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Behind The Franchise Curtain - The Journey Begins...

Over the years, I've had an opportunity to read literally thousands of blogs and articles relating to virtually every aspect of franchising. In thinking about what I'd like to do with my blog, I've decided to put a new spin on things. I am going to write a fictional account of the entire franchising experience from initial conception to the "end of the line," and I'm going to write it from the perspective of BOTH the Franchisee and the Franchisor. Am I a bit daft for taking on this initiative? Perhaps, however it's my blog and therefore my prerogative.

I think the one aspect that really intrigues me about this project is that there are SO many different types of franchises and SO many different variables, that it would literally be impossible to capture every different scenario. With that said, I believe that my background adds a unique perspective to this project, as I have been both a Franchisee and a high-level Franchisor executive (which I am today).


The journey begins...

FRANCHISEE

You know what? I've had it. That is the last straw. I've been giving my blood, sweat and tears to this *&%$@#! company for over ___ years now, and I can't take it any more. I just can't work for these clueless, closed-minded robots for another day, and I swear that if I have to deal with one more worthless meeting or fill out one more ________ report I'm going to go postal. When I look around all I see is mediocrity and if I don't make a move soon I'm going to be trapped in this place forever. I'm a smart person. I've worked hard to get where I am and I know I can do better than this. I think it's time for ME to run the show -- now, what do I want to do? Let's see what I can find on the web...


FRANCHISOR

Man, I'm good. Nobody does ___________ as well as I do -- nobody. Check this place out - it's a thing of beauty. Everyone knows exactly what to do, they all love working here, my customers are raving fans and best of all, I'm making a killing! I'll bet that I could have one of these in every major city in America...man, wouldn't that be incredible?! I'd be the king of the world, and I could finally rub elbows with all of those hot shots that I see at those big political bashes they're always having. But where the heck am I going to get the money to pull this off? I'm doing well, but I don't have THAT kind of money, and plus my ________ would freak out about the risk. OK, so the "brick and mortar" approach is out. What's another way that I can grow my business quickly, while minimizing my risk and without the need to obtain millions of dollars in working capital? I've heard that franchising is a great way to grow a business but I really don't know much about it. Let's see what I can find on the web...

Let The Internet Searches Begin!

Following is post two (2) in an ongoing series of posts regarding the franchising experience. 

FRANCHISEE
Well, alrighty then -- let’s see what the web has to say about becoming a franchisee.  (Opens Google and enters the words “franchise opportunities.”)  HOLY COW – 5,430,000 results in 0.22 seconds!  Let’s take a closer look at what we have here…

      EDITOR’S NOTE - The following search results are based on a real Google search conducted on June 4, 2014 at approximately 7:00pm Pacific Daylight Time.  Before we delve into the search results, let’s take a quick look at a few of the key elements of online marketing:

o   SEARCH ENGINE MARKETING (SEM) – Search Engine Marketing is a global term that refers to the technical work necessary to promote websites by increasing their visibility in search engine results pages (SERPS). 

§  PAID SEARCH RESULTS - These are results that show up as an “Ad” at the top and on the right-hand side of a search results page based on Google’s AdWords program. Here’s a link to a great explanation of how this program works http://www.wordstream.com/articles/what-is-google-adwords.  Google AdWords is a “flavor” of the Pay-Per-Click or PPC concept and accounts for a very large percentage of paid ad dollars.

§  PAY-PER-CLICK (PPC) – PPC ads generally do not cost anything to display.  Only when a viewer clicks on the ad is an advertiser is charged for the ad – hence the term ‘pay-per-click.’
·         In some cases ads are charged based on an ‘impression’ (i.e. each time an ad appears on a viewer’s screen).  As impressions take place so quickly and with such frequency, these types of ads are generally paid for in batches of 1000 impressions.

o   ORGANIC SEARCH RESULTS - These are the listings that appear below the paid ads on a search engine results page based on their relevance to the search terms.  Many people believe that organic search results present a more accurate reflection of what they are looking for and are more credible, because they are generated by popularity and common usage vs. paid advertising.  An entire industry has sprouted up to support companies in their quest to land the much coveted number one slot on the first page of a Google search engine results page. 

§  SEARCH ENGINE OPTIMIZATION (SEO) – Although there is no industry standard definition of Search Engine Optimization, in over-simplified terms, SEO is essentially the art and science of ensuring that a website can be found by search engines based on words and phrases that are relevant and valuable based on what the viewer is searching for. 

