FRANCHISING is, absolutely, a very unique business. Unlike any other kind of business or method of expansion, franchising requires its own unique organisational structure and operational 'culture'.
FRANCHISING is, absolutely, a very unique business. Unlike any other kind of business or method of expansion, franchising requires its own unique organisational structure and operational 'culture'. The mistake many companies make is in understanding franchising to be a legal process and to automatically seek guidance and advice from lawyers. This is most common nowadays, especially since there are more and more lawyers who specialise in the franchise method of expansion.
Franchising is, however, not a legal process. It is an operational and marketing process that has legal implications because it is carried out in a regulated environment, and involves different types of legal arrangements including contract law, disclosure requirements and anti-trust issues, just to name a few.
The legal process is an important aspect, but it is just one of many different specialties needed for successful expansion through franchising. Equally important is the operational, marketing, financial, organisational, sales and human resource elements of a business. A company, which engages the services of a lawyer, may end up with legal documents that certainly comply with the various rules and regulations, but may or may not be saleable to the correct audience a franchise ought to be seeking.
Franchising is 'all about people doing business with people'. If you miss targeting the right individual or construct a legal document that is either onerous or difficult to embrace, the programme will, usually, not be successful. A franchise expansion programme needs to carefully integrate all the critical aspects and not just the legal aspects i.e. franchise agreements, offering circular, various state registration documents, trademark/trade name registrations, etc.
Actually, when a company begins a franchise expansion programme they are engaged in two distinct businesses: The first is the 'core' business of offering a product or service to the end-user and the second is creating a distribution system of more facilities, businesses or locations (franchises) which will also offer the same products or services to the end-user. These are two distinct businesses that require their own strategic plans, development activities and expertise. For instance, one of the most important documents a franchisor will ever have is a Franchise Action Plan. This plan should be a master strategy and a 'blueprint' for how the franchise programme will be structured and then, implemented. Again, the development and implementation of the franchise strategic plan requires a combination of specific expertise.
Another, rather unique, aspect of the franchise business is the dynamism of the franchisor-franchisee relationship. This relationship is the backbone to successful expansion. For instance, if a company fails to identify the required competencies their franchisee should have and sells a franchise to an unskilled individual, then a 'disconnect' occurs. If the disconnect is serious enough it will filter all the way down the franchise distribution system to the end-user i.e. the customer. If the customer is affected in a negative manner, it will have repercussions throughout the company, especially for all of the other franchisees in a system.
Further, as demonstrated by some effective franchise companies, the key to success in franchising, the things that affect success or failure, have nothing at all to do with franchising.
The point I want to make crystal clear is that if you want to compete in the franchising arena you should seek out and employ the very best professional expertise you can afford, in the areas of:
Franchise Architects' methodology
Franchise Architects' methodology is fundamentally the same as one would use in building a structurally strong, fully functional and well-designed building or structure.
A brief description of our Seven Phase Methodology is as follows:
Feasibility and Assessment
This step involves a systematic analysis of the business to be franchised. A review is conducted of the operational aspects, marketing strategies, advertising formats, legal structure and relationship issues, financial strategies, sales aspects, organisational design issues and the human resource requirements of the core operating business as well as the proposed expansion strategy. This step also determines the evolutionary stage of the company, the company's viability and ability to accommodate franchising.
Phase one: Franchise Action Plan - This phase is most important part of the entire franchise development process as it involves the creation of a 'blueprint'. The information obtained in the feasibility and assessment analysis is projected into the future to create a specific expansion model that addresses the elements. This blueprint serves various functions. One of the most important is that it creates a path to be followed by various consultants and specialists, including lawyers, working on the development project. Another very important function of this process and the resultant document is that it becomes an operations manual on how to be a successful franchisor.
Phase two: Structure and Tools - This phase involves creating the structural elements and procedures for the franchise company to ensure uniformity and consistency amongst all the franchisees within a system. It includes the development and/or refinement of operation manual(s), pre-opening procedures, grand opening manuals, field support manuals, real estate and site selection procedures and all of the appropriate internal financial controls.
Phase three: Organisational Development - In order to expand successfully through franchising, it is imperative that the company be properly designed, structured and staffed. This phase, conducted by organisational design specialists who understand franchising, involves the creation of the organisational charts, job descriptions and profiles of the key executives involved in the franchising process. As previously stated, 'franchising is all about people doing business with people'.
Phase four: Training and Education - At the heart of every successful business is a very strong training and education program. In franchising this becomes even more crucial. This phase involves creation, design and implementation of the training systems for the employees of the core business, the franchise company itself and most important of all, the franchisees.
Phase five: Franchise Design - This phase brings together all the necessary components related to franchising. Franchise brochures, audio visual aids and other tools to actually market the franchises are created along with franchisee financing designs, architectural plans, specifications for prototype locations (if appropriate) and the creation of the actual legal documents, registrations, necessary to comply with all Federal and State regulatory authorities.
Phase six: Launch - Franchise Sales - In this phase, the company can proceed to the marketplace and begin its expansion program.
By following the previous phases, companies can avoid costly positioning and marketing errors.
Phase seven: On-going Guidance - Franchise Architects helps adapt the Franchise Action Plan and other related tools to changing market conditions to keep the franchise company pro-active and ahead of competition. Franchising, however, may not be the best expansion model for every type of business. Franchise Architects also has extensive experience in helping businesses expand through other forms of indirect channels of distribution such as dealerships, distributorships, partnerships, joint ventures and licensing programmes.
Craig Slavin is president of Franchise Architects, a management consulting firm specialising in design of customised expansion programmes. You can check the website: www.franchise architects.com, or contact him at craig@franchisearchitects.com
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