Tag Archives: franchising

How to Sell Your Franchise
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Perhaps the most common question we are asked by new and emerging franchise companies is “how do I sell my franchise?”

Consultants, lawyers and others offer all kinds of advice and counsel on this most important question, some of which is either ill-advised or based on self-interest. Sound and responsible recommendations on this vital subject can only be provided after the program for franchise development is well underway – not before it starts.

Historically, franchise sales efforts were almost always performed on an in-house basis, where a franchisor hired a franchise sales/development person to be responsible for this effort. They generated their own leads, performed all the functions involved in the sale of a franchise and directly approved all qualified candidates for their franchise. Over time, however, much has changed as it relates to selling franchises. The growth of the internet, reliance on websites and the emergence of various forms of franchise sales brokers have dramatically changed the franchise sales landscape with some positive outcomes and many negatives and abuses.

What a new and start up franchise company must first understand is that neither they, nor any qualified and responsible consultant or advisor, can provide the right answer and advice until the franchise development process has started and there is a clear understanding of the franchisor’s objectives, their resources, their unit operating and financial history, their personnel, their growth potential, the competition and many other key factors. In selling franchises, one size does not fit all. We can speak with considerable authority and experience that an emerging franchisor must first go through this process to make the right decision – a decision that may likely determine the success or failure of the company.

You cannot accurately determine at the outset whether you should use one of the many franchise lead generating companies that are available or one of the many franchise brokers that exist or whether you should commit to have a franchise consulting firm sell your franchises for a fee or commission. And you cannot at the outset determine whether you should bring this all important function in-house.

It is essential and very sound advice that you not make this decision and not allow an advisor to influence you until the first phases of your franchise program have been developed and you have a sound basis for making this important decision. There cannot be any self-interest on the part of the person or entity providing you with advice on this subject.

Our expert consultants are here to answer your questions on this topic, please contact us.

Anyone Can Become a Franchise Consultant
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New franchise consultants enter the marketplace on a regular basis. After all, unlike accountants or lawyers, no license is required, no examination or certification is necessary.  Becoming a franchise consultant is easy.  All it really takes is to know a little more about franchising than the clients you hope to attract. With a convincing  and well designed website,  methods to appeal to a very vulnerable audience, use of social media to promote you or your consulting company, low balling of realistic consulting fees, and promising delivery of required services in speculative and unattainable time periods, you’re open for business.

Having provided franchise related consulting services for over 35 years, we have witnessed firsthand the plethora of new “consultants” entering the franchise space to offer advice and counsel. They attempt to do this where the parties in a franchise relationship must invest considerable sums of money, which in most cases, they cannot afford to lose. The depth, wisdom, experience and ethics that are required of those who offer franchise consulting services must be unquestionable and backed by many years of excellence with a proven track record of accomplishment in this area.

There are, in fact, a limited number of what we believe are reliable and experienced franchise consultants. They understand that those seeking to  franchise their business are vulnerable, in that they believe and aspire to be the next “golden arches” in the business they desire to franchise. Realistically, few if any will achieve that, and most will not even reach less ambitious goals. Much of this can be determined up front by experienced and ethical consultants who, when it is called for, will tell a potential client that their business is simply not viable for franchise expansion, and that they need to avoid a costly and harmful investment by a prospective franchisor with unattainable goals. Responsible and experienced consultants will do that because it is the right thing to do.

Before retaining a consultant, do your due diligence very, very carefully. There is a lot at stake for all parties. Only very experienced & ethical consultants know and honor this. Unqualified and unproven consultants will all have a story to tell about their accomplishments but it is up to you,  as their prospective client, to ask all the hard and essential questions that will help you to determine their true depth, experience of accomplishment, and motives for offering franchise consulting services.

Do You Know What Your Franchisees Really Think About You?
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And if you think you do, how do you know what you think you know?

It might surprise you that I can say with a high degree of certainty that most franchisors do not know Hmmhow they are thought of and perceived by their franchisees. And especially in franchise relations, perception is truth. It is the reality that all franchisors must live with and the reality they must deal with every day.