·         For an excellent in-depth description of all of the above, you may want to click the following http://www.netgain.net.au/the-difference-between-sem-seo-ppc-and-adwords/

OK, now back to our FRANCHISEE

Hmmmm…very interesting. I wonder which one of these I should click on?  Under the ads section, here are the top five that appeared:

  • nhancefranchiseopportunities.com
  • franchiseopportunities.com
  • healthyyouvending.com
  • franchiseforsale.com
  • franchisedirect.com
In the organic section, I’m showing the following top five:


  • entrepreneur.com/franchise500
  • franchising.com
  • chick-fil-a.com
  • franchise.org
  • franchisegator.com

Based on the names of each of these sites alone, (aka the ‘URL’ for each site), I have a feeling that each is going to provide a very unique viewing experience.  Let’s see what happens when I take a closer look at each option…

FRANCHISOR

Well, alrighty then -- let’s see what the web has to say about becoming a franchisor.  (Opens Google and enters the words “franchise my business.”)  HOLY COW – 35,200,000 results in 0.26 seconds!  Let’s take a closer look at what we have here…

Hmmmm…I wonder which one of these I should click on?  Under the ads section, here are the top five that appeared:

  • ifranchisegroup.com
  • franchisegrowthpartners.com
  • mcgrow.com
  • thefranchisemaker.com
  • thefranchisebuilders.com
In the organic section, I’m showing the following top five:


  • entrepreneur.com/article/220438
  • inc.com/guides/201107/how-to-franchise-your-business.html
  • http://www.sba.gov/content/build-your-own-franchise
  • franchisedoc.com
  • http://franchises.businessmart.com/should-i-franchise-my-business.php
Very Interesting.  At first blush, this looks like a combination of companies that help to franchise businesses and articles based on the concept of franchising.  Let’s take a closer look and let’s see what this is all about…

Initial Search Completed – More Perplexed Than Ever!

Following is post three (3) in an ongoing series of posts regarding the franchising experience.

FRANCHISEE

Now that I've reviewed the results of my top five paid search results (ads), here’s what I found:
  • Two of the ads were for specific franchise opportunities – one was a wood renewal franchise and the other a healthy vending concept. Both featured websites that were relatively easy-to-navigate and I found it interesting that both also prominently featured video testimonials from existing franchisees. In truth, they were both quite compelling, but neither were concepts that truly resonated with me.
  • The other three sites led me to websites featuring a dizzying array of franchising opportunities including:
    • A list of franchise industries
    • A host of specific franchise opportunities with clickable logos
    • A list of “low cost franchises”
    • A list of “new franchise business opportunities”
    • A few links to general “franchise information”
    • And a search tool designed to provide feedback based on my:
      • Industry selection
      • Investment range
      • State (not my mental state, my geographical state)
Now let’s take a closer look at what came up in the “organic” section of my search:
  • Entrepreneur Magazine’s annual ranking of America’s top franchise opportunities (the “Entrepreneur 2014 Franchise 500®.” http://www.entrepreneur.com/franchise500/index.html Although this was a very interesting list and I literally spent hours perusing the information, I was overwhelmed by the sheer number of choices and options. In did notice, however, that the “Top 10 Franchises for 2014 were all very well known brands, and I filed that little tidbit of information away for future reference.
  • Franchising.com was a fascinating site that appeared to be an amalgamation of franchise opportunities, franchise-related news, franchise law and a very interesting “resources” page. I bookmarked this site for future usage, as it appeared to have links to virtually every franchise-related resource imaginable. www.franchising.com
  • Franchise.org (www.franchise.org) led me to the website for the International Franchise Association (IFA), which describes itself as, “the world’s oldest and largest organization representing franchising worldwide.” This site provided a plethora of resources as well, and I was particularly impressed with the “IFA Store” section, which featured a large selection of franchising-related books. Hmmmmm, perhaps it would be a good idea if I purchased a couple of books on franchising before I take the plunge? EDITOR’S NOTE – Ya think?!!
  • The other two sites were similar to what I found in the paid ads section; one was for a specific franchise opportunity, and the other was a “franchise opportunity” site that looked virtually identical to the other franchise opportunity sites I had seen, with the exception of a slightly different “skin.” 
Since each of the five sites appeared in the “organic” section of my search, my assumption is that these sites are more heavily trafficked than others, and that’s why they showed up organically. Who, knows? Perhaps these sites just had some great SEO going for them; however I must say that the majority of the sites that popped up organically appeared to be a bit more credible than the paid sites.

