Becoming A Franchisor

Successful Entrepreneurship Does Not Necessarily Equal Successful Franchising

Becoming A Franchisor Is Not Easy In Any Sense Of The Word

Building a solid franchise company is neither a strict business proposition nor a natural extension of successful entrepreneurship. Franchising a business is a slippery slope to climb. And, we’ll go as far as to say that it has an extremely high attrition rate. Most fail. Many people believe that the food industry has the highest failure rate, but believe us, franchising has it beat by a mile.  Think about it.  In the food business, if your stove breaks down, you call for technical support; if the cook burns the meat, you get a new cook (and new meat).  OK, these examples are too childish compared to a real food operation, but still, help is available for overcoming most problems.  In the franchise business, “do it your-self” franchisors face totally new ground alone. And even with expert help that new ground has many pitfalls along the way.

I’m a successful business person. Why should building a successful franchise be a problem?

The common thinking that gets so many new franchisors in trouble is this: “I’m a successful entrepreneur, and therefore I’ve learned to overcome the obstacles associated with my business.”  Yes, the successful entrepreneur has overcome numerous obstacles, but franchising is NOT their business, not their expertise. This is an incredibly important concept to recognize, accept and then deal with. It’s at the heart of almost every franchise failure.

It’s true that no one understands the owner’s business better than they do. But becoming a franchisor is to enter an industry totally unto itself. Moreover, it’s an industry that somehow appears to be straight forward until one looks beneath the surface. Just consider the breath of the matter: federal (and often state) requirements/regulations, fees, franchise agreements, disclosure documents, financial reporting, training, marketing, real estate, organization, critical personnel decisions, and on and on.

Once a prospective franchisor embraces the importance of quality help in building a successful franchise company, they will either obtain such help or abandon the idea. Unfortunately, some charge ahead blindly and in get into the fight of their lives. By quality help, we’re referring to financial, legal and franchise development consulting.  And, don’t get trapped by the common notion that your family attorney and accountant can help you create a successful franchise.  If a non-franchise attorney accepts you as a client, you’ll be paying for their education as they learn along with you.  In a word: franchising is a specialized field.

A note of caution regarding franchise consultants

With regard to franchise consultants, find out if they can help you through the entire process, meaning feasibility through on-going coaching. And, be sure that you like them.  If handled correctly, the relationship should be a long lasting one. Be sure you can honestly accept them as your counsel.  Understand that there are no standards or credentials required to use that title, so do your research to make sure they’re equipped to help for the long haul.

There Are Myriad Issues: Study Them Exhaustively 

OK, what’s the bottom line for creating a successful franchise?  Study for the role of franchisor just like you would prepare for any critically important event in your life.  Read, ask, reflect and ask again.  This is a subject that will result in more questions as you become increasingly familiar with its intricacies.  Practical marketing, strategy, legal, operations, training, and pricing, are among the many issues at the forefront as you prepare for your journey toward establishing a successful franchise. Bottom line: becoming a franchisor, a successful franchisor, is a whole new world. Read this critical article on franchisor success or failure.