Franchising | Entrepreneur Roadmap | FranchiseWell, LLC

Strategies for
Starting a Franchise
presented by
Dr. 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

 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

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

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

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, regulation
Newsletter, 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
o There are real risks to consider
o It’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
system
o You need plenty of working capital
 A Short-Term Commitment
o Average contract is 10 years
Entrerpneur Road Map– Starting a Franchising

Thank you!
Dr. Ben Litalien, Principal
Franchise Well, LLC
www.franchisewell.com
ben@franchisewell.com
540.657.1427 cell 540.845.2885
Entrepreneur Road Map – Starting a Franchising

Franchising | Entrepreneur Roadmap | FranchiseWell, LLC

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Franchising | Entrepreneur Roadmap | FranchiseWell, LLC