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Are you wondering how to franchise a business?

If you have a successful business, you may think the next step is franchising. You may be right! Before you learn how to franchise a business, first you have to learn if franchising is right for you.  Once you have made the decision to franchise, you should consider the outsourcing option. Choosing the right franchise consultants is a key factor in your early decision making process, and can make the rest of the process go much more smooth.

Franchise Beacon knows how to franchise a business! We are a group of business people, all with current and past experience as franchisees, franchisors, and small business owners. Placing your trust in Franchise Beacon as your franchise consultant is a great first choice in your franchising process.

Franchise Beacon also offers many services to help out existing franchisors, franchisees, and small business owners, so make sure you check out all the services we offer.

Below is many of the articles we have written, many of them featured in popular franchise and small business publications. We hope you enjoy reading them and get something out of them that helps you build your small business or franchise your business!

 

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Five things to consider before franchising your business

Are you wondering how to franchise a business? Are you considering if becoming a franchisor is right for you? Then here are ten 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 business model works, it probably isn’t right for franchising.

4>  Are you prepared to make the investment?

Becoming a franchisor is not cheap, and it is not a do-it-yourself project. Becoming a franchisor requires investment in legal fees, consulting fees, technology development, marketing and advertising collateral, and lead generation. Typically, you are going to need at least $200-$300K to start your franchise, including working capital.

Read more . .

Top ten Guerrilla Marketing tactics for retailers

You hear it all the time, “Guerrilla Marketing”. But what is it, really? Guerrilla marketing is non-traditional marketing strategies which are typically low cost, unconventional, and often are typically localized in scope. Guerrilla Marketing, in short, is the life-blood of small businesses. Through the proper application of an effective Guerrilla 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 Guerrilla 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 them up. Make your sign spinner a mascot. Put them in a Mario suit, a football uniform, a hot dog, or some other costume that has to do with your business or specific promotion.

Consistency is key. Once you start using spinners, keep using them. Have them in front of your store a minimum of Friday night, Saturday, and Sunday, as well as for promotions, special events, sales, holidays etc.

Change up the message. Remember, a lot of the same people will be seeing your sign spinner. So every month or so, tell them something new! Tell them about your current sale or something else exciting in your store.

read more . . .

Technology in franchising 

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.

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 for every sales person to determine their strengths and weaknesses. Today we can identify where in the process a prospective candidate loses interest, while at the same time monitor a salesperson’s performance. This then allows for categorical and clear-cut coaching opportunities, both individually and as a collective.

Though we currently use technology extensively in our sales process, we are in no way satisfied with where we are with it. We are looking to make additional investments into technology in the near future to improve existing abilities and expand our tracking and measuring capabilities. Our next objective is to be able to track not just if a client accesses an asset, such as a presentation or an FDD, but how many times, and how much time is spent with each asset. This will give the franchise development team even more tools to assess the client’s unique needs and concerns, and be proactive in answering them.

Technology improvements have allowed us greater internal transparency in every step of the sales process, and as we continue to add more capabilities we expect to see these improvements continue to grow.

 

 

 Understanding the Item Six

Item Six requires franchisees to disclose “recurring or occasional fees associated with operating a franchise” (section 436.5[f]). 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 the common items you will find in an FDD, and what you should consider:

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, upon notice.  Typically, this is between 1%-2% of gross. Talk to other franchisees about this, and see if they are getting a benefit from the fund. If not, attempt to negotiate it out of the agreement, or wait for 12-24 months before it starts. Some franchisors will bend on this, many will not, but it is definitely worth understanding.  Keep in mind that the most successful franchisees pay a disproportionate amount, so also consider negotiating a cap on this. Understand that some of these funds may also be earmarked for corporate staff; any employee in the marketing process could be paid for by the marketing fund.

Regional Marketing

This is a co-op type fund that franchisors typically reserve in their document. The idea is that, if a certain market has a high concentration of franchisees, the franchisor can mandate that they use some or all of their local marketing (see below), taking advantage of economies of scale for the betterment of the brand and the region. The only time to be concerned about this fee is if it is in addition to, rather than in lieu of, your local marketing.

Local Marketing

This is the amount of money that a franchisor requires that you spend in your market to promote the brand. Make sure that these numbers are in your business plan, and really understand what they may mean to you. As you reach maturity, you may find that spending 2-3% of your gross revenue each year on marketing no longer makes sense, so consider trying to negotiate a cap or a endpoint to this.

