have to pay a penny. Finally, imagine that these managers hire, fire and management of all employees and pay the bill for all operating costs and expenses. Sound exaggerated?
Not if you’re thinking of entering the franchise industry, one of the fastest ways to grow a small business without breaking the bank. For many companies, the franchise of a company (or licensing) is a sensible way to achieve rapid profitable growth, without sacrificing any control or ownership. Moving from one place to a dozen in a couple of years, in ten or one hundred years is possible and well documented, because the franchise owner since all investors of investment capital, shoulders all the risk and assume all daily operating responsibilities.
This is the expansion, using OPM – Other People’s Money. In addition, the franchise company gets paid to teach others magnificently the secrets of how to operate your business. First, it should advance the “ownership” or franchise fee of $ 20,000 to $ 50,000 paid for using the brand and operating methods. Moreover, continuing royalties of 5% to 10% of gross sales for the advice and consultation. In essence, a program of franchise development allows the company to leave the trenches and become a highly paid general supervision of its soldiers. Long-term options are attractive. Build an empire and relax, or let the company acquired the franchise for a growing number of large companies that cater to the small but growing franchise companies. According to the International Franchise Association, 900 new companies have franchises in the past three years.
Entering a New Business
Society must realize that the franchise is entering a new company that offers an entirely different service (training and support) to entirely new customers (business owner-operators). This new business requires different skills, abilities and experience. The new business franchise, it is essential to develop an effective evaluation, documentation, consulting, training and consulting skills. Since these skills are rarely present within the staff, out of a franchise requires expertise to train existing staff and plan the transition. The first step is to determine whether a company can franchise and, if so, what needs to be developed. Then the franchise strategic planning is required to create a “master plan” for the success of expansion efforts. Experience shows that, like a building, the Foundation developed to create an enduring principles that affect the relative success (or failure) of the entire company. Legal (document franchise, franchise agreements) and operational documents (franchise operations manual, franchise training program) have been prepared and drafted, and finally a franchise registration process is required in about 14 states, depending what state (s) the company sells franchises. These phases are described below.
FRANCHISE FEASIBILITY STAGE
An essential step before any development agenda of the franchise is being carried out an analysis of the concept and business model. The concept has been sufficiently proven in the market? How profitable are the prototypes or outlets owned by the company? The franchise will not solve the problems only intensify them – and usually at a serious cost to franchise investors. The franchise should not be seen as a method to raise capital, expand a business that has problems, or a way to get rich quick. Must have sufficient profitability in the business model so that the royalty and other payments can be made and leave the franchise investors with a sufficient profit. With a franchise feasibility analysis, the determination can be made on:
(a) the licensing or franchising expansion ideas should be pursued, postponed or abandoned, and
(b), assuming a positive result in (a), which should be further refined or developed from scratch for the franchise program.
In addition to determining if and when the company can franchise, the analysis should also provide guidance and direction so that much of the foundation as possible can be done by existing staff. This has proved a very effective and significantly reduces the development costs of a franchise. If the feasibility analysis is positive, the other phases are discussed below. My twenty-eight years of experience in the franchise industry allows me to share valuable information on franchise feasibility studies. Too many companies jump into franchising without a feasibility study, or if one is made by a franchise consultant or group that tells you all good news – all of which are franchise-able. ” The vast majority of studies on the feasibility of franchising I have done well to identify areas that need attention before the franchise makes sense or tell the client to forget about it and apply other options.
Franchising strategic planning phase
A successful franchise development program starts with a solid plan – a foundation for the franchise. The long term goal is to establish balanced, integrated, successful business relationships with qualified individuals to support business objectives and image. Creating a lasting relationship requires a comprehensive strategy that addresses all aspects of franchising effort.
The starting point is a detailed analysis that includes:
(1) identify the profile of the characteristics of who is the best franchise owners of the business;
(2) competitive positioning for the franchise are distinguished from other franchises 3000 +;
(3) geographic area – where and when to sell franchises;
(4) analysis of the organizational strengths and weaknesses in relation to the franchise;
(5) identification of the appropriate franchise organizational structure and staffing requirements and responsibilities and
(6) the structuring of the franchise for a balanced, win-win scenario.
