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Franchising Your Business: What Franchise Developers Are Not Telling You

Charles Internicola

by Charles Internicola
National Business and Franchise Lawyer

Date: 08/02/2016 | Category: General | No comments

 

I get the calls all the time…

A hard working and successful entrepreneur who has recently franchised his or her business, contacts us because something does not seem right, and they are trying to figure out “what happens next”. For this new franchisor, the FDD has been prepared, they have worked with their franchise developer, have had their website updated, they are considering an SEO contract, and they are about to sign a contract with a franchise developer – but, for good reason, information seems to be missing and they have questions.

The call sometimes goes like this:

New Franchisor : I recently franchised my business and worked with a franchise developer. My FDD is ready and I am trying to figure out the next steps and what I should and shouldn’t be spending my money on to sell franchises…

Question for New Franchisor : Well, so I better understand where you are at, can you tell me the work that has gone into the development of your franchise system and FDD? What work has the franchise developer done for you?

New Franchisor : Well, the developer helped me with the legal stuff. They coordinated with a lawyer and helped me decide what fees to charge.

Question for New Franchisor : Did the developer work with you in establishing goals and game plan? Did the developer discuss the budget that you would need to devote to franchise sales after you launched? Did the developer work with you in determining the unique factors and attributes (we call it USP – Unique Selling Proposition) that would differentiate your franchise from the many others already out there?

New Franchisor : No. But now they want me to hire an SEO company, set aside money for pay per click ads, and they will help me when franchisees call.

The conversation continues, and I can tell you this is a conversation (both as a franchise lawyer and a franchisor myself) that pisses me off. You see, there are far too many unqualified “franchise developers” that are out there for one reason and one reason only: to sell you on the “idea” of franchising your business. I call them franchise vultures, and these franchise vultures don’t care about your long-term success. They’re only interested in selling you a few franchising widgets and refer you to a few of their referral partners. After that (and in many cases), you are left entering the franchising world completely unprepared.

Some points to consider:

1. Franchising Requires a Long-Term Strategy and Budget – Franchise success is a long-term process and the budgeting that you put in place for the development of your franchise system is just the start. That is, after you launch your franchise system, you need to have a 1 year, 2 year, 4 year, and 5 year game plan and budget. You will need to invest capital into the franchise sales process;

2. Before You Spend a Single Dollar on Marketing You Must Know Your USP – So many marketing professionals and franchise developers are quick to have you sign up for SEO contracts, web development, pay-per click, and portal leads. They do this because they are lazy, and will just blame your lack of franchise sales on your not spending enough money. However, you need to consider and know that there are many competing franchise systems. Before any marketing efforts, and before you spend a single dollar, your budget must be strategic. While there will be room for your system (assuming that you have value to offer), you need to know, understand, and live the USP of your franchise offering. What is the Unique Selling Proposition for your franchise? What makes your system so unique and different that your franchise is the perfect choice for your ideal franchisee? You need to answer these questions first, and center your marketing efforts and budget around those answers.

3. Setting a Budget and Realistic Expectations – Many times franchise developers want you to sign a contract and they promise you that they will help with the franchise sales process. Before you consider any contract or relationship you must ask that developer to establish a realistic game plan as to the number of franchises to be sold and, most important, what is the budget that you will need to make these sales a reality.

We have a great webinar that is all about Direct Response Marketing for Emerging Franchisors with great information about the importance of your USP and how to stay away from the franchise vultures. Watch the webinar below.

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