Technology

This is a fee you will often see for access to the franchisors Point of Sale, website, e-commerce, and also to fund research and development. The important things to look at are does the fee cover all major technology needs, and under what circumstances can it change. Talk to other franchisees and get a real feel for the technology provided.

 

Business Generation

Some franchisors, specifically in service-based industries, will charge you an additional percentage on business that they generate for you through their national advertising efforts. The key here is do you have to accept the business that they generate, and if so is the business profitable even with this extra fee? This can be a business killer, so be very careful in understanding what this could mean to your bottom line if 10%, 20%, or even more than 50% of your business is coming from your franchisor.

read more . . .

 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;

  1. 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 compensation package.  And the initial compensation package is just the beginning.  In addition, costs will be incurred for lead procurement to generate the number of prospects necessary to justify the compensation being paid to the sales executive.  Additional support personnel will be needed to fill lead-marketing and clerical positions.  Other expenses rounding out the complete sales budget include office space, desk, computer, phone, contact management software, etc.
  2. Creating Desire:  Seasoned franchise sales professionals are unlikely to risk their career path to work for a young franchisor.  Their concerns include the franchisor’s level of business acumen, franchise experience, financial resources, and the long-term commitment necessary to support a franchise sales program.  These unknowns with all startup concepts make the experienced sales professional very reluctant to leave an established franchise company unless there are significant offers of guaranteed cash or equity in the new venture.

Challenges in the Current Economic Climate

The economy is recovering, but still not in good shape.  The business climate demands careful allocation of company resources.  All companies, both large and small, are looking for ways to reduce expenses without losing productivity.  Retaining the in-house sales staff while reducing the lead procurement budget to reduce expenses makes reaching budgeted sales goals almost impossible.  Instead, franchisors can reduce expenses by outsourcing their sales function and then increase the lead procurement budget with some of the savings.  The trajectory of the business remains on a positive slope while at the same time freeing up management to direct their time, energy and focus on internal operations and franchisee initiatives.

read more . . .

Validation, the key to successful franchisee recruitment 

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 will actually decide if you sell a franchise or not 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 model. If your franchise model does not allow for franchisees to make money, then stop selling and fix it.

Step One- Measuring validation

Before you can address franchisee validation issues, you need to learn what they are and how rampant they may be throughout your system. You may think that this is as simple as talking to your support personnel and finding out what the key franchise complaints are, but unfortunately it’s just not that easy. You see, when some franchisees is talking to their franchisor, they often feel at a disadvantage and that they have to exaggerate problems to get help. Other franchisees may not want their franchisor to know they are struggling, or may not want to admit they need help, so they may sugar-coat things. Conversely, when some franchisees are talking to prospects, they may feel their ego is on the line and talk about how great they do, they may feel loyalty to the franchisor so put the best shine on things, or they may be concerned that the prospect might compete against them, so they might try to talk the prospect out of buying. Basically, often what your franchisees tell you and what they tell prospects is two different things.

So what’s the solution? How do you find out what franchisees are telling prospects? It’s simple; become a prospect! Call your franchisees as though you are considering buying your own franchise. Ask specific questions. Questions like

  • What was your total initial investment?
  • Have your sales and profits met your expectations?
  • Knowing what you know now, would you make the investment again?

Asking these and other, similar questions will give you a true insight not only into how your franchisees validate, but also any upcoming problems in your system.  Make sure you also ask questions to find out what makes the happy franchisees happy. Try to get in touch with every franchisee in the system. Don’t use cell numbers or other personal information, though. Only use information available to your prospects, like information from the FDD and your website. Click here to learn how Franchise Beacon can provide this service for you.

Step Two-Triage

There is a saying in franchising:  There are two types of franchisees; franchisees that succeed because of their own efforts, and don’t succeed because of corporate. In other words, typically franchisees take credit for their successes and lay blame for their failures. Most likely, after you finish these calls, you will have a laundry-list of good and bad observations from your network. Now, you need to triage them. If franchisee says that the franchisor sends too many emails, or a certain person in corporate isn’t responsive, that is not quite as important as if they say no one ever answers the phone at corporate, or the technology system is horrible, etc. Once you have a succinct list of complaints, go though them and look for the complaints that:

  • Are repeated consistently
  • Could potentially stop someone from investing
  • Are solvable

Narrowing the list down to (hopefully) 2-3 issues that fall within this scope, and put together a plan of action to solve them.

read more . . .