What should emerge from this analysis is a strategic plan and framework to guide the efforts of virtually every franchise. Despite the long-term importance of franchise planning step, many new companies enter franchising franchises with no plan or planning – other than “we will try to sell a lot of franchises.” To rush through (or abandoned entirely) the strategic planning process, thus creating a future franchise litigation landmines are ticking franchise claims waiting to happen.
Often this is because they only use the services of a consulting firm franchise or franchise tax, where little or no attention is paid to critical strategic, operational and organizational issues. Typically, these companies the “boilerplate” franchise documents, franchise agreements and franchise operations manuals on the basis of a questionnaire completed by their client, who is presumed to have made all strategic decisions. Franchise documents are presented, along with an invoice and a handshake – hardly the ingredients for success in the new franchise business.
THE FRANCHISE DOCUMENTATION PHASE
If the company has done a good job in the planning stage the number one priority, franchise documentation is clear goals. Property and intellectual property assets (such as technical performance, customer information, recipes, formulas and methods) should be identified and protected. An agenda for trade secret protection is developed and implemented. The name, logo and brand lines should have been previously registered as trademarks or service marks.
franchise operations manuals
Franchise operations manuals and training programs are developed, often from scratch to teach companies that operate the franchise owner, and to ensure uniformity of products and services. The franchise operations manual and training curriculum should be written with a particular focus. Certain themes, chapters and policies are in the manuals for a company-owned chain, for example, are totally inappropriate in a neutral environment, creating significant liability (legal) issues for the franchise division.
I usually find franchise operations manuals prepared by the consultants franchise or do it yourself manual kitscontaining inappropriate chapters or topics. Not knowing where the bullets come from the franchise at issue, that before acting blindly using “boilerplate” where most of the manuals (but not all) cases of “hamburger” was changed to “tax returns. ” Supporting aspects of the franchise must be carefully considered, structured and reflected in the franchise operations manuals.
Decide who writes the franchise operations manual is a simple matter to answer, however, many new franchise companies also fall into a trap here. Puzzled by the new business of franchising, with its legal requirements, the franchise operations manuals, training programs, etc, its decision to “delegate responsibilities, usually at a high price franchise consultant to produce the operations manual and sometimes even legal documents. Leaving aside the practice of law without a license on the issue of legal documents, using someone who does not write your franchise operations manual that literally knows nothing about your business, it never makes sense?
The best practice approach, developed over nearly three decades of my writing, editing and reviewing hundreds of operations manuals franchise is based on common sense. Let the true “expert” in your business writing manual. Who is the expert? In general, the founder of the company or a handful of his staff who knows the business inside and out. True, a franchise outside experts should participate in the process, but this must be strictly limited to the planning and editing capabilities – to help develop the Table of Contents showing the styles of writing and technicques and then after reviewing each chapter is written by you or your management team. This approach produces a professional, easy to use and update the franchise operations manual. It also ensures more efficient use of resources and talent.
franchise disclosure documents
Finally, and only after all the above are in progress, a franchise disclosure documents, similar to a securities (shares offering) prospectus, is prepared by a competent franchise lawyer and registered with several agencies to comply with federal and state laws. This document may contain thousands of disclosure within their discrete twenty-three chapters and attached exhibits, and, obviously, should be prepared by a franchise lawyer. Doing well in a fair and balanced perspective can help keep the company out of the room later. In addition, the registration of a franchise is required before the franchise can be advertised or sold in the 14 states or to take a franchise registration requirement. Having a business author, edit and revise all documents is not only cost-effective – but also avoids inconsistencies that can plague the company as franchise franchise legal pitfalls in the future (see below).
RECOMMENDATIONS
My twenty-eight years of experience has shown that for a franchise to go down to a good start, a strong emphasis should be placed in franchise strategic planning for the future management of the franchise relationship as mentioned above. Then, before the program begins franchising, management needs training in how to effectively operate a franchise. At a minimum, the following programs must be in place before you start marketing activities for Franchisees
1. Processing System franchise lead (sm):
Two key considerations for all companies involved in the franchise marketing franchise is the careful selection of applicants for franchise and adopting the appropriate media plan, schedule and budget. Only the cream of the crop should be allowed to join the franchise network. The elimination of applicants at the entry stage is far easier than waiting for inevitable and costly problems later. An examination of franchise networks plagued by troublesome franchise owners (often mature in future trials) shows a lack of planning and attention to this relatively simple concept. Given the unlimited personal liability risk inherent in the franchise, the companies neglect this important concept, or using franchise brokers, are simply asking for trouble.