After playing around on these sites for a few weeks, not only are my eyes bleeding - I still don’t have a clue what I’d like to own. How am I possibly supposed to figure out which of these franchises opportunities are legit, and which are just people looking to make a buck???




FRANCHISOR

Now that I've reviewed the results of my top five paid search results (ads), here’s what I found:
  • Interestingly enough, every single one of the paid ads that appeared featured specific companies that specialize in helping people to franchise businesses. Looks like I struck gold with my search words!

Although many of these sites looked quite credible, I’m still having some difficulty trying to figure out which, if any, I’d like to work with.
  • On the organic side of the house, my experience was very different. Of the five websites that appeared, three featured articles detailing how to franchise a business (or IF I should franchise my business). One featured a website that was virtually identical to the sites that showed up in the paid search section, and one was essentially a hybrid of the two. 

So here’s what’s become clear (as mud) to me so far. If I’m going to embark on this adventure, I’d better have a VERY good understanding of exactly what I’m getting myself into. Becoming a franchisor does not appear to be an endeavor for the faint of heart.

EDITOR’S NOTE – Joe Mathews, the Founding Partner of Franchise Performance Group recently wrote a very interesting on his blog titled, “Why do Franchisors Fail?” http://www.franchiseperformancegroup.com/franchising-failed-model/  Joe’s article has since generated quite a bit of interest in the franchise community, particularly with regard to the somewhat eye-popping sums that a several franchisors have indicated would be prudent for optimal capitalization.

There's No Silver Bullet – It’s Homework Time!

Following is post four (4) in an ongoing series of posts regarding the franchising experience.

FRANCHISEE

Although my searches provided some great links and some very helpful information, what I really need is a few good books (or at least something I can download to my Kindle).  Call me crazy, but if I’m going to invest a good chunk of my life savings into a business, I really want to understand how this business works.  EDITOR’S NOTE – It is very easy to become emotionally attached to a franchise concept, and it is not uncommon for prospective Franchisees to leap before they look.  Plus, you’ll want to be on guard around those franchise developers and/or franchise consultants.  As I say in my book, “Franchise salespeople are often among the friendliest and most fun-loving people you’ll ever meet.  With a smile in their voice and a twinkle in their eye, they will quickly and easily make you feel like the smart, sexy, savvy business person you are, and before you know it you’ll be singing their praises from the rooftops.”

So let’s take a look at what’s out there – I think it’s time to do a little “light” reading…



FRANCHISOR

Although my searches provided some great links and some very helpful information, what I really need is a few good books (or at least something I can download to my Kindle).  Call me crazy, but if I’m going to invest a good chunk of my life savings into a business, I really want to understand how this business works.  EDITOR’S NOTE – As I indicated in my previous post, becoming a franchisor is no joke, and if you thing being a franchisee is complex, just wait until you see what it takes to become a franchisor!

So let’s take a look at what’s out there – I think it’s time to do a little “light” reading…



From Books to Brokers!

Following is post five (5) in an ongoing series of posts regarding the franchising experience.

RECAP: In my last post, both Franchisee and Franchisor were astute enough to realize how much they didn't know about franchising. Unlike so many people today who suffer from data overload and what I like to refer to as “information ADD,” if everyone would just slow down a bit and read – I mean actually read an entire book (not just skim it), most would be amazed at the sheer volume of high quality information available.  These days we've all become so accustomed to reading tweets and blogs in the few minutes we can steal during our 10-plus hour workdays and family obligations at home, that reading an entire book has become a luxury for most.  With that said, if you’re going to drop some serious coin on a business and invest years of blood, sweat and tears, isn't it worth a few hours of your time?  Of course it is!  With that said, I still find it amazing that thousands of people each year invest in a franchise because they think that their consultant/developer is a really great guy or gal or because they just absolutely looooove the franchisor’s color palate. 