 Why Franchising Your Business Makes Sense

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 the company and its franchisees.

 

 Why become a franchisee?

If you are looking to start your own business, an excellent way to minimize risk, while increasing the odds of succeeding is to consider opening a franchise. There are many options available, such as; retail chains, fitness gyms and even pet franchises. Whatever your passion is, there is likely a franchise business that will allow you to do something you love, while still making a profit!

When you are researching what type of business you would like to own, it is important to evaluate all of your options and consider the advantage of launching a franchise. Listed below are some of the many advantages to owning a franchise business.

 

  • Spend less time getting started. The difference between starting a franchise business compared to starting a business on your own is, the franchisor steps in to help you expedite the start-up phase by providing you with a plan and helping you make crucial decisions such as site location, hiring new staff members and promoting the grand opening. The franchisor has an invested interest in seeing your business succeed, and will draw upon past experiences in starting other operations to help get your business off the ground.
  • Benefit from national brand recognition. Some of the most significant benefits of owning a franchise business are brand awareness and national advertising power. By joining a franchise that is already well-known and respected, you don’t have to spend as much time educating your target market on what your company is all about. In addition to launching national advertising campaigns, franchisors help you establish an effective marketing plan and provide advertising materials to help make your company a success.

read more . . .

 Are you ready to Franchise your business?

efore embarking on a franchise development program you’ll want to determine if your business has what it takes to be a viable investment opportunity for investors and is ready to franchise. Listed below are a few questions that one should carefully consider prior to moving into a franchise model. There are many factors to consider when deciding if franchising is right for your business, however positive responses to the following questions are a good indication that your business might be ready to start franchising.

  1. Is there more than one location currently in operation?
  2. Is the current business operation a suitable prototype for the franchise model?
  3. Is there a system of processes and procedures currently in place for the business?
  4. Has the business been open and operating for more than two years?
  5. Are the profit margins sufficient to institute a percentage of the gross sales to be paid to the company in the form of a royalty and continue to produce a profit?
  6. Are there proprietary systems, products or services in the operation of the business?
  7. Is the business unique in any way or one of the few within its industry?
  8. Are there economies of scale related to purchasing, advertising or administrative functions that will increase as additional locations are added?
  9. Can others be trained to duplicate your existing system?
  10. Is the current business profitable?
  11. Have you had individuals or investors express interest in opening additional locations for the company?

 read more . . . 

 Capitalizing on Your Facebook Following

If you read my last blog post, you now know how to get 1000 people to like your Facebook page in a year! That is 1000 people who shop in your store, and now you can market to them for free. Now what? We all know that good content is the key to social media engagement, but what IS good content?

Good Content

Good content is content that your Facebook fans read and share. If you can get your fans to consistently share your content, your fan base will grow exponentially.   Here are some keys to good content.

  • Use images, but mix it up. Images are key to posts, but don’t use them every time. Most of your posts should have images or links, but don’t be afraid of an occasional text-only update.
  • KISS (Keep it Simple, Sir). Posts with less than 80 characters have a 27% higher rate of engagement, yet people often think they need to write a novella for an effective post. Keep it short, simple, and fun. Which brings us to
  • Make them laugh (or cry or go WOW). People love to share humor. Something that is truly funny is most likely to get shared. Barring that, a touching story, or something that they find interesting and think their friends will, too, is more likely to get shared.
  • Engage. Ask your customer’s questions. Have them vote for your next in store promotion or new product line. Ask them what their favorite one of your products is, how old they were when they first started using your products, or other interesting and industry-relevant questions.
  • Tell them what to do. Do you want your customers to share your post? Ask them to! Do you want them to comment? Ask for comments! Do you want them to answer a question? Ask a question! Give simple, explicit instructions as to what you want them to do, and if they are interested in what you are posting about they will.
  • Give them value. Give a Facebook-only promotion.  “Mention this post and get $__ off of ___, (with an image of the product) today only”. “$ OFF” offers receive twice the engagement of “% OFF” offers.
  • Be consistent. Posting 1-4 times per week will recreate 71% more engagement with your brand. If they get used to seeing your content, and they like it, they will look for it!
  • Post at the right time. Thursdays are the best weekday to post, and Friday is almost as good. Weekends are better. “Bankers hours” are the least-favorable time to post because people are working, and are less likely to engage your posts, even if they read them. Vary your posting time (you can pre-schedule posts), but keep them in the “hot zone” of 6pm-midnight, with an occasional day-time weekend post.