Before starting the marketing activities of franchises, a franchise company must take a lead system that includes custom processing instructions to key personnel in:
(1) adopting the appropriate organizational structure;
(2) to define the profile characteristics of prospective franchise owners;
(3) the development of interrogation techniques, marketing materials, procedures and checklists;
(4) using a series of tests and other measures to ensure that unsuitable candidates are disqualified before joining the franchise network;
(5) detecting (and then avoid) red flags that arise in the course of marketing of franchises, and
(6) adopting the appropriate media plan, schedule and budget.
2. Legal Enforcement Program (sm):
A trial may result in the franchise if inconsistent or misleading communications occur when a franchise is the first sale. Most of the franchises is the legal risk is focused on what happens during the course of marketing: the twenty-three chapters of the revelations in the document of the franchise, and who said what and when. The defense of any claim of exemption, even frivolous, can be huge. Franchise franchise companies involved in litigation are often surprised to discover they have fallen into a quicksand that swallows time and money without limit. The cost of prosecuting or defending a “small” excess demand can quickly exceed $ 100,000, and more. The exhibition will run in the millions. Although a study of franchise disclosure documents indicated 27 percent of franchise businesses have a history of franchise litigation (slightly more than 1 in 4), the actual percentage is much higher and probably andalusia north of 50 percent. This is because only litigation pending and final decisions must be disclosed in the documents of the franchise. Most litigation cases franchise, like other litigation cases are resolved, so it is only required to be in the document of the franchise from the time it is filed until resolved. After that, they disappear without a trace. And if the chances of getting sued in demand and put a franchise in franchise litigation is greater than 1 in 2 or 1 in 4, you want engage in a long, stressful and expensive mess?
It is almost impossible to avoid the potential liability of a franchise unless a genuine program of education and instruction is conducted with the staff of marketing and media executive and management franchise. An integrated Compliance Outreach program which specifies the standards and expectations (including the legal rules on the sale of a franchise), manages the franchise documents and controlling the dissemination of all information is absolutely essential. It is also one of the best investments that a business franchise ever. For all these reasons, the use of the franchise is definitely not recommended for runners. His statements (or other) to “close the deal” will make the franchise organization (and the personal assets of its officials) responsible for violations of federal or state franchise laws. This also explains why the vast majority of franchise organizations successfully create their own home in the franchise’s marketing department so that actions and statements made during the course of marketing of franchises can be monitored and controlled within System Control Franchise Sales (sm).
3. Control System Sales Franchise (sm):
Control of sale of franchises is the other half of the full implementation of the equation. While legal compliance standards and specific expectations, sales of franchise is the control mechanism for identifying gaps and inconsistencies. When detected, their causes can be identified and corrected before the franchise wounding effort. A control system for the sale of franchises should be designed with this in mind and should include a variety of feedback mechanisms to monitor performance and retrieve pertinent information for review by management. This not only increases the effectiveness of marketing efforts franchise – but it also greatly reduces the likelihood that sales personnel will depart from established procedures in selling franchises. Finally, a well-designed control system Franchise Sales creates a full backup for each franchise sold qualify as evidence of business registration in the event of a future franchise dispute. It also meets the legal requirement of various franchise companies states that maintain a complete set of books, records and accounts of sales of franchises. As most of the legal risk in franchising arises during the course of marketing of franchises, a control system for the sale of franchises is the best protection against the shifting sands of franchise litigation.
4. The management of the franchise relationship:
As franchises are sold, the lines of communication that develop between the parties will have a major impact on the success or failure of the existing franchise relationship. Control is placed on the network through the steps described above is the essential first step. Once inside the franchise network, franchise owners must be taught to realize that they are members of a system of outlets mutually dependent, each working to the best of the entire network. Developing an awareness of this concept early in the relationship and the implementation of a feedback system franchise to create a positive attitude, encourage innovative ideas from the owners of franchise royalty payments ensuring on time and prevent relationship problems franchise later.