FRANCHISEE

Wow.  Now THAT was time well spent!  I learned more about the do’s and don’ts of franchising than I ever imagined, and I have the dog-eared pages to prove it!  There’s only one little thing that’s still missing…I still have no idea what type of franchise is right for me.  A number of the books I read had some great information regarding franchise brokers (also known as franchise consultants).  Perhaps a franchise consultant can help me to navigate this dizzying maze of options.  When I searched for “franchise brokers” on Google, I found some very interesting resources (in the organic section):

Top five organic search results:


Here’s a brief summary of some of the more interesting facts I was able to gather:

There appears to be a bit of controversy in the franchising arena regarding the terms “franchise broker” and “franchise consultant.” Generally, a franchise broker is defined as: “…an individual who acts as an intermediary between the franchisor and an individual interested in buying a franchise. In most cases a franchise broker is not directly employed by the franchisor and represents many different franchises. There is no fee incurred by the individual interested in buying a franchise. The franchise brokers are paid a commission by the franchisor.” http://abt.cm/1nV7z6D

A franchise consultant, on the other hand, is generally defined as, “A business specialist with significant knowledge of the design, development, and operation of franchising and the underlying franchise relationship.” http://bit.ly/TiwN3T

So, in a nutshell, franchise brokers are technically salespeople (although the vast majority of brokers would claim that they don’t “sell” franchises, they “award” them. Franchise consultants, therefore, are basically technical and operational experts.  The rub here is that most franchise brokers have begun referring to themselves as franchise consultants, which has aroused the ire of the “true” operational (non-sales) consultants and caused a bit of confusion in the marketplace.

EDITOR’S NOTE: In my next post, we will explore the full spectrum of franchise broker (consultant) options, which is significantly more complex than one would think. 


FRANCHISOR

Wow.  Now THAT was time well spent!  I learned more about the do’s and don’ts of becoming a franchisor than I ever imagined, and I have the dog-eared pages to prove it!  There’s only one little thing that’s still missing…I still need to figure out how to franchise my business. A number of the books I read had some great information, so let’s see what Google has to say.  When I searched for “how to franchise my business,” this is what came up (in the organic section):

Top three organic search results:


Here’s a brief summary of some of the information that must be considered prior to expanding a business via the franchise model:

  1. Do you have an existing business (or preferably two or three) and is your business profitable and growing?
  2. Has your business been able to withstand the ups and downs of the economy?
  3. Do you believe that your business is something that would be attractive to others? (Would anyone want to buy it?)
  4. Is your business replicable (can it be duplicated) on a large scale, or have you simply been successful because of your location or your ties to the local community, etc.?
  5. Will you be able to document ALL of your processes and systems such that a franchisee will be able to duplicate your success? Or is your business overly dependent on the talents and skills of a particular individual or individuals? 
  6. Do you have a sufficient (significant) amount of investment/working capital?  Becoming a franchisor can be a VERY expensive proposition (if you plan on doing it right), and some have even suggested that a budget of $1 million plus, is not out of the realm for some concepts.
  7. If you do not have sufficient capital, do you have any relationships with lenders (or) do you have a very strong credit rating?
  8. Are you prepared to spend a significant amount of your time and money building a strong business team consisting of: a very good franchising attorney, an experienced CPA and a financial planning expert?
  9. Are you considering expanding via the franchise model for the “right” reasons – i.e. to ensure that EVERYONE wins, not just you?  This would include your franchisees, your staff and your family at a minimum.
  10. Are you willing and able to work harder than you've ever worked in your life for the foreseeable future?

Well, my answer is a resounding YES, so I’m off to make some calls to check out my options.  It’s time to get serious!

Brokers, Consultants & Attorneys - Oh My!

RECAP: In my last post, our Franchisee had just begun to explore the wonderful world of franchise brokers (aka consultants), and was on the verge of discovering that there are actually several "flavors" of consultants available in the marketplace.  

Our Franchisor, on the other hand, had discovered that introspection is the name of the game when it comes to deciding whether or not to franchise a concept, and he was well on his way to discovering a few "flavors" of his own.  In the case of our Franchisor, however, we're talking about the spectrum of options available to actually construct a franchise system.  

FRANCHISEE

Now that I have a better grasp of the "franchise broker" vs. "franchise consultant" controversy, I'm going to delve a bit deeper into the franchise broker end of things to see what I can find.  Based on my research, it appears that franchise brokers come in multiple flavors:

On one end of the spectrum we have franchise brokers that work on a fee-for-service (non-commission) basis, and are not associated with any specific brand or organization.  In other words, they are in business by, and for themselves.  These brokers charge a fee for helping a client to determine which franchise opportunities are most suitable, and do not receive a commission from the franchisor for their services.  These brokers are typically known as “independents.”