 

  10 Signs you should or shouldn’t franchise your business

Before you ask how to franchise a business, you should ask if you SHOULD franchise your business. Not all businesses will make good franchises, and not all business owners will make good franchisors (or franchisees, for that matter, but we cover that in a different article). To really know if your concept is right for franchising, you should work with a competent professional to do a feasibility study, but here are some quick flags that franchising may or may not be the way for you to go:

10 Signs you should franchise your business

1> You have a proven concept
2> You have a team in place
3> You have been approached by multiple people asking to buy a franchise
4> You are profitable
5> Your business runs smoothly without your presence
6> Your local business growth is starting to plateau, and you are looking for the way to the next level
7> The idea of helping other entrepreneurs is exciting to you
8> You can teach others to do what you do
9> Your market can weather an economic downturn or recession
10> Your business is high-margin

10 signs you shouldn’t franchise your business

1> Your are looking for a way to save your business
2> Your business would likely fail without you behind the wheel
3> You are struggling financially
4> You can’t imagine moving your location, it wouldn’t work as well anywhere else
5> You can’t take a day off or go away on vacation because the business would fall apart
6> If your business had to give away 5% of its gross sales, it would fail
7> Your business is very reliant on something that is popular in your area (surf shop, ski shop, etc)
8> Your industry is facing technological obsolesce
9> You love what you do and can’t imagine doing something else
10> You only have an idea, not a business

 

If you really want to know if you and your business are ready for franchising, give us a call. One of our franchising experts will walk through all of the above considerations, and many others, and see if you are a good fit for franchising. We do not take on every client, but only those that we truly think have what it takes to make it in the franchising world.

Initial consultation and feasibly study are free, so go ahead and contact us today.

If you really want to know if you and your business are ready for franchising, give us a call. One of our franchising experts will walk through all of the above considerations, and many others, and see if you are a good fit for franchising. We do not take on every client, but only those that we truly think have what it takes to make it in the franchising world.

Initial consultation and feasibly study are free, so go ahead and contact us today.

How to get 1000 likes in 1 year on Facebook 

Social media is the quickly becoming the juggernaut of interpersonal and business connection. There are over 1billion users on Facebook, and the site sees over 600 million unique visitors a month. While Facebook is obviously the dominant player in the market, Twitter currently have 165 million users, foursquare has 20 million, and even social media dinosaur MySpace still boasts over 20 million active users, so these are most certainly with your attention as well. This article will focus on Facebook marketing, but most of these techniques can be applied to other social media as well.

The key to any marketing is the audience. If you don’t have an audience, the best designed marketing plan is worthless. In social media, your audience is your followers, and on Facebook, your followers are the people that have liked your page. Building likes is something that you should be focused on every day. There are two keys to building your following; in-store promotion and solid content.

In-Store Promotion

The best time to get a customer to like your Facebook page is while they are in your store. First, you know that this person is the ideal audience; after all, they are shopping right now in your business. Secondly, you can ask them. People don’t like to say no to other people, and when you are asking them to do something that doesn’t cost them anything, you are likely to get a yes. You are even more likely to get a yes if you incent them, and this is our recommendation.

The majority of your customers walk into your store with a computer in their pocket. They have the ability to pull out their smart phone and like your page right there at your cash wrap. We recommend that you ask every paying customer to like your page on Facebook, and give them an incentive to do so. That incentive can be a discount on the current purchase, a free membership, or whatever other give-away that your store likes to use. The key is to give them the incentive to like you RIGHT THEN. The exchange would look something like this:

Sales Associate: Your total is $42.99. Have you liked us yet on Facebook?

Customer: No, I haven’t seen your page.

Sales Associate: Well, if you like us on Facebook on your phone right now, I can take 10% off this order.

Customer: Great

Customer then pulls out her smartphone, shows the associate that she has liked the store’s page, and the associate takes 10% off the order.

Think about this; How many transactions do you do on a weekly basis? Most retail stores would say between 100-1000 transactions a week. If you converted 1 out of five of those customers, you would grow your “fanbase” by a minimum of 1040 people in the first year of this program! That is 1040 people who have purchased at your store, whom you can get a marketing message to at your convenience, with no additional cost.  Talk about a great marketing investment!