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Franchising

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 […]

Validation, the key to successful franchisee recruitment

Franchisee Recruitment
Validation is something you should be thinking about even if you are just now considering how to franchise a business. You might think that you are responsible for selling your franchise, or that you employ the people responsible for selling your franchise, but that is simply not true. The people that impact your franchisee recruitment the most are not your salespeople, they are your existing franchisees.  They are your salespeople.  If they are happy, you will sell franchises, and if they aren’t, you won’t.

Sure, there will always be one or two people out there who you can “talk into” buying a franchise, because the concept you have happens to be what they have dreamed about their whole life, but most people make their investment decision based largely on what they hear from the franchise network.

Validation is even more important to a start-up franchise than it is to a mature franchise. When you have 100-200 locations or more open, and 2-3 franchisees that are unhappy, the impact is not nearly as damaging as if you only had 5-10 franchises open with 2-3 that were not happy with the system.  Furthermore, a start-up typically will not have any name recognition to lend it credibility; the only credibility is what comes from the franchise network.

Of course, most franchisors know that validation is important; they just don’t know what to do about it or even if they have great or poor validation. There are a few key steps a franchisor can take, however, to measure validation, find out what is helping and hindering it, and quickly improve their system-wide validation with minimal investment.

Please note that there is one killer for validation that we cannot help; an unprofitable […]

Why Franchising Your Business Makes Sense

Why Franchising your business makes sense
Franchising is a unique method of growing your business; it truly is a merger of large-organization efficiency with small-business, entrepreneur spirit and motivation. Of course we talked a lot about the fact that not every business should franchise, but if yours is right for franchising you will experience an awesome wealth-producing machine. So lets talk about why franchising your business makes sense, and the benefits of franchising.

the benefits of franchising your business
If you are wondering what the benefits of franchising your business are, here are just a few:

Less Capital Requirements
Fuel the growth of your business through the capital invested by each individual franchisee.
Add Additional Revenue Streams to Your Business
Franchise Fees
Royalty Fees
Advertising and Marketing Fees
Sales of Company Branded Products
Sales of Supplies
Training Fees
Sales of Promotional Products
The Ability to Expand Rapidly
Opening multiple locations at the same time allows you to obtain a large footprint quickly while putting your company a step ahead of the competition.
Gain Quality Management in Additional Units and Maximize Unit Revenue
Having an owner running the business usually insures that there will be a level of service and dedication that typically can’t be found in an employee. Franchisees have a vested interest in the success of their business and with their investment at risk, franchisees should be much more motivated than an employee.
Larger Advertising and Marketing Budget
Many franchisors institute a national advertising fund. This requires the franchisees to contribute a percentage of their gross sales to a fund used to increase advertising, name recognition, and the overall value of the business.
Branding
Opening units throughout the country will increase Brand awareness adding value to […]