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
2012 © Copyright - Franchise Well, LLC
Must Manage Each Area: Growth Strategies Franchise Operations System / Franchisee Support Franchisor / Franchisee Relations
Formulating an integrated approach Getting easier everyday!
Franchise Building Blocks“Strategies for Managing a Franchise”
Doing Business: 2.0
2012 © Copyright - Franchise Well, LLC
Growth Strategies“Strategies for Managing a Franchise”
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
2012 © Copyright - Franchise Well, LLC
Growth Strategies“Strategies for Managing a Franchise”
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
2012 © Copyright - Franchise Well, LLC
Growth Strategies“Strategies for Managing a Franchise”
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
2012 © Copyright - Franchise Well, LLC
Growth Strategies“Strategies for Managing a Franchise”
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
2012 © Copyright - Franchise Well, LLC
Franchise Operations“Strategies for Managing a Franchise”
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
2012 © Copyright - Franchise Well, LLC
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,
“Strategies for Managing a Franchise”
founder of Subway
Doing Business: 2.0
2012 © Copyright - Franchise Well, LLC
Franchise Operations“Strategies for Managing a Franchise”
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
2012 © Copyright - Franchise Well, LLC
Franchise Operations“Strategies for Managing a Franchise”
Retail stores Complexities include:
Site Selection Lease Negotiation Construction Signage Changing demographics, consumer trends Economics Local laws & jurisdictions
Doing Business: 2.0
2012 © Copyright - Franchise Well, LLC
Franchise Operations“Strategies for Managing a Franchise”
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
2012 © Copyright - Franchise Well, LLC
Operational Elements“Strategies for Managing a Franchise”
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
2012 © Copyright - Franchise Well, LLC
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
2012 © Copyright - Franchise Well, LLC
Franchisee / System Support“Strategies for Managing a Franchise”
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
2012 © Copyright - Franchise Well, LLC
The Relationship“Strategies for Managing a Franchise”
“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
2012 © Copyright - Franchise Well, LLC
The Relationship“Strategies for Managing a Franchise”
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
2012 © Copyright - Franchise Well, LLC
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
“Strategies for Managing a Franchise”
Doing Business: 2.0
2012 © Copyright - Franchise Well, LLC
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
“Strategies for Managing a Franchise”
Doing Business: 2.0
2012 © Copyright - Franchise Well, LLC
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
“Strategies for Managing a Franchise”
Doing Business: 2.0
2012 © Copyright - Franchise Well, LLC
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
2012 © Copyright - Franchise Well, LLC
Thank you!
Ben Litalien, Principal
Franchise Well, LLC
540.657.1427 cell 540.845.2885
Doing Business: 2.0 – Starting a Franchising