If you have a successful business, especially if you have a retail store or an established shop, chances are that customers have asked you, "Are you a franchise?" And when you say no - that you own the business independently, then they promptly say that they would be interested in buying it if you were franchising. That is often the first step toward a new franchise business - the "Ah-HA" moment. Unfortunately, that first step often can lead to the end of a successful business. Listening to non-business owners is flattering, but not helpful... The next thing the flattered business owner does is to seek out information on franchising - sometimes from the Internet, but often through an attorney. (Not particularly from a franchise attorney of course, because at this point the owner doesn't know how much he/she doesn't know.) What the owner really needs is a dose of reality from a franchise consultant (sometimes called a franchise developer) with integrity. I emphasize "with integrity" because requesting information from an attorney or consultant who stands to make money by saying, "Yes, you should become a franchise..." can start a good business down the wrong (and very expensive) path. The owner needs to be asked some tough questions from the franchise consultant: * Are you making money? * Could your new franchisees earn at least $35-40,000 their first year in business? (If they can't earn enough to help pay their home expenses, they will be unhappy, which hurts or kills future sales of the franchise.) * Do you have the funds to last for 3-4 years until you have a critical mass of franchisees in place who pay enough royalties to begin covering all your support costs? You're going to spend $100,000 or more in the first year or two to get started franchising - can you afford it? * Do you want to work hard for at least 4-5 or more years to build a much larger business? * Are you a good leader and team builder? Franchising is expensive, and many new franchisors fail from lack of funds... When the answer to all these questions is yes, then the first step the franchise consultant takes is to calculate financial projections to determine whether the company will make money and how much it will cost to put the wheels in motion. If and when the projections look logical and positive, the franchise consultant begins studying the company's systems and how they can best be duplicated - tightening up the business processes and documenting them into a set of manuals, overseeing the production of a first-class marketing program, and working with the attorney to produce a federal disclosure document. All along the way, the franchise consultant is teaching. Franchising is a separate venture by itself - an all-new set of sales and support processes. The entire staff of the company needs to be carefully schooled in the legal ramifications of this new and complex business. In the meantime, the consultant helps to establish a new org chart and oversees hiring to take care of both the operational side as well as the franchising roles. Remember those enthusiastic customers who wanted to buy your franchise? Remember those customers who wandered in and said they wanted to buy the franchise? They had $5,000 in savings and had so little knowledge in business that they couldn't see that you had $150,000 invested in the construction of your site alone! It happens all the time. Don't let those amateurs push you down the wrong path, and don't let companies who desperately need your business tell you that you definitely SHOULD become a franchise. Find a professional in franchises development with at least 20 years of experience who will tell you the truth and talk about financials before asking you to put your signature on a long-term contract. Franchising is NOT for everyone!
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