Strategies for Starting a Franchise presented by Dr. Benjamin C. Litalien, CFE

Strategies for Starting a Franchise

presented byDr. Benjamin C. Litalien, CFE

Entrepreneur Road Map: Starting and Growing a Franchise

May 14th, 2014

2014 © Copyright - Franchise Well, LLC

Today’s Objectives Give you perspective on the key

elements of a franchise system Provide you with practical

information about franchising Give you actionable ideas to

consider pursuing a franchise To create more “students of

franchising”

“Strategies for Starting a Franchise”

Entrepreneur Road Map


Must Manage Each Area: Growth Strategies Franchise Operations System / Franchisee Support Franchisor / Franchisee Relations

Formulating an integrated approach Getting easier everyday!

Franchise Building Blocks




Growth Strategies Single Site

The right to operate one franchise unit Predominant strategy for franchising Provides high-touch process Numerous risks (competition, density)

Key Considerations What are your financial goals? Can the franchise concept accommodate my goals? What does the future look like?




Growth Strategies Multi-Site

The right/obligation to operate multiple units Provides better economies-of-scale Can be good health predictor of franchisor Numerous risks (capital invested, site

economics ) Key Considerations

Can you manage multiple sites? What is the make-up of the franchise system? What does the future look like?




Growth Strategies Area Development

This license usually grants the franchisee the right to open a certain number of franchises in a given area.

There is usually a production schedule where the area development franchisee must open a certain number of franchises during a certain period.

As long as the area development franchisee stays on track in opening franchises in the area, he/she has an exclusive area where no other franchisees are allowed to open a franchise.

Becoming very popular with franchise systems




Growth Strategies Area Development, continued

Generally you pay reduced franchise and royalty fees but requires significantly more capital

Rapidly expanding concept but attractive primarily to investors

Provides for faster market penetration but can dilute the quality of single-site results

Key Consideration Can you afford it?




Franchise Operations Operations is the backbone of the system

Extensive documentation on operating the concept

Must be able to attract ‘non-experience’ operators Must be able to create success within a

reasonable time frame Creates the necessary ‘web’ to connect all the

franchise system components Eliminates ‘guessing’ by franchisees and support

staff




The Value of Your Time“A franchise system must allow an owner

to ‘stick to the knitting’ of the business. Many entrepreneurs simply spend too

much time on tasks not associated with their overall mission.”

- Fred DeLuca, founder of Subway




Franchise Operations Two basic platforms

Retail stores Foodservice, Automotive, Education Requires a ‘location’ which drives up

complexity and cost

Service providers Handyman, Residential/Commercial

Cleaning, Pet care New energy in the sector driven by

advances in technology




Franchise Operations Retail stores

Complexities include: Site Selection Lease Negotiation Construction Signage Changing demographics, consumer trends Economics Local laws & jurisdictions




Franchise Operations Service providers

Complexities include: Customer Service Customer Engagement Hiring & training of consistently competent staff Monitoring of authorized activities Compliance with system requirements



http://www.worldfranchising.com/profiles/housemaster-home-inspections/1/1/


Operational Elements Manuals

Critically important for consistency Often tied to Franchise Agreements

Information Systems The communications ‘web’ connecting all operational elements

Training & Ongoing Development Dedicated versus Outsource




Franchisee / System Support “After the Sale”

Franchise Launch critical time for relationship building big ‘let down’ time after training

Building the Business gradually gain independence franchisor must not ‘let go’ too soon

Ongoing Operations franchisee should assume leadership role try to stay ‘in the boat’ with franchisor




Franchisee / System Support Home Office

Back-office support Accounting, call center, warehousing, procurement Advertising/marketing materials development

Field Staff / Offices On-site, in-store, territory relationships Systemic evaluations

Periodic Gatherings Convention, vendor meetings, special events




The Relationship“What does the franchisee want? What they

would do for themselves if they weren’t running the business everyday!”

-famous franchise expert Knowledge Transfer

Competition, industry know-how, regulationNewsletter, bulletins, ‘data dumps’

System Development Increased efficiency, growth, alliances




The Relationship It’s a matter of leadership

must be driven from the top must permeate the entire organization must be documented in FDD

How can you know? talk to several franchisees visit corporate headquarters read the FDD




A Consumer Perspective"That's the name of the game ... pleasing the customer. If we ever lose sight of that

fact, we've lost the ball game." -Ray Kroc



Leveraging Franchise Power… Unique Aspects in Franchising:

Shared Risk – don’t reinvent the wheel Communal Learning – concept enhancement Association – education, R & D Liquidity – documented higher resale value Economies of Scale – buying power




Franchising is NOT... A Guarantee of Success

oThere are real risks to consideroIt’s easier to get in than out of a

franchise For Everyone

o You must be willing to give up some personal preference for the good of the systemoYou need plenty of working capital

A Short-Term CommitmentoAverage contract is 10 years

Entrerpneur Road Map– Starting a Franchising


Thank you!

Dr. Ben Litalien, Principal

Franchise Well, LLC

[email protected]

540.657.1427 cell 540.845.2885

Entrepreneur Road Map – Starting a Franchising

http://www.franchisewell.com/

mailto:[email protected]

Strategies for Starting a Franchise presented by Dr. Benjamin C. Litalien, CFE

Documents

Transcript of Strategies for Starting a Franchise presented by Dr. Benjamin C. Litalien, CFE