15 Steps To Starting A Successful Franchise System

In my work in Franchising, I am surprised by how many businesses decide to head into a Franchising model with no plan on how to get there. I see businesses that have tried to do it themselves, engaged a lawyer as a Consultant, or just tried a shot gun approach and fired shots at where they see a problem.

My advice to any future Franchisor is to think in terms of the 15 steps to Franchising, from when they cannot spell Franchising, until they appoint their first Franchisee – and decide how they are going to make it all happen.

Whilst I am a Certified Management Consultant, we do not undertake the work as Franchise Consultants; however there are people in this area that can act as the specialist. Think of it like an orchestra and their job is to be the Conductor, and bring in (and out) the various instruments as and when required. In our case I say we are the first violin – needed for Strategic Network Planning, Site Selection policies and Territory Planning – and then we pass our work back to the Conductor and Client to move to the next steps.

The Fifteen Steps to Franchising:

1. Undertake a feasibility study (or just your own due diligence to prove the concept you have can work). I become very concerned when I hear from potential Franchisors that they have not opened or company run the business they are planning to Franchise – and I even have said to major international companies intending to open in Australia, why not open a couple of stores yourselves to prove that it works. Unfortunately many American Franchisors say that is up to the Master Franchisor – and do I know anyone with $5M to invest? Most of those are still kicking tyres looking for their dream investor.

2. Understand that the costs to develop a workable franchise system is probably $50K – $100K, and thinking you will do it cheaper is a false economy. I am often asked to postpone payment for my companies’ service, and I remind the client that we are Consultants and that Banks are Banks – and go and speak to them if you plan to make an investment into Franchising.

3. Arrange the writing of your Operations Manuals. Your choice if you do it yourself or work with a Professional company who will have templates and ways to construct these manuals. Ideally they may start as paper manual, however the modern companies are setting this up in a digital environment – thru the web.

4. Strategic Network Planning is thinking in terms of what the network may look like in 5 or 10 years. It is about what type of areas you should be physically looking for sites in. This investment may save you huge amounts in mistakes, as there is no cheap reversal in leaving or closing a store – and less if you lose a legal case if the store you approved turns out to be a disaster – and you have no process you can demonstrate in how you made the decision.

5. Site selection policy – decide what type of stores you are seeking in terms of size, where they sit in terms of Impulse or Destination, and how you can instruct other people in what you are looking for. Issues need to be considered include size, traffic (vehicle or pedestrian), visibility, parking, access, local generators (or neighbours) and many other issues.

6. If you are a service franchise, you probably need to grant territories especially if you have a central ordering concept where leads come in by phone or computer. What is the policy for Territories in terms of what makes up a sufficient size territory and how many should we be looking for in each main market? You may start with a “beer and pizza map”, however this develops an inconsistent Franchise System.

7. Sort out your marketing and make the necessary decisions on who is your potential customer and how are we going to find them? If it is a walk up customer, then image and signs. If it is a phone in customer or web based customer, how do we attract them, inform them and entice them to make the call to purchase form us? Do we advertise in magazines, websites, bus shelters or many many other opportunities that will be thrown at you?

8. Find your first few stores. This can be undertaken internally, or you may want to appoint a professional site finding company who are expert in negotiating with Leasing agents and Real Estate agents.

9. Appoint a Law firm to write your disclosure Agreements and Franchise Agreements. This may involve some major decisions as the Agreements need to line up with what you are offering a Franchisee. Decisions have to be made such as Franchise periods and options to renew, territories or not, exclusive or non-exclusive territories, exclusion zones and many other issues that will govern how you operate in the future.

10. Attract future franchisees. This is crucial to the future of the business so how will this be done? Review the options and decide how much involvement you want in the process of acquiring leads and selecting franchise buyers. You can manage everything yourself, engage help along the way with lead generation or appoint a specialist who will qualify future franchisees on your behalf. Decide on a process to approve franchisees. How will franchise buyers be profiled and interviewed?

11. Assuming we now have an approved Franchisee, we need to match the Franchisee with the potential site, hoping the timing is right that the Franchisee is willing to take on the location that has been put forward, and we are approving as suitable for our System.

12. The store fitout now needs to occur and it is in our interest to ensure this is done to our standards. Do we appoint a fit out company, or allow the Franchisee to organise the store fit out themselves? Either way we need controls so it meets our corporate standards, which hopefully are well documented in our Operations Manuals –  step 3.

13. Our Franchisee now needs to undergo training in the Franchise System. This probably needs to be done internally, partly by our leaders and hopefully we have some form of company operation that they can train within to learn the ropes of the business into which we are about to appoint them.

14. Plan the opening. We need many things to come together at the same time to open successfully. This can include stock, equipment, staff, vehicles and some Local Area Marketing.

15. Open our new Franchise, and support the Franchisee who is probably taking the biggest business decision in their lives. They may need their hand held and that is what our Field staff and operations people need to do – even if that is one person also holding the title of Franchisor, MD, Development Manager and Chief Operations officer.

I can only say to a future Franchisor look at these steps and see if you have them covered. If you are looking at going into a newly formed Franchise System, maybe this list can form part of the questions you need to discuss with the Franchisor to feel comfortable that all these items are covered – before you part with your initial Franchisee Fee.