Franchising Your Business: What you Can Learn from Existing Franchisors
For the successful business owner and entrepreneur the thought of “franchising your business” is something that requires serious consideration and a good deal of “scrutiny.” There are many legal and business factors to scrutinize and there are many sources of information that you should be evaluating (see, our franchise library). However, one great source of information includes existing franchisors and the successes, failures and lessons that they have learned.
In a recent franchise article on Business News Daily, Pierre Panos, the founder and CEO of Fresh to Order, explains what he learned about “franchising his business.” So here is what Mr. Panos has to say about the do’s and don’ts based on his own experience:
Do’s:
- Ensure your unit economics work for you before franchising;
- Make sure the concept is fully developed before you start franchising (minor tweaks in the future will be okay but major changes are not);
- Ensure you get a well respected business and franchise attorney familiar with franchising to prepare your Franchise Disclosure Document (FDD) and related paperwork – if not one unhappy franchisee could ruin the entire system;
- Have all your training manuals and operations procedures perfected before; and
- Start a franchise association early – franchisees are your partners, not your employees.
Don’ts:
- Don’t grow too quickly from a small base of stores to avoid losing control of your brand standards;
- Don’t grow all over the country or world before you can support stores effectively – grow around your home base first;
- Be very selective when accepting franchisees into your system;
- Don’t outgrow your support structure; and
- Don’t run out of cash – be fully capitalized when your business is in growth mode.
As a franchise lawyer I am a big proponent of establishing a franchise system focused on “controlled growth” and Mr. Panos’ advice to treat franchisees as “partners.” There is a lot to be evaluated in Mr. Panos’ advice and many questions that you should be evaluating. So, what will your unit economics look like? What do you need to do to insure that your FDD and Franchise Agreement are developed to support future growth? What is your plan to turn franchisees into partners and raving fans?
For additional information about setting up a franchise, we recommend this article:
How to Franchise Your Business