On the plus side of the independent broker equation, these brokers:

  • Are free to select from ANY franchise opportunity, not just the relatively small number of options provided by a typical broker.  
  • Are much less likely to be biased in favor of a specific concept because their compensation is not tied to a sales commission.
  • Generally must be VERY knowledgeable about not just franchise sales, but also all aspects of franchise operations in order to compete with the vast marketing and branding resources of the larger commission-based consulting firms.  In other words, these consultants can’t possibly compete head-to-head from a monetary standpoint, so they must rely on their skill and experience to add value to the equation.

On the minus side of the independent broker equation, these brokers:

  • Are few and far between (the vast majority of brokers work on a commission basis).
  • Add a bit of additional cost to the initial franchise purchase, because their fees are paid in addition to the franchise fee charged by a franchisor. With a commissioned franchise broker, the broker’s fee is paid by the franchisor based on the funds collected for the initial franchise fee (typically), so in the typical broker scenario, the franchisee would only be obligated to pay the franchise fee.
  • May not have access to the tools, training and products available to a commissioned broker working for a large firm, as the larger firms are generally able to provide significant economies of scale and resources that are simply out of reach for smaller organizations.

On the other end of the spectrum, we have the larger, more traditional, commission-based brokerage organizations.  These firms do not typically charge their clients (aka candidates) a fee for their services, because they are compensated by the franchisors they represent in the form of a commission for each franchise sold.  These brokers work exclusively for these brokerage brands, and represent themselves as such. 

On the plus side of this arrangement, these brokers:

  • Often have access to a plethora of sophisticated client management tools and programs.
  • Provide initial and ongoing training, based on programs designed and delivered by experienced franchise development (sales) professionals.
  • Provide conferences and various opportunities to mix and mingle with fellow franchise brokers.
  • May have a strong brand identity and access to sophisticated marketing and advertising tools and technology in both the digital and traditional spheres.  Online programs often include robust programs such as Pay-Per-Click (PPC), Search Engine Optimization (SEO), Display Advertising (banners), websites, etc. Traditional advertising generally includes programs such as ads in trade magazines, professionally designed brochures and pamphlets, high-end trade show booths and much more.
  • Have access to legal services, which help to ensure strict compliance with state and federal laws, which is a significant issue in the world of franchising.
  • Provide access to franchise opportunities that have been thoroughly screened and hand-picked by the firm.*

*EDITOR’S NOTE: This claim has also been somewhat controversial, in that some insist that most brokers only select franchise concepts that they know they can sell, and that are willing to pay the highest broker commissions.  

On the minus side of this arrangement, these brokers:

  • May only represent 100-300 franchisors, which equates to less than 10% of the total universe of available franchise opportunities.
  • Are far more likely than pure fee-for-service (non-commissioned) brokers to steer clients toward the concepts and/or specific franchisors that pay the highest commissions (they may be more biased).
  • Often have part-time brokers that do not work in the franchising industry on a full-time basis.  These brokers may be significantly less knowledgeable than an individual that is working as a full-time broker.

EDITOR’S NOTE: Some of the less reputable franchise brokerage organizations have been known to advertise the franchise broker franchising opportunity by using such messages (tactics) as:

  • Become an entrepreneur!
  • Professional training provided
  • Executive-level income potential
  • Work part-time or full-time
  • One-time fee
  • Etc.

In an interesting twist, some franchise brokerages have themselves become franchisors, which means that the franchise broker role is packaged and sold as a franchise. 

And in the middle of the spectrum, we have independent franchise brokers that have banded together to form associations in order to leverage the best of both the independent (pure fee-for-service) and the commission-based brokerage (aka consultant) models.  I the association model, the association does not charge royalties or share in the commissions of their members.  Rather, members pay monthly dues to support the organization.  


FRANCHISOR

So let's see what's available for someone like me who's looking to franchise their concept.  

Based on all the homework I've done, I know that I will need to create a number of key documents in order to franchise my business.  These documents include (but are not limited to):

  • The Franchise Disclosure Document (FDD) - Required by law and describes the relationship between the franchisor and the franchisee.
  • The Franchise Agreement - Required by law and governs the relationship (a written contract).
  • The formation of a business entity (the corporate franchise structure and all related filings and documentation).
  • The preparation of trademark, copyright and business patent applications.
  • The preparation of franchise registration applications for various states.
  • The development of an Operations Manual.
  • The development of collateral material and brochures.
  • The development of a Business System (Letterhead, business cards, etc.).
  • The creation and development of a website.

