HOW TO FRANCHISE SIMPLY
How I grew my business over five years to six franchise groups with over 120 outlets and helped dozens of business owners do the same
I have put this website together to guide you through the seven step process that I have used to help dozens of business owners franchise their businesses successfully, substantially increase their profits and work fewer hours. Most even manage to take time off with their kids each school holiday. And most achieved this with little of their own capital.
Now I’d love to help you do the same.
I’ve included all the steps, hints and tips that I’ve discovered in three decades of working in the franchise industry as a franchisee, franchisor and franchise consultant and franchise broker.
So before we go any further let’s get a better understanding of franchising.
What is Franchising?
Business Format Franchising, as it is known in business circles, is a business technique where you systemize your document and brand your business, so that you can sell the rights to establish and run an exact replica of your business outlet to another business owner.
That new business owner (known as the franchisee) pays one up-front fee and on-going service fees for these rights. The franchisee also puts up the capital to establish their outlet.
You (the franchisor) continue to own the franchise system and, along with the fees you receive, you have the obligation to train each franchisee, probably to do most of the marketing for the business and to keep standards up across all franchise outlets and keep the lines of communication open.
Case Study One – Poolworx, a successful franchise company with a great communication style, happy franchisees and happy customers
How does franchising allow me to have more time off?
You will have to systemize your business so that other people can run it in exactly the same way as you do. Experience shows that standardizing and systemizing makes the business more efficient and effective so time is not wasted doing things that are not necessary.
In addition, as the business expands with additional outlets, your franchisees will actually do much of the work. Each franchisee is a business owner who will operate their own outlet with very little input from you. This process also creates time.
How does franchising increase profits?
Because you can sell numerous rights to numerous franchisees, you will receive a number of payments for things such as service fees, product and training. Most businesses increase the revenue stream when they become a franchise and use their leverage to buy at prices you never dreamed were possible!
In addition, there is nothing to stop you from owning and operating one or more of the outlets so you can generate revenue that way. By systemizing the business to franchise, it also becomes easier to operate under management so you don’t need to work in the business if you do decide to keep one or more outlets for yourself.
How does franchising raise capital?
With each sale, you receive an upfront franchise fee, part of which goes to establish the new outlet, part of which goes to pay towards the cost of developing the franchise systems and the balance is yours for working capital or to take as profits. Once all the franchisor set-up costs are paid, the more of the franchise fee is for you to retain.
Franchising need not be complicated
Case Study two – Jim’s Mowing, an example of how franchising can be applied to simple business models
When most people think of franchising, they think of the complex documents and procedures and rules and regulations that they believe exist. But the truth is franchising need not be complex, especially for most small to medium sized businesses.
Franchising need not be expensive
The reputation franchising has with most business owners is that it involves elaborate documents produced by expensive lawyers and franchise consultants.
But you do not need to get these documents prepared by others. You can do each step yourself. We provide discounted template packages for our members which make the job of writing the documents easier.
Of course, there are some steps where the work you do must be checked by a lawyer and others where an accountant or other expert is appropriate. And we do recommend that you do pay for some additional franchise mentoring, business coaching and other expert help. We also recommend that you find out as much as you can about franchising and its pitfalls before you begin.
However by taking charge of the process yourself, you will save an enormous amount of money.
Case Study Three – Ken Kleen, an example showing that franchising need not be expensive
The seven key steps to franchising
- Learn about franchising: Before you begin, you need to know how franchising works.
- Feasibility: Is your business suitable for franchising and do you have the business skills, the confidence and personality to make it work?
- Develop the franchise documents: A series of documents need to be prepared to help you develop the business as a franchise, guide the franchisor and the franchisee in their responsibilities and form the legal agreement between the two parties.
- Develop the franchisor business: Before you can begin, you will need to get the various parts of the franchisor business up and running.
- Establish a pilot franchisee operation: You will need to either systemize your existing business or develop a new one to show that you can operate the business successfully as a franchise outlet before you sell a franchise to a franchisee.
- Recruit Franchisees: Advertise, select carefully and sell the first outlet to a separate franchisee. Keep going until you have as many as you need.
- Manage your franchise business into the future: Now you are up and running your job is to provide on-going training for your franchisees, make sure they keep the brand alive and that they are performing well. Critically, you are also responsible for continuing to develop the franchise business as a whole, keeping it current and fresh.
