Strategies for
Starting a Franchise
presented by
Dr. Benjamin C. Litalien, CFE
Entrepreneur Road Map:
Starting and Growing a Franchise
May 14th, 2014
“Strategies for Starting a Franchise”
Today’s Objectives
Give you perspective on the key
elements of a franchise system
 Provide you with practical
information about franchising
 Give you actionable ideas to
consider pursuing a franchise
 To create more “students of
franchising”

Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
“Strategies for Starting a Franchise”
Franchise Building Blocks

Must Manage Each Area:

Growth Strategies
 Franchise Operations
 System / Franchisee Support
 Franchisor / Franchisee Relations

Formulating an integrated approach

Getting easier everyday!
Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
“Strategies for Starting a Franchise”
Growth Strategies

Single Site
 The
right to operate one franchise unit
 Predominant strategy for franchising
 Provides high-touch process
 Numerous risks (competition, density)

Key Considerations
 What
are your financial goals?
 Can the franchise concept accommodate my goals?
 What does the future look like?
Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
“Strategies for Starting a Franchise”
Growth Strategies

Multi-Site
 The
right/obligation to operate multiple units
 Provides better economies-of-scale
 Can be good health predictor of franchisor
 Numerous risks (capital invested, site
economics )

Key Considerations
 Can
you manage multiple sites?
 What is the make-up of the franchise system?
 What does the future look like?
Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
“Strategies for Starting a Franchise”
Growth Strategies

Area Development
 This
license usually grants the franchisee the right to
open a certain number of franchises in a given area.
 There is usually a production schedule where the
area development franchisee must open a certain
number of franchises during a certain period.
 As long as the area development franchisee stays on
track in opening franchises in the area, he/she has an
exclusive area where no other franchisees are
allowed to open a franchise.
 Becoming very popular with franchise systems
Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
“Strategies for Starting a Franchise”
Growth Strategies

Area Development, continued
 Generally
you pay reduced franchise
and royalty fees but requires
significantly more capital
 Rapidly expanding concept but
attractive primarily to investors
 Provides for faster market penetration
but can dilute the quality of single-site
results

Key Consideration
 Can
you afford it?
Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
“Strategies for Starting a Franchise”
Franchise Operations

Operations is the backbone of the system

Extensive documentation on operating the
concept
Must be able to attract ‘non-experience’ operators
 Must be able to create success within a
reasonable time frame


Creates the necessary ‘web’ to connect all the
franchise system components

Eliminates ‘guessing’ by franchisees and support
staff
Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
“Strategies for Starting a Franchise”
The Value of Your Time
“A franchise system must allow an owner
to ‘stick to the knitting’ of the business.
Many entrepreneurs simply spend too
much time on tasks not associated with
their overall mission.”
- Fred DeLuca,
founder of Subway
Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
“Strategies for Starting a Franchise”
Franchise Operations

Two basic platforms

Retail stores
Foodservice, Automotive, Education
 Requires a ‘location’ which drives up
complexity and cost


Service providers
Handyman, Residential/Commercial
Cleaning, Pet care
 New energy in the sector driven by
advances in technology

Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
“Strategies for Starting a Franchise”
Franchise Operations

Retail stores
 Complexities
include:
Site Selection
 Lease Negotiation
 Construction
 Signage
 Changing demographics, consumer trends
 Economics
 Local laws & jurisdictions

Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
“Strategies for Starting a Franchise”
Franchise Operations

Service providers
 Complexities
include:
Customer Service
 Customer Engagement
 Hiring & training of consistently competent staff
 Monitoring of authorized activities
 Compliance with system requirements

Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
“Strategies for Starting a Franchise”
Operational Elements

Manuals

Critically important for consistency
 Often tied to Franchise Agreements

Information Systems


The communications ‘web’ connecting all
operational elements
Training & Ongoing Development

Dedicated versus Outsource
Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
“Strategies for Starting a Franchise”
Franchisee / System Support

“After the Sale”

Franchise Launch



Building the Business



critical time for relationship building
big ‘let down’ time after training
gradually gain independence
franchisor must not ‘let go’ too soon
Ongoing Operations


franchisee should assume leadership role
try to stay ‘in the boat’ with franchisor
Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
“Strategies for Starting a Franchise”
Franchisee / System Support

Home Office

Back-office support
Accounting, call center, warehousing, procurement
 Advertising/marketing materials development


Field Staff / Offices
On-site, in-store, territory relationships
 Systemic evaluations


Periodic Gatherings

Convention, vendor meetings, special events
Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
“Strategies for Starting a Franchise”
The Relationship
“What does the franchisee want? What they
would do for themselves if they weren’t
running the business everyday!”
-famous franchise expert

Knowledge Transfer
 Competition,
industry know-how, regulation
 Newsletter, bulletins, ‘data dumps’

System Development
 Increased
efficiency, growth, alliances
Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
“Strategies for Starting a Franchise”
The Relationship

It’s a matter of leadership

must be driven from the top
 must permeate the entire organization
 must be documented in FDD

How can you know?

talk to several franchisees
 visit corporate headquarters
 read the FDD
Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
A Consumer Perspective
"That's the name of the game ... pleasing
the customer. If we ever lose sight of that
fact, we've lost the ball game."
-Ray Kroc
Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
“Strategies for Starting a Franchise”
Leveraging Franchise Power…

Unique Aspects in Franchising:

Shared Risk – don’t reinvent the wheel

Communal Learning – concept enhancement

Association – education, R & D

Liquidity – documented higher resale value

Economies of Scale – buying power
Entrepreneur Road Map
2014 © Copyright - Franchise Well, LLC
Franchising is NOT...



A Guarantee of Success
o There are real risks to consider
o It’s easier to get in than out of a
franchise
For Everyone
o You must be willing to give up some
personal preference for the good of the
system
o You need plenty of working capital
A Short-Term Commitment
o Average contract is 10 years
Entrerpneur Road Map– Starting a Franchising
2014 © Copyright - Franchise Well, LLC
Thank you!
Dr. Ben Litalien, Principal
Franchise Well, LLC
www.franchisewell.com
ben@franchisewell.com
540.657.1427 cell 540.845.2885
Entrepreneur Road Map – Starting a Franchising
2014 © Copyright - Franchise Well, LLC