After years of hard work, your business is successful. Carving out a comfortable lifestyle is no longer a problem for you. You don’t want to sell your business, so the only bottom line task facing you is to continue to profitably manage your business and stay one step ahead of your competitors. However, you know your business is unique and better than your competition. You have entertained the idea about expanding and becoming even more successful, but how do you take what you already have and expand your business without investing a great deal of your own time, effort, and money? Franchising may be the answer.
You have no doubt heard the old expression ”if I could only put it in a bottle and sell it I could make a fortune” many times over the years. McDonald’s, Kentucky Fried Chicken, Century 21, Midas Muffler and a host of other local or regional firms heeded that old adage and wrote a new chapter into the business textbooks by growing nationally. From humble beginnings, they mushroomed into immensely profitable business operations. Their franchisees are in business for themselves, but not by themselves. Being part of a large, reputable franchise organization has its advantages. You have on-going training and support, chain buying power with vendors, cooperative advertising clout for merchandising and promotions, plus continuous research and development on new product and service ideas from both the franchisor and the franchise organization itself.
It’s no coincidence that franchise chains are dominating the nation’s business community and keeping public stockholders happy. Unlike the odds an independent business faces, a franchise operation is the closest thing to a sure bet in the challenging world of free enterprise. There’s never a guarantee of success, but a franchisee’s potential success rate is eight times greater than that of an independent business operator, according to a ten-year study that involved the efforts of the U.S. Department of Commerce, Dunn & Bradstreet, the Small Business Administration, and the International Franchise Association.
The U.S. Congress passed the Franchise Rule in October of 1979 and ordered the Federal Trade Commission to supervise and enforce their new law. In order to franchise now, you must comply with the federal law, and in some cases a more encompassing and demanding state law. A franchisor will have to have an attorney create a Uniform Franchise Offering Circular, which contains a full disclosure about the franchise business, a copy of the franchise agreement, audited financial statements on the new franchise company, and other pertinent attachments to help a prospective franchisee make a sound business decision. Upon the first personal meeting with a prospect, the franchisor is obligated to give this information required by law to the prospective franchisee and obtain a receipt of disclosure showing that the franchisor complied with the franchise law. The prospect must wait 15 days before s/he can even attempt to purchase the franchise rights. This cooling-off period will benefit both parties in the long run, since the decision to buy then becomes one based on facts, logic, and objectivity, rather than emotion. The prospect then should have his partner, spouse, attorney, accountant, banker, and other experts review the franchisors entire legal and marketing package for good, solid feedback. The prospect is encouraged to call as many of the franchisees in the system as possible to find out if their franchisor is doing its job in accordance with the franchise agreement. Then--and only then---can the proper decision to purchase the franchise be made with a clear mind.
Our company is a business brokerage and franchise consulting firm that can help you expand through franchising, which requires the investment of time and money from others who want to be in your business…as your franchisee! If you have been in business for a proven length of time (3-5 years), have a successful business with multiple locations (3-5 units), a strong financial track record of earnings, and a management team that can train and support other individuals to operate a franchise business in your industry, you may be a candidate for franchising your own business concept. The bottom line is…LET’S TALK!
Because of our experience in franchising, we can help you find the correct area, location, and specific site for a franchisee needing the best possible location. There’s an old saying in the franchise world if your specific retail business format is site sensitive…”make sure you approve the right location for your new franchisee to ensure his/her success”. Although there’s no way to guarantee the success of any franchisee, choosing the absolute best site for your new franchisee is paramount to his/her success, as are many other factors. Too often an inexperienced franchisor placing new franchisee’s in business for their first time overlook the value of current U.S. Census demographic information that can help make the right decision on a specific site, like past/present/future population and household income growth, future roadway construction and re-routing, site-specific traffic counts, ingress and egress opportunities, parking availability, local signage restrictions, business permits and licensing requirements, and a host of other important topics that need the franchisor’s review and approval prior to authorizing a site for a new franchisee. Don’t make the three most common mistakes that new franchisors normally do when launching their new franchise program. First, they select the wrong individual to be a new franchisee. Secondly, they allow that person to be under capitalized to start their new franchise. And finally, the franchisor unintentionally approves the wrong location. These three mistakes up-front will cause major problems for the entire franchise program as time marches on.
Once the correct area, location, and specific site is approved by the franchisor, we can assist in negotiating the price, terms and conditions of a land purchase to play host to the new franchise building. Or, in the case of existing lease space, we can negotiate a lease on a free-standing building, strip center, or major regional mall. We’ll help negotiate the leases initial term, option periods, base rent, common area maintenance, property taxes, building insurance, marketing fund fees, percentage rent, construction credit, option to purchase, etc. if the franchisee prefers to commence operations in a leased space rather than purchase the land and erect their own building.