Case Study Four – Jack Cowen, using systems to grow your business
Step One – Learn about franchising
Before you begin, you need to know what a franchise is and how franchising works. And if you have little experience in business it will also help to do some research on running a business and how franchising fits into the overall concept.
As with any business there are risks involved but these can be reduced if you research effectively.
Ask questions, read books and all the magazines you can find on the subject.
The Franchise Council of Australia website, www.franchise.org.au, has much information on franchising from the view of both the franchisor and franchisee and is a good place to start. There is a list of reading material available which will help to put things into perspective.
The books we recommend as a good starting point are:
The E-Myth Revisited
Franchise Profit Tree
Improve your franchise relationships and change your life
Top Franchise Secrets Revealed
How to attract amazing wealth and success
Darren Stephens with Stephen Raff
Step Two – Feasibility
Franchising is not for everybody nor for every business. And the first question any franchise consultant will ask you is; ‘Is your business suitable for franchising and do you have the business skills, confidence and personality to make your franchise system work?’
Some businesses are not suitable to franchise. Most businesses can be changed so that they are suitable but there are rare cases where the product is so specialized that only one or two outlets are needed to service customer needs. In this case it is not worth considering going to this level as there would not be a market to expand the business to many outlets in Australia. In other instances, the skills required to run the business are specialized and it would be very difficult to find suitable franchisees. On the other hand many businesses operate very successfully and very profitably with as few as 3 to 10 outlets.
There are other occasions where business owners do not have the characteristics to manage a franchise chain. By franchising, you will no longer dealing directly with the product and its customers. Your business will involve managing your franchisees and managing the system they will be operating. Very different management and business skills are required and in many cases people happy with working in a business dealing with the day to day challenges of customers and product do not have the personality to take on the different skill set needed.
‘How to Franchise Simply’ offers two levels of feasibility assessment which can be done by filling in our simple questionnaires or with input from our expert franchise mentors.
These assessments identify your personality, your current business skills, the changes you need to make and the avenues you have available in order to develop the skills needed. They also examine your business and identify the suitability of your business for franchising and any changes that can be made to increase its suitability. In most cases the necessary skills can be learned.
Case Study Five – The Retail Food Group; the value of planning and how important feasibility studies, projections, budgets and business plans are when franchising your business
Step Three – Develop the franchise documents
Development of the franchise documents is the central action taken to convert a business into a franchise system. A prospective franchisor designs and develops a franchise business by writing two sets of documents:
- Those that will control the overall franchise system or franchisor business
- Those that will control the franchise outlets owned and operated by the franchisees.
Some of these documents are required by law and others are there simply to clarify business practices.
The franchisee documents include:
- The initial design of the franchisee business
- The Operations and Procedures Manual that controls the details of the way the franchisee business is managed
- The Legal Agreement between the franchisor and franchisee
- The Disclosure Document from the franchisor to the franchisee
The franchisor documents include:
- The initial design of the franchisor business
- The franchisor business plan
- The franchisor Operations and Procedures Manual that controls the details of the way the franchisor manages franchisees and creates the culture to grow the business
- The Marketing Plans for selling each franchise
- The Recruitment Package given to each prospective franchisee
These documents are developed in the following order.
Design the Franchisee Structure
The first action is to design, in a general sense, how each franchise outlet will look and operate and how the product will be standardized. At this stage the design is not detailed, it is an overview of the franchisee business and will include things such as customer service, product standards, branding, shop fit-out, accounting and reporting etc.
Design the Franchisor Business
The next action is to design, also in a general sense, the way the franchisor will manage the overall franchise system. The franchisor will be responsible for things such as business culture, management of standards and systems, legal structure, accounts, communication systems between the franchisees and the franchisor, training offered, brand development etc. This is a critical stage – things you determine here will be committed to the Franchise Agreement, so make sure you get the structure right – especially fees etc.
