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Five things to consider before franchising your business

Are you wondering how to franchise a business? Are you wondering if franchising your business is the right decision for you? Then here are five things you should consider!
1> Do you have a proven concept?
You are asking people to invest in your concept, so you better have proven it. If you have an “idea” you want to franchise, go prove it first. Do the business that you want to franchise, for at least a year, before you try to franchise it.
2>  Can your business model sustain a royalty?
Some businesses operate on low margins, and that’s ok! If you have a business that does $500K in revenue a year, and you bring 10% ($50,000) to the bottom line, and it doesn’t take up all your time, then a lot of people consider that a good business. However, if you were to franchise it, a franchisee doing the exact same numbers, but having to pay a 5% royalty back to corporate, would only be making 5%, or $25,000, to the bottom line. That’s not nearly as attractive.
3> Is your business scaleable?
Even if you have a proven, high margin concept, you still might not want to franchise. If there is something unique about you or it, it is still not fit for franchising. If you have a successful surf shop, which requires proximity to the ocean to succeed, you might be better served opening a couple of corporate stores. The same would apply to a ski and snowboard store, a boat cleaning business, or any other business that relies on proximity to the ocean, snow, desert, etc.  Additionally, if it took you years to master your craft, or if you feel like you got lucky that your […]

Top Ten Guerrilla Marketing Tactics For Retailers

You may wonder why a website that is dedicated to franchising would cover a subject like guerrilla marketing? After all, what You hear it all the time, “Guerilla Marketing”. But what is it, really? Guerilla marketing is non-traditional marketing strategies which are typically low cost, unconventional, and often are typically localized in scope. Guerilla Marketing, in short, is the life-blood of small businesses. Through the proper application of an effective Guerilla Marketing plan, every person within your local market (within 3-5 miles of your retail location) should know about your store, what differentiates you from your competition, and how to reach you.

 

There are as many ideas about Guerilla Marketing as there are small business owners, and there are a lot of books on the subject, too (I  recommend Guerrilla Marketing by Jay Conrad Levinson). Obviously, every idea isn’t good, and even good ideas don’t work in all businesses or all markets. These ideas should work in most if not all retail stores, however.

 
Sign Spinner
Sign spinners visually engage traffic as they pass by your store. They help to raise awareness of the location of your store, and what products/services you offer. Sign spinners are most effective when they are close to an intersection, but, if that is not an option for you, get them on the road closest to your location. Here are some things to think about when you use sign spinners:

Not all spinners are created equal. Some sign spinners will sit out in front of your store and hold a sign. Others will actually spin the sign, dance, and truly engage the traffic in an entertaining manner. Watch your spinner in action, and if they don’t entertain you, they won’t entertain your customers.

Dress […]

Technology in franchising

This article first ran at franchise-update.com under their Challenge the Pros section.
Challenge the Pros
“How are technological changes affecting how you recruit, and how are the latest tools changing how your development department does its job?”
Charles Franklin
Vice President of Franchise Development
Play N Trade
Technology has become an essential part of every portion of the franchisee recruitment process. We are constantly trying to stay ahead of the technology curve. From the “old school” platforms of online paid directories to social media and other instant-reach platforms to employing an enterprise-solution CRM, technological changes are affecting how we manage every facet of our franchise development efforts. Technology in franchising must be a consideration for every franchisor looking to grow their brand.

Once we receive an inquiry from a prospective candidate, we truly bring our technologies to bear. Through the use of web-to-lead functionality and an auto-responder we can give an immediate response to all inquiries. Assignment rules ensure that the first attempt at live contact happens within minutes. After pre-qualification we conduct several live presentations sharing our desktop as we work them through the mutual evaluation process. All information and interactions are kept in a cloud database that can be accessed anytime, anywhere, from any computer or smartphone in the world.

Every effort, from initial advertising to the final closing attempt, needs to be quantified and tracked. Technology allows for extensive measuring of the metrics of sales performance as well. Not only do we track our advertising spends to identify where our advertising dollars are best being spent, we use our CRM to track stages of lead progression, to identify where potential bottlenecks might exist in the process and set key performance indicators, and at the same time assess each stage […]

Understanding the Item Six

Item Six requires franchisees to disclose “recurring or occasional fees associated with operating a franchise” (section 436.5). This is any ongoing money you pay to the franchisor or an affiliate thereof. If you are considering buying a franchise, this is one of the most important items. Item 6 in an FDD may seem very straight-forward, but it requires significant study and investigation to fully understand how it may impact your business. Though the $200/month technology fee may seem like nothing compared to a $25,000 franchise fee, that tech fee can cost you basically the same ($24,000) over the course of a 10 year franchise agreement.

Some franchisors have a 4-5 line item Item 6, whereas others may take up 3 or 4 pages or more. It is imperative that you understand EVERY fee on Item 6, its likelihood of affecting you, and also make sure that it is in your business plan. Here are some things you should consider as you try to understand the Item Six of the FDD:

Royalty

The royalty is pretty basic, but you need to check in the remarks/notes section, the footnotes, and the agreement itself to see when/if it can change. For a business that does $500,000 a year, a change of just 1% can make a difference of $50,000 over a ten-year term, so understanding under what circumstances that this can change is very important.  This, in addition to franchise fees, is the primary way your franchisor is able to pay their bills and staff the corporate office.

National Marketing

Most franchisors either have a National Marketing fund or have one reserved in the agreement, whereby they can instate one, either when the brand reaches a certain strength or when they decide, […]

Outsourcing Franchise Development

 

Part of knowing how to franchise a business is knowing how you are going to sell your franchise. The concept of outsourcing the franchise development function of a franchisor’s business is nothing new.  Historically many startup concepts, which often lack the necessary capital and infrastructure required to generate unit growth, reached out to franchise consultants to provide a professional level of franchise sales services.  Today, franchisors of all sizes often look outside to handle some or all aspects of their franchise sales process.  This has proven to be an attractive alternative because it frees up a franchisor’s time and resources to focus on the success of their franchisees.

 

Why Franchisors are Outsourcing Their Sales

To understand why outsourcing has become such a popular option, franchisors need only look internally at their current sales efforts.   Answer these questions, honestly and objectively:

Is your sales team effective at generating sales? Have they historically met goals and forecasts?
Internally, who will manage the franchise sales consultants?
Do you understand the current cost associated with the sales department? (Salaries, overtime, bonuses, office expense, travel and entertainment etc.)
Do you understand the complete costs of a franchise consultant? (Commissions, management fees, software fees, minimum add spends)

 

 

Recruiting a Franchise Sales Professional

Over the last seven years the number of franchisors entering the market has more than doubled.  This has created a buyer’s market for quality franchise development personnel.  Startup franchisors often find it difficult to compete for the few seasoned franchise executives available in the market place.

The challenge to attract the right person is twofold;

Expense:  The cost associated with recruiting and potentially relocating a sales executive can be significant – even one with modest franchise experience can easily command a six-figure […]