MSNBC published an interesting article stating that Franchisors in the US are now cutting thier Franchise Fees to create incentives to attract investment (see the article here: http://www.msnbc.msn.com/id/28071010/).
This is a positive reaction to hard economic times and thankfully, contrary to something I see all too often with franchise systems, that the Franchisor literally prices themselves out of, what could be, a very lucrative business scheme for all concerned.
As the Franchisor is going to be sharing in the profitability of any new Franchisee is is important that all Franchisor's literally create the "recipes for success" in all their Franchisees. In hard economic times this includes:
1. Lower front end costs - Franchisors should consider lowering initial franchise fees to attract new investment.
2. Find cheaper subsitutes (and suppliers) - Ofter Franchisors, before they were Franchisors, know of a cheaper way to do things, there is always way to be a 'little leaner' without sacrificing too much quality. Chances are the Franchisor knows of these 'shortcuts' because they had to take them in the 'early days' when they were just a single store front.
3. Delay Franchisee Incorporation - Often you cannot deduct business losses of a corporation from your other personal income. Delaying incorporation assures that, if there are few hard years, you will at least have the benefit of a personal deduction and reduces the administrative, legal and accounting expenses associated with incorporation.
4. Eliminate Guess Work and get new Employees up to Speed - Have an up to date procedure manual to increase the efficiency of employees. A recession means that there should be lots of people willing to work, but being able to training he effectively and quickly is a key to profitability.
5. Use your Buying Power - All Franchise systems have buying power, the Franchisor and Franchisee should leverage this advantage in tough economic times.
Friday, December 5, 2008
Tuesday, October 28, 2008
What is Franchise Law?
For the Franchisor, a well thought out Franchise system can be the key to an early retirement whereas a poor, ad hoc Franchise system can quickly devourer your previously successful business. I have helped grow many successful business ideas and concepts to "FRANCHISE" status, and generally some keys to the success of the Franchise are:
Have a solid, reproducible business system - Your Franchise is not worth buying if it cannot be reproduced and copied. Business owners who do not have the ability to develop instruction manuals or business models which rely on the unique skill of the business owner will have difficultly passing on that knowledge to Franchisee.
Don't expect to "sell out" - Your business has been successful because of your efforts. Similarly, your Franchise will only be successful if you devote similar effort to the support of your Franchisees. Go to the Franchise Shows, market to your target owner (just like you marketed to your customers).
Get a good lawyer - Franchise Law is unique in the world of legal disciplines, blending the old law of leases and tenancies with the relatively new law of intellectual property and licensing. It is essential to any Franchisor to engage the service of a lawyer who knows both sides of the fence and understand the considerations unique to franchising.
Protect your Ideas - This is something that is always business specific but at a minimum, you need to: a) require a non-competition and non-disclosure agreement from all managers and, key employees and b) trade-mark your brand as early as possible. Even if your not thinking of Franchising "right now", without these basic protections in place you will see your great business concept in the hands of your competitor.
Get a lay of the land - You were successful in your hometown, in part, because you chose a great location for your business. When you franchise you will be opening stores in "foreign territory". Enlist the help of local commercial realtors to ensure that the location has the traffic and reputation the location needs to be a success.
Don't get greedy - Your ultimate success as a Franchisor is "shared" success with your Franchisees. If you set product pricing too high or ask for royalties which are higher than the industry average, you will be inhibiting your own success and making your Franchisors slaves to their own stores. Generally successful Franchisors have Franchisees who have become wealthy by being store owners and, in many cases, they will own multiple shops.
Copyright (2008), Peter Borszcz
Have a solid, reproducible business system - Your Franchise is not worth buying if it cannot be reproduced and copied. Business owners who do not have the ability to develop instruction manuals or business models which rely on the unique skill of the business owner will have difficultly passing on that knowledge to Franchisee.
Don't expect to "sell out" - Your business has been successful because of your efforts. Similarly, your Franchise will only be successful if you devote similar effort to the support of your Franchisees. Go to the Franchise Shows, market to your target owner (just like you marketed to your customers).
Get a good lawyer - Franchise Law is unique in the world of legal disciplines, blending the old law of leases and tenancies with the relatively new law of intellectual property and licensing. It is essential to any Franchisor to engage the service of a lawyer who knows both sides of the fence and understand the considerations unique to franchising.
Protect your Ideas - This is something that is always business specific but at a minimum, you need to: a) require a non-competition and non-disclosure agreement from all managers and, key employees and b) trade-mark your brand as early as possible. Even if your not thinking of Franchising "right now", without these basic protections in place you will see your great business concept in the hands of your competitor.
Get a lay of the land - You were successful in your hometown, in part, because you chose a great location for your business. When you franchise you will be opening stores in "foreign territory". Enlist the help of local commercial realtors to ensure that the location has the traffic and reputation the location needs to be a success.
Don't get greedy - Your ultimate success as a Franchisor is "shared" success with your Franchisees. If you set product pricing too high or ask for royalties which are higher than the industry average, you will be inhibiting your own success and making your Franchisors slaves to their own stores. Generally successful Franchisors have Franchisees who have become wealthy by being store owners and, in many cases, they will own multiple shops.
Copyright (2008), Peter Borszcz
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