More Related Content More from Washington, DC Economic Partnership (20) Franchising | Entrepreneur Roadmap | FranchiseWell, LLC1. Strategies for
Starting a Franchise
presented by
Dr. Benjamin C. Litalien, CFE
Entrepreneur Road Map:
Starting and Growing a Franchise
May 14th, 2014
2. 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
3. 2014 © 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
Entrepreneur Road Map
“Strategies for Starting a Franchise”
4. 2014 © Copyright - Franchise Well, LLC
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?
Entrepreneur Road Map
“Strategies for Starting a Franchise”
5. 2014 © Copyright - Franchise Well, LLC
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?
Entrepreneur Road Map
“Strategies for Starting a Franchise”
6. 2014 © Copyright - Franchise Well, LLC
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
Entrepreneur Road Map
“Strategies for Starting a Franchise”
7. 2014 © Copyright - Franchise Well, LLC
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?
Entrepreneur Road Map
“Strategies for Starting a Franchise”
8. 2014 © Copyright - Franchise Well, LLC
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
Entrepreneur Road Map
“Strategies for Starting a Franchise”
9. 2014 © 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,
founder of Subway
Entrepreneur Road Map
“Strategies for Starting a Franchise”
10. 2014 © Copyright - Franchise Well, LLC
Franchise Operations
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
Entrepreneur Road Map
“Strategies for Starting a Franchise”
11. 2014 © Copyright - Franchise Well, LLC
Franchise Operations
Retail stores
Complexities include:
Site Selection
Lease Negotiation
Construction
Signage
Changing demographics, consumer trends
Economics
Local laws & jurisdictions
Entrepreneur Road Map
“Strategies for Starting a Franchise”
12. 2014 © Copyright - Franchise Well, LLC
Franchise Operations
Service providers
Complexities include:
Customer Service
Customer Engagement
Hiring & training of consistently competent staff
Monitoring of authorized activities
Compliance with system requirements
Entrepreneur Road Map
“Strategies for Starting a Franchise”
13. 2014 © Copyright - Franchise Well, LLC
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
Entrepreneur Road Map
“Strategies for Starting a Franchise”
14. 2014 © Copyright - Franchise Well, LLC
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
Entrepreneur Road Map
“Strategies for Starting a Franchise”
15. 2014 © Copyright - Franchise Well, LLC
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
Entrepreneur Road Map
“Strategies for Starting a Franchise”
16. 2014 © Copyright - Franchise Well, LLC
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
Entrepreneur Road Map
“Strategies for Starting a Franchise”
17. 2014 © Copyright - Franchise Well, LLC
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
Entrepreneur Road Map
“Strategies for Starting a Franchise”
18. 2014 © 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
Entrepreneur Road Map
19. 2014 © 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
Entrepreneur Road Map
“Strategies for Starting a Franchise”
20. 2014 © Copyright - Franchise Well, LLC
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
21. 2014 © Copyright - Franchise Well, LLC
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