Franchisors have different ways and methods of trying to communicate with and understand their franchisees and their needs. They might conduct field visits and inspections, arrange various meetings throughout the year, maintain telephone and email communications, newsletters and often create Franchise Advisory Councils. Yet in spite of all of these, most franchisors still don’t get it. They still do not really know the hopes and dreams of their franchisees, their true concerns and frustrations with the franchisor and what the future has in store for them.

In making these statements I can just sense an array of strong reactions from franchisors reading this. I can hear the words, “What is the basis for these strong accusations?” “Who is he and how does he know what he thinks he knows?” Those are fair questions that certainly deserve a fair response.

In my more than 35 years in franchising, I have been a franchisor, a franchisee, Past Chairman of the International Franchise Association (IFA), board member of several franchise companies and a consultant to hundreds of companies. In these experiences, I have attended dozens, if not hundreds of franchisor/franchisee meetings and I and my consulting staff have personally interviewed hundreds of franchisees. These interviews have been part of many consulting assignments intended to evaluate and assess the effectiveness of franchised networks. They are prompted by franchisors who see the value in learning how they are viewed by their franchisees and also by potential acquirers of franchise networks who realize that comprehensive due diligence must include an assessment of the franchisor/franchisee relationship. In addition, many financial entities considering various loan and equity transactions with franchisors understand that it is essential to conduct due diligence that includes more than the obvious financial and legal evaluations. Whether it is an enlightened franchisor that truly wants to know what their franchisees think of them or an entity contemplating an acquisition or a financial transaction involving eight figures, knowing the health of the franchise relationship is an absolute must.

The initial part of an evaluation includes in-depth discussions with franchisor management. When asked the question, “how would you describe your relationship with your franchisees?”, in the great majority of cases their answers range from terrific to pretty good. But then when the same type of questions is asked of franchisees, the answers are so different that it becomes clear that most franchisors do not truly know their franchisees and are in varying stages of denial. It should be pointed out that the interviews are conducted in person by very experienced consultants and with a pledge that whatever is told to them is totally confidential. It then becomes a cathartic experience for franchisees. An outpouring of concerns and problems is typical. There is much negative criticism and an equal amount of constructive criticism yet the overwhelming majority of franchisees only want things to get better and to have the franchisor understand their concerns and be able to better communicate with them. In some cases, the problems are more severe and is either approaching a high degree of acrimony or leading to the likelihood of litigation.

Franchisors who understand the value of knowing franchisee perceptions have so much to gain. They not only open up a previously closed door but are able to receive recommendations as to how to make the system better for their benefit and that of their franchisees. Potential acquirers of franchise companies can take steps to know in advance what the true health of the franchise company is and what if anything should be done to make it better. We have seen where an entity considering a $40 to $50 million transaction restructured the proposed deal because of what we learned in our franchisee interviews, and we have experienced some well known and enlightened franchisors who only wanted their relationships to be better. They were able to take the information received and analyzed from franchisees and convert it into positive action steps with immediate and long term benefit to both parties, and to the benefit of the entire franchise system.

It is common in many segments of franchising to utilize mystery shoppers to help assess the performance of a unit and evaluate the customer’s buying experience. Isn’t it ironic that most of the companies that see the value of mystery shopping programs do not likewise understand the value of some form of franchisee mystery shopping? It is a win-win proposition if seeking the truth and improving their company’s performance is a primary objective. It further amazes me that companies considering major financial investments in companies with hundreds and thousands of franchisees do not usually see the critical need to understand the health of the company’s relationship with their franchisees as part of their due diligence process.

Lastly, there is an additional and very powerful benefit to taking the time to know how your franchisees truly perceive you. When they understand that you are interested enough to have an evaluation performed by outside professionals who are totally objective, and that your only interest as a franchisor is to make the system as good as it can be for both parties, they have the utmost respect and admiration for your initiative in taking this step. We have seen franchisors that were on the verge of serious problems turn things around because of what we were able to learn from franchisee interviews; and we have seen some wonderful companies with highly recognized and respected brands whose goal was to be a “World Class Franchisor” learn enough in the process to achieve that goal.

Success in franchising is not measured solely by the financial results of a franchisor. The measurement must include the financial results and satisfaction of franchisees. About this there should be no question. Yet for a variety of reasons, most of which totally defy logic, most franchisors today still do not know what their franchisees really think about them.