Success in the world of franchising is found in training, developing models that make it possible to achieve financially successful, multi-unit and enduring operators, who are part of the system and pay us royalties in a long-term relationship. Structure the model so that it is standardizable, transferable and controllable, and provide the network with support programs and adequate and sufficient care for this to happen, otherwise the franchise program will be destined to fail in the short term; irremediably affecting the brand, its owner, its franchise partners, its suppliers, its collaborators and consequently the final customer. If we are not willing to do the homework, it would be better to look for a growth format other than franchising.
The franchise model has proven to be one of the biggest growth accelerators for brands around the world. Who has not seen in different cities or in different airports brands that are familiar to them? Brands with which we identify ourselves, brands from which we know what product and experience we will receive, how we will receive it and how much it will cost – good or bad, depending on the circumstances. needs and expectations of each one – but always the same product. The decision to grow your brand under this great model is regularly focused on the business, the software, the processes, manuals, etc.; The so-called “diagnostics” are carried out to find out how “franchisable” a business is; however, rarely do we sit down to think that, in this magic recipe for growth, the most important factor is not the business model, but the entrepreneur. It is the entrepreneur, with his preparation, his vision and his commitment, who will take his brand to other markets and make it grow; it is his leadership who will push the new franchisee partners to share their vision in their respective cities, whoever they want cross borders, the one who sees beyond what others commonly do not. The limitation on the subject of franchises is the fear of failure, it is the booth syndrome, wanting to continue in your comfort zone.
Two important points to take into account when thinking about growing our brand under the franchise format. One: It is about the Franchisee earning money and wanting to acquire more franchises in a certain territory. We need to show that we have a financially profitable business model that, even sharing the profits, paying royalties and/or a surcharge on inputs, shows acceptable rates of return for all involved; and two: It is about me putting together the model so that it works wherever and with whomever. That I put together a SYSTEM (know-how or operation model) that allows the franchisee to have a standardized operation, and that we continue to grow exponentially, guaranteeing the standardization of the product and/or the concept in front of the client.
According to data from the Latin American Franchise Institute, only 7 percent of the brands that offer franchises have more than 100 units or 10 years in the market, and a little more than 70% are young franchises, which stop franchising (they die as franchisees and return to their life as restaurateurs) before the fifth year of having granted their first franchise, that is, not all that glitters is gold in this business model, on the contrary, it is a model full of challenges, with results in the medium term (not in the short) and where everything is franchiseable but not all entrepreneurs should franchise.
TO FRANCHISE OR NOT TO FRANCHISE? Before making this important life decision, you must carry out a self-analysis on these 7 points that are of vital importance to evaluate if you are ready to enter the wonderful world of franchising.
“I set up my company like you would expect a 17-year-old to do; but over time I learned about the business, I tried the product, I tried the service, I learned how to make money from the business and then I started franchising” – Fred Deluca, Founder of Subway.
- Do you know how the model works? The franchise, although fascinating, is a multidisciplinary and complex model, difficult to understand even for people who are already involved in it. One of the big mistakes that people make when starting out in this business is not understanding what we got ourselves into or pretending that because we hired a consultant we don’t have to learn it or that by decree or magically we will become franchisors because the consultant decreed it and we he tossed 8 paper folders. It is our responsibility to understand 100% how the model works, its advantages, its disadvantages, to read the largest number of books, attend appointments with the largest number of consultants (in different specialties), go to the largest number of courses, seminars, conferences and of course, taking the time to study the International Franchise Diploma organized by the Latin American Franchise Institute. If you don’t feel like learning something new or if you don’t have the time, it’s better to continue with your life plan and taking care of the business you have today.
- Is it the right time in your life? Starting a new project always requires being at peace with yourself and the right timing. Franchising will require a lot of time, leadership and a lot of effort on your part, there will be activities that you cannot delegate and that require your 100% attention, as well as important decisions that only you can make. It is important that your family agrees and supports you in this new venture and that you understand that we require your time as owner and creator of the brand in the planning and follow-up sessions. Do you have the desire to do it? Does helping other entrepreneurs succeed motivate you? Is this one of the most important projects in your life right now? If the answer to these questions is YES, go ahead and welcome to a new way of doing business.
