units you can open in any given period
of time is limited.
For companies with too little time
(or too little staff), franchising is often
the fastest way to grow. That’s
because it is the franchisee that per-
forms most of these tasks. The fran-
chisor provides the guidance, of
course, and the franchisee does the leg-
work. Thus, franchising not only
allows the franchisor financial lever-
age, but it allows him to leverage his
resources as well.
THE PROCESS OF
FRANCHISING
When a company makes a decision
to franchise, it must first develop a
sound plan for expansion. The plan
must take into consideration the
numerous issues confronting a new
franchisor: speed of growth, territorial
development, support services,
staffing, and fee structure, to name sev-
eral of the most important issues. operations manual. This manual must that when they turned to franchising
Larger companies need to address contain not only the systems used by they entered a completely different
more complex issues such as channel the business, but also the checklists, business. Regardless of how the fran-
conflict, anti-trust, and resource alloca- policies, procedures, and tactics that chisee makes money, the franchisor has
tion issues. And obviously, this entire will allow these systems to be uniform- two roles: selling franchises and serv-
plan needs to be subjected to rigorous ly enforced. Moreover, operations icing franchisees. And of the two,
financial analysis and scrutiny to fine- manuals must be careful to avoid the ensuring the success of the franchisee
tune the strategy for growth. creation of an agency and must also is the most important.
Once this plan is in place, the fran- address issues that could create claims Properly structured, franchising can
chisor needs the proper legal documen- of negligence if the franchisor is to allow small companies to more effec-
tation. At a minimum, the franchisor maintain an effective shield from con- tively compete with much larger com-
will need a franchise contract, an offer- sumer liability. petitors. It can also allow large com-
ing circular (as required under FTC Finally, the new franchisor must panies to gain the advantages of highly
Rule 436), and, depending on where develop the ability to market and sell motivated unit management while
franchises are being sold, state regis- franchises. That requires knowledge reducing overhead. As such, franchis-
trations. There are literally hundreds of how to attract the prospective buyer ing is an option that more and more
of different business issues that must and the necessary materials (brochures, companies should explore.
be addressed in a good franchise agree- mini-brochures, videotapes, DVDs, The key to success in franchising is
ment, and the decisions made regard- etc.) that will help make the sale. successful franchisees. Without suc-
ing these issues will ultimately dictate Moreover, since the franchise sales cessful franchisees, no franchise sys-
the franchisor’s success. process is highly regulated, the fran- tem will last. But if you can put the
Quality control for a new franchisor chisor needs to be educated in proper interests of your franchisee first, those
involves the development of highly sales, disclosure, and compliance tech- same franchisees might help you
developed systems. Generally, this niques. become the next McDonald’s. HNM
translates into the development of an Every new franchisor quickly learns Source:
ifranchisegroup.com
WWW.HNMAGAZINE.COM Celebrating over 15 Years of Embracing Diversity 55
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