How does a small business make the jump from local success to national presence? As many entrepreneurs have discovered, franchising can be the best path for explosive growth — as long as your business is unique enough to stand out in the market, and has an operating platform that can be easily replicated.
So what else does a business need to become a successful franchise, what are the first steps to take, and what pitfalls should be avoided at all costs? Credibly asked 14 leading franchising experts for their insights on these topics and many more, and compiled them into our inaugural Credibly Business Journal. Download it for free right here, and read on for some sage advice from seven of the featured experts.
Franchise Marketing Systems COO Tom DuFore on the three main reasons a business should consider franchising:
“The first is money — or rather, using other people’s money to grow your business, which is really what franchising does. Someone else is going to invest the necessary capital to open the location or territory. They’re going to buy the vehicles, furniture, fixtures, equipment, inventory, and whatever else is needed to run and operate it. This tends to be the #1 driver as to why a business would consider franchising. But it’s not the only driver.
“The second component is human capital, which is the personnel or people side of the business. As any small business owner who’s tried to expand into multiple locations or territories knows, finding good quality employees or managers is always hard, and when you find them, they’re always difficult to keep. So when you franchise, you’re not only getting someone who’s going to invest in your business, but you’re also getting someone who in most situations will be that vested owner and operator who will keep a close eye on the business.
“And the third reason someone might franchise their business is speed and the ability to grow more rapidly. Even if you were to only sell one franchise a year for the next 10 years, that’s faster growth than most small to mid-sized businesses would have on their own. A phrase that I use here is, ‘You can catch lightning in a bottle and it can explode.’”
1-800-GOT-JUNK? founder Brian Scudamore on how to select ideal franchisees:
“Recruiting people — whether as franchise partners or as employees — is less about a checklist or resume, and more about trusting your gut. When potential hires or franchise partners come in the door, I ask myself, ‘Do I like this person? Do I find them interesting, and interested? Do they have passion for something in life?’
“These questions boil down to one: ‘Would I enjoy grabbing a beer with this person?’ Although it’s hypothetical, it is incredibly powerful. It reveals to me if that person fits the culture I’m trying to build at the head office, and if they’ll uphold the culture as a franchise partner operating in a different city or country.
“If I can see myself having a beer with the candidate, it’s likely the start of a great working relationship. Having the right qualifications for the gig is essential, but the Beer Test determines if the candidate is compatible with our culture and is interested in building something bigger, together.”
Two Men and a Truck founder Mary Ellen Sheets on turning a small family business into a gigantic family business:
“Launching a franchised company with family has got to be one of the most difficult yet rewarding ventures a family can take on. In addition to my own family, I’ve seen many families start TWO MEN AND A TRUCK® franchises and the variety is wide: Husband and wife, mother and daughter, father and sons, brothers…you name it, we’ve got it. And it seems that when a family has a strong foundation of trust and a strong business plan they’ve agreed upon, success is highly likely. When you are a team, fighting for the same purpose — in this case to grow a business and build a legacy — it makes it easier to get past the little disagreements.”
Lenrock Management Group partner and principal Joe Tagliente on finding the best locations for your franchise:
“Real estate is one of the most critical strategic decisions that you can make when you are building your business. Whether you’re a franchisee, or you’re a franchisor and you’re trying to make your brand ubiquitous, you cannot be cheap with the real estate. You have to spend the money to get the best locations, because if you don’t get the best locations, you won’t be where the business is.
“So many chains these days are trying to break through, but they’re trying to save money, so they end up building in a mall that might be past it’s prime, or they’re building on one of the off-streets in a popular town, instead of on a street that’s more centrally located. They’re hoping that crowds will find them — and it rarely works.
“I learned how to select sites from my dad, who is a Burger King franchisee, and he was very well respected for being great at picking locations, His formula was very simple: Here’s a McDonald’s that’s doing $3 million in sales, and we’re going to build right next to them and do 80% of whatever their sales are, and have a fabulously profitable restaurant. And like clockwork, it worked every single time. So, it helps to keep good company when trying to figure out where to build the next location for your business.”
16 Handles Founder Solomon Choi on the biggest mistake that franchise businesses need to avoid:
“One major mistake is to stop hiring when you have filled your employee roster. Too often I’ve seen franchisees scramble when they lose an employee — whether it’s a seasonal worker, a student, or a terminated employee — because they don’t have backup staff. This hurts the guest experience as well as the other employees who expect a knowledgeable coworker to help them on a shift. As a result, other team members have to pick up the slack, which often leads to shortcuts and going against standard operating procedures.”
Blink Fitness President Todd Magazine on why getting the first franchisee is the most difficult — and the most important:
“It took us about six months to get our first franchisee, which was a lot longer than we expected, but as I look back it’s not all that surprising. Nobody wants to be first in the pool.
“Even though you might have a great business, potential franchisees want to hear it from the people who are already operating and working with you, to see if you are, indeed, a good partner to them. But when you’re a new franchisor, you don’t have that luxury. There’s nobody for them talk to.
“So, getting the first one or two franchises sold and open is really critical, because you need them to be advocates to future franchisees and franchise candidates.”
iFranchise Group CEO Mark Siebert on the importance of differentiation:
“To succeed in franchise marketing to prospective franchisees, you need to start with a powerful brand story that is uniquely compelling on both an emotional and logical level. Every franchise company will claim and tout to have the best concept, or the best support, but to effectively market a franchise brand, it must be differentiated from the competition.
“Of course, there are dozens of ways for a company to differentiate itself. The easiest is often found at the consumer level, by achieving concept recognition in a particular industry or niche. Franchise companies can also differentiate themselves in the franchise sales process based on the size of the initial investment (keeping in mind that cheaper doesn’t always mean better), target market, services provided to franchisees, and even franchise structure.
“In the end, a franchisor should strive to be the best at something. Biggest selection, lowest prices, fastest service, or hottest trend are just some ways to achieve this status — and a concept can even aim to be the leader through a combination of these factors.
“Bottom line: If you don’t know how you want to be positioned in the marketplace, your consumers or prospective franchisees may end up being educated on your position by your competitors.”
For more tips and guidance on launching a franchise business, download Credibly Business Journal, Volume 1: Grow Your Business Through Franchising.