Develop Marketing Plans for Selling and Establishing Franchisee Outlets
Once the overall concept of the franchise system is in place, the franchisor can develop the Franchisor Marketing Plan. This is the document which outlines how the franchises will be promoted for sale. A wide range of marketing material can be used including email, online brochures, live presentations, TV, Radio, etc
Develop the Franchise Recruitment Package Material
The Recruitment Package will include the material given to each prospective franchisee when they approach with interest in buying an outlet. The package will have application forms, confidentiality agreements, and any information on seminars that will be run to provide information about the business. It will also determine when different levels of information are provided. And finally it will include material on the prices and guarantees and when each portion of the payment is to be made.
Business Plan for the Franchisor Business
Now the prospective franchisor understands the business, it is time to develop the business plan for the franchisor business. This will be a classic simple business plan identifying each part of the business with forecasts on how it will develop over time.
Franchisor Business Operations and Procedures Manuals
Writing a simple Operations and Procedures Manual to systemize the franchisor’s part of the business will ensure that each part of the business is carefully thought through. This will ensure that things such as research and development of the whole system, web page maintenance, franchisee training and field visits and regular networking and morale building meetings are addressed.
Franchisee Business Operations and Procedures Manuals
The development of the franchisee Operations and Procedures Manuals is seen by most consultants to be the most important step in franchising a business. It is crucial because it is this document which will ensure that each outlet is standardized and systemized and that every customer gets the level of service you, as the franchisor, thinks they should.
Franchise Agreement and Disclosure Documents
Legally required by the Franchise Code Of Conduct, the Agreement and Disclosure Documents are the central part of any franchise business. These documents form the legally binding agreement between each franchisee and the franchisor. In many cases they are put together by a lawyer with little input by the prospective franchisor. However, using legally vetted templates any franchisor can put this document together themselves provided the finished documents are vetted again by an experienced franchise lawyer. This is where much of the money can be saved.
Why it’s so important to get this structure right up front – it’s not easy to change later
Case Study Six – Speedy Lube Automotive and the value of systems in all business formats
Many franchise consultants only focus on the last two documents, the franchisee business Operations and Procedures Manuals and the Franchise Agreement and Disclosure Documents.
‘How to Franchise Simply’ has found over years of experience with many different franchises of different kinds, that this is a false economy which creates problems. Where the documents which mostly look at the general overall design and how the franchisor business is structured and managed are not addressed, it becomes difficult to actually create the overall franchise business. It also becomes almost impossible to sell franchise outlets because they do not have the credibility of a well structured parent operation to fall back onto and this is evident to any astute buyer.
Step Four – Develop the franchisor business
Before you can sell any franchises, you will need to get the various new parts of the franchisor business up and running.
Branding will need to be carefully considered with logo, corporate colors and design for any shop-front, vehicles and uniforms. A webpage is a necessity for any business operating today and this will probably need to be partnered with a blog, facebook and other social media. Accounting and reporting systems will need to be in place as will the detailed planning for any advertising or marketing that the franchisor will be responsible for.
Step Five – Establish a pilot franchisee operation
You need to show that you can operate the business successfully as a franchise outlet. So, it is usual to have a franchised outlet running under your management for at least one year to show that the systems work and the business is profitable.
To do this, you will need to use your the Franchisee Operations and Procedures Manual to systemize your existing business so it becomes your first franchise or develop a new outlet.
Case Study – Seven Automasters, the value of a pilot business
Step Six – Recruit Franchisees
Finally, you as the franchisor will be in the exciting position of being able to advertise for franchisees and then select carefully and sell the first outlet.
Keep going until you have as many outlets operating as you need to keep the business operating in accordance with your business plan.
Step Seven – Manage your franchise business into the future
Now your franchise chain is up and running, your job is to keep being the entrepreneur and manager you always knew you were.
Put in place all the on-going training for your franchisees, make sure they keep the brand alive and that they are performing well and keep an eye on the changing vision for the future of your business.
THE EASY WAY TO DO IT
If all of these steps seem to be just too hard, there is an easier way. For just $97 per month you get access to our mentoring program to guide you in detail every step of the way. Plus you get access to one of our experienced mentors to help you with your feasibility and guide you on your way.
To make it even easier, the first 100 people to join our mentoring program before July will do so at a very heavily discounted $49 per month
We also have a FAQ page with answers to the most common queries, so please check the FAQ page at this site to see if your question’s answered there.
Meanwhile, become excited about the opportunity to grow your business, increase your profits and give yourself time to do other things – start planning your franchise business now.