In the case of the franchisor; on one end of the spectrum we have the do-it-yourself (DIY) model, which is also commonly referred to as the "boot-strap" model.  In the purest sense of this model, these ultra-conservative individuals have concluded that they prefer to accomplish all of the above-listed tasks (and more) on their own - literally.  This would typically include downloading and customizing various sample documents directly from the web, such as the FDD, the Franchise Agreement and even the Operations Manual.  From everything I've read this is a VERY risky move which could easily end up costing many multiples of any money saved if things should go awry down the road.

A few rungs up the ladder from the DIY crowd, I've found a group of organizations commonly referred to as "franchise packagers."  These organizations tend to seek out inexperienced franchisors that are highly price sensitive and looking for a quick all-inclusive solution.  Many, if not all of the documents provided by these companies are essentially "boiler-plate" solutions, whereby the franchisor simply fills in the blanks.  Given the fact that there are literally hundreds of variables that a franchisor must consider when creating these all-important foundational documents (and the fact that no two franchise systems are exactly alike), this is a highly risky strategy which, just like the DIY model, will likely end up costing much more in the long run.

As we continue our journey along the spectrum, the next stop brings us to the land of the franchise attorney.  Please notice that I say, "franchise attorney" because franchising is a very specialized field, and an experienced franchising attorney is an absolute must.  If you want to let your cousin Vinny handle your divorce that's certainly your prerogative, but don't let him anywhere near your franchise.  

On the plus side of the franchise attorney equation, from what I've found, many attorneys are very skilled at drafting franchise documents, and many do a very solid job of protecting the interests of the franchisor and covering all of the legal bases.  

On the minus side of the franchise attorney equation: 

1) Some attorneys tend to look at franchising strictly from a legal perspective, and as such, the documents they draft may not incorporate some of the more subtle nuances of a particular franchise concept.  Although the trend lately in many franchises has been to lean toward a more colloquial, reader-friendly "voice" in their documents, most franchising documents still tend to read like a legal treatise.  

2) Many attorneys only specialize in the drafting of the "core" legal documents (such as the Franchise Disclosure Document and Franchise Agreement), and as such, they would not draft any of the other critical documents such as the Operations and/or Training Manuals.  In these cases, the creation of the other documents would need to be outsourced, which would mean more work (and potentially cost) for the franchisor with regard to coordinating the creation and review of all of the documents.

3) Experienced franchising attorneys can be very expensive, so knowing and understanding their fee structure is critically important.


In addition to franchise attorneys, this general section of the spectrum also includes organizations that specialize in drafting key manuals and related materials, which may include (but are no limited to):

  • An Operations Manual
  • A Marketing Manual
  • A Sales and Compliance Manual
  • A Field Consultant Manual
  • A Training Manual
  • And quite a few more as applicable
While some of these organizations are essentially "manual packagers," that operate in much the same manner as a "franchise packager" (i.e. they use boiler-plate, fill-in-the-blank" manual templates); the higher end companies will essentially write each manual from scratch.  The costs for creating these manuals can vary dramatically depending on the amount of boiler-plate vs. custom work, so it's critical to know exactly what you're getting for your money. 

At the top of the food chain (so to speak), are what I like to call the "mega consulting firms."  These firms, which have typically been around for at least a dozen years or more, are essentially a one-stop-shop for everything a new franchisor could ever want or need.  These firms are very well connected in the franchising world, and have solid reputations for providing top-notch advice.  In addition, many of these firms can afford to hire very experienced individuals, or in some cases even entire departments, that specialize in various franchising disciplines (legal, operations, marketing, etc.). Those mega consulting firms that do not have large in-house teams often sub-contract their work to various well-known franchising professionals, and essentially serve as the "quarterback" for the coordination of all services.  

On the plus side of the mega consulting firm equation:

1) These firms may save a significant amount of time, energy and potentially money, that might otherwise be spent on piecing together each element of the franchising puzzle.

2) They may also bring a level of credibility and expertise that is difficult to find - especially for the uninitiated novice.

3) Based on their many years in business, these firms have developed key contacts and working relationships with with organizations in virtually every facet of the franchise universe including (but not limited to): software, finance, real estate, supply chain, product fulfillment and much more.

On the minus side of the mega consulting firms equation:

1) These firms are generally not inexpensive, and the vast majority will require a significant commitment of both time and money in the form a formal Agreement/Contract.

