Doing Business in DC | Starting and Growing a Franchise | Strategies for Managing a Franchise

Strategies for Managing a Franchise

presented byBenjamin C. Litalien, CFE

Doing Business 2.0: Starting and Growing a Franchise

February 9th, 2012

2012 © 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 Managing a Franchise”

Doing Business: 2.0


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

Formulating an integrated approach Getting easier everyday!

Franchise Building Blocks


Doing Business: 2.0


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?

Doing Business: 2.0


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?

Doing Business: 2.0


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

Doing Business: 2.0


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?

Doing Business: 2.0


Franchise Operations


Operations is the backbone of the systemExtensive documentation on operating the

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

reasonable time frameCreates the necessary ‘web’ to connect all the

franchise system components Eliminates ‘guessing’ by franchisees and support

staff

Doing Business: 2.0


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

Doing Business: 2.0




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

Doing Business: 2.0




Retail stores Complexities include:

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

Doing Business: 2.0




Service providersComplexities include:

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

Doing Business: 2.0

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

Doing Business: 2.0


Franchisee / System Support“Strategies for Managing a Franchise”

“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

Doing Business: 2.0


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

Doing Business: 2.0


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

System Development Increased efficiency, growth, alliances

Doing Business: 2.0


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

Doing Business: 2.0


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


Doing Business: 2.0


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


Doing Business: 2.0


Influence is Local… Your most powerful position Leverage of your franchise

“We find that large cascades of influence are driven not by influential's

but by a critical mass of easily influenced individuals.”

-Journal of Consumer Research


Doing Business: 2.0


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

Doing Business: 2.0 – Starting a Franchising


Thank you!

Ben Litalien, Principal

Franchise Well, LLC

www.franchisewell.com

[email protected]

540.657.1427 cell 540.845.2885

Doing Business: 2.0 – Starting a Franchising

http://www.franchisewell.com/

mailto:[email protected]