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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!

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