2) Many of these firms have negotiated special commission and/or referral fee arrangements with the vendors they refer, so their referrals may not come without a certain bias.  

Your best bet with these mega consulting firms is to look for an organization with solid industry credentials and an established history of working with successful franchising organizations.  As always, you should ask for referrals and don't be afraid to discuss their fee structure in detail.

It's Time to Fish or Cut Bait for our Franchisor and Franchisee...

RECAP: In my last post, our Franchisee found himself delving deep into the world of franchise brokers (aka: consultants), in an effort to determine if this was the best route to ensure his success as a future franchisee.  He had already explored a number of online websites and "portals," and had read a number of books and articles detailing the franchise experience.

Meanwhile, our Franchisor, was busy conducting her due diligence as well, however she was busy trying to choose between the "do it yourself" (DIY), "franchise packager," "piece it together" or the "mega consulting firm" models.


FRANCHISEE

It's been approximately six months since I first decided that I wanted to be my own boss and began researching the franchise model in earnest.  I can honestly say that I've learned more in the past six months than I ever imagined, and I am very thankful that I took the time to really understand what I'm getting myself into.

Although I'm definitely feeling a mixture of excitement and fear, I know that I'm ready to take the plunge, and not a moment too soon I might add.  My employer just announced yet another round of layoffs, and I can't tell you how comforting it is that this time I don't have to spend the next two months sweating it out every day wondering if I'm next to get the axe. 

After speaking with numerous individuals and considering all of my options, I've decided to engage one of the larger franchise brokerages.  I know full well that this particular organization represents only a fraction of the franchise options available and that the consultant I'll be working with stands to earn a large commission from the franchisor when I purchase a franchise, however I really like the fact that she has been in the business for over ten years, and I believe she is genuinely interested in ensuring a good fit for me.  Of course it doesn't hurt that I called a number of references and they all had nothing but glowing praise for her.  It's time to bit the bullet and make it happen!

So...I just got off the phone with my franchise consultant and the first thing she asked me to do was to complete a "quiz" to determine if I'm even suited to become a franchisee.  What's really interesting about this is that in all the time that I've been doing my research, I always just assumed that I'd be a great franchisee...however, I never actually took the time to quantify this assumption.

To check out the quiz I took, click on the following link: http://www.entrepreneur.com/article/44202

EDITOR’S NOTE: If YOU'RE interesting in franchising as well Mr. or Mrs. blog reader, perhaps YOU should click on the above-listed link and take the quiz as well!

 To be continued...


FRANCHISOR

After thoroughly considering all of my options, I've come to the conclusion that I would be totally nuts to try to become a franchisor on my own.  I know that other people have done it, and I certainly respect their efforts, however after reading multiple articles and books about the franchisor experience, this is just NOT something that I'd like to attempt without a net.  The good news is that I have secured the necessary capital to really give this a good run, and for me, that amount is $800,000.  Sounds like a lot, doesn't it?  Well it certainly is, however I have no desire to "boot strap" my franchise, and from my perspective, I'm looking at this more as an investment than an expense. 

EDITOR’S NOTE: Click on the following link for a great article that helps to summarize the difference between an investment and an expense: http://www.entrepreneur.com/article/206186

Given my level of capitalization and my penchant for seeking good, sound advice, I've decided to go with what I previously defined as a "mega consulting firm."  I spent several weeks interviewing various employees of the top mega franchise consulting firms (from the CEO on down), and I settled on what I believe is a great choice.  For me the benefits are many, as what I was really looking for was a one-stop-shop that would be able to provide everything in-house.  In addition, this firm has so many relationships with so many seasoned providers, that if I can't find what I need in-house, I know I can count on any referral partners to be "best of breed." 

During the interview process this particular consulting firm began by asking me "two key questions: 1) Is my business franchisable? 2) Is franchising the right strategy for me?  Talk about two great questions!  They shared with me that these questions can only really be answered after evaluating my business and determining how franchising fits with my specific goals and objectives.  This is known in the franchising arena as a "strategy and feasibility analysis."  Further, they shared that they have identified "a series of twelve (12) predictive criteria that they use to assess the readiness of a company for franchising and the likelihood that it will achieve success as a franchisor."

EDITOR’S NOTE: If YOU'RE interested in becoming a franchisor Mr. or Mrs. blog reader, perhaps YOU should click on the following link and review the "Twelve Criteria of Franchisability" for yourself: http://bit.ly/1rCwbTt

To be continued...