- Do you have enough money? As we have repeated on several occasions, franchising is not cheap, it will require a lot of financial resources beyond what the specialized franchise consultant charges you. You will need to do branding studies, invest in intellectual property issues, software, hardware, commissaries, architects, supplier development, etc.; so the amount that the consultant specialized in franchises charges you will be the least of it. And please do not intend to get into debt to start this project, if your finances are not healthy with your current units or if your children are in college, or you are investing in your home, investing in other businesses, etc., it is better to think twice since the project can be affected by a bad financial planning of the same. If you are one of those who think that franchising your business will save you from financial ruin with franchise fees, don’t try it, the result will hurt a lot.
- Do you have a solid team? Starting the project will require a lot of energy, planning meetings, reviewing documents, thinking about new strategies, etc., and while all this is happening, we cannot stop operating on a day-to-day basis, we require that your current businesses, that your units your own, your factory, your office, continue to operate successfully while the new business is set up and implemented; therefore, we require that you have developed and that we have a solid work team that can work without you; On the other hand, if the current business requires a lot of time on your part and you can’t get out of it (you literally can’t get out of the back of the box because the junk falls), it seems to me that it is not the time to franchise yet!
- Are you willing to give up control? It is time to grow and a very important moment in your life in which you have to review your financial schemes, but above all patrimonial, legal and fiscal. It is time to institutionalize the company, to allow corporate governance and start professional accountability, to review the succession protocols, to think about preparing your departure, to think about the eventuality of a change in your family, etc. For an investor it will always be better to sign with an institutionalized company than with a person where all the decisions fall. If you are one of those who wants to stay involved in everything, the process to convert your business into a franchise could be affected, since there are decisions that only you can make in which your intervention will be essential to be able to advance in the project. If so, it is best that you do not start the process until you have enough time to attend to the project, or that you designate someone you trust who knows how to run the business as well as you do and who can dedicate himself exclusively to it. franchise development. We have to professionalize the company even when we have to say goodbye to Doña Juanita or do without that uncomfortable family member or understand that my son with a truncated career as a musician can be the owner, but should not participate in the daily operation of the business.
- Are you going to allow the changes? I regularly tell those who ask me that when a project of this nature starts, what it starts is not what it will end. The word to analyze is reproducibility, you have done a great job over the years having a successful brand and a profitable business (otherwise we would not be talking about franchising it) however, all this has happened under your tutelage and under your very particular way of doing things, we must ask ourselves if this same method will work in the hands of a third party and how we make it happen, it is time to sit down and review everything and improve the way in which the business is carried out in order to count with “a model” that can be reproduced and that serves for both you and your new partner to do business with franchises. We need an open mind from you and your entire work team so that together we can find the best model, even when the changes hurt.
- Time to change jobs? Franchising means ceasing to be a restaurant operator to become a business developer. You have to be willing to change the paradigm and understand that life is too short to operate since there are better ways to work and grow. It is necessary to stop being self-employed and a slave to our business to leave it in the hands of a third party who is probably better than us to operate and move to be full-time franchisors, looking for new sites for our brand, selecting the best candidates to enrich your system. franchise, improving the technical assistance program by negotiating better conditions with suppliers, etc.; that is, increasing the value of your brand and leading professionals just like you and conquering new markets.
And remember that franchising your business is a very big responsibility since people place their trust in your word, invest in your brand and expect a higher return on their money than if they did it with an independent business. Taking a check without being prepared can bring us serious problems, and the money received will not be enough to solve the problems we are going to get into for doing so without good planning or bad advice. Franchising isn’t easy, but if you’re willing to do it the right way, the rewards will be gratifying.
It is better to be informed and prepared before making the decision to franchise, such an important decision for you, your family and your brand. Listen to advice, seek mentors and advice, pay for it and as my friend Rayo Correa says: To franchise successfully, you only have to do one thing; pay attention to who has already done it.
“Growing up is NOT for everyone; It’s NOT easy, it’s NOT cheap, and it’s not fast. Franchising implies ceasing to be an operator to start our career as a business developer. All businesses are franchiseable but not all entrepreneurs should franchise. Franchising is training, institutionalization and turning my restaurant into a profitable, transferable and standardizable business model. The entrepreneur and his vision of growth on the A & B business are more important ”– #PalabradeZAR
I hope this weekly column is useful for you and your business. Remember to visit my Youtube channel “FranchiseZar” where you will find more than 500 videos on franchise and entrepreneurship topics. Interested in acquiring a franchise? Ask FranchiseZar® and #notedejessoprender. Your friend the Czar of Franchises says goodbye to you, see you in the next one.