If you have made the decision to franchise your business or if you’ve recently launched a new franchise system, then now is the time to formulate and implement a plan to succeed. Actually it’s time to implement a plan to win big at franchising.
Too often, start-up and emerging franchisors make the mistake of entering the franchise world without the right planning and strategy. Just franchising your business – issuing your FDD, developing your operations manual, and preparing franchise sales media – is not enough. You need a 5 year plan and strategy to succeed.
Think long term and season and grow your emerging franchise system. You need a plan and…below we have one for you!
The biggest mistake that start-up franchisors make is that they view the process of franchising their business as the goal. In reality, it’s just the starting point. Many times, this mistake is not the fault of the franchisor but, rather, the consultants and advisors that they rely on like franchise development consultants. Remember, some consultants out there make money on selling people on the concept of franchising without really explaining what it takes to succeed.
The end result is that so many start-up franchisors end up suffering from franchise fatigue. The first few years don’t turn out the way they expected, they waste capital, get discouraged, and never gain real traction. In fact, there are even some franchise consultants and advisors that make a living by offering inexpensive franchise sales solutions. Many times these “solutions” amount to nothing other than false hope and wasted time.
The good news…is that you can succeed and win big at franchising…you just need the right plan and mindset.
To win at franchising you must view your first 5 years as the start-up phase of your new franchise system. During this 5 year period, focus on a number of milestones. Focus on initial planning and issuing your FDD in year 1. Focus on accelerated growth strategies and private equity discussions in year 5. It’s not an exact science and so while the timing could be off, the key is to understand each stage of growth and to have a plan.
Below are the major franchise growth milestones and mindset that we recommend:
In year 1, you’ll be working with your franchise lawyers and development team to develop your new franchise system. Primarily, this will mean preparing your Franchise Disclosure Document (FDD) and building all of the underpinnings for what will need to be a competitive franchise offering.
Critical tasks include benchmarking competitors, developing a transparent Item 19, and building your franchise brand story. Within this first year, after you’ve issued your FDD, it will be time to focus on strategic franchise sales that, typically, will be targeted on the organic reach of your brand.
Another important step in your year 1 strategy will be to season your franchise offering. Develop digital and third-party media that tells a compelling story about your brand and how your franchise can transform the lives of your franchisees.
Your year 1 franchise development milestones should include:
The second and third years are critical to the future of your franchise system. If your first 5 to 10 franchisees are well supported, achieve good unit level economics (they make good money and ROI), and validate your brand (they praise you when contacted by potential franchise buyers) then your franchise system will grow.
So years 2 and 3 (really every year, but these two in particular), focus on supporting your franchisees, assisting them with their openings, training, support, and success. With good franchisee data and numbers, you’ll now have the ability to add critically important franchisee financial performance data to your FDD Item 19.
What follows next should be broker interest. Consider that brokers want to see the numbers and hear about the existing franchisee satisfaction and validation.
Franchise Development Milestones for Years 4 and 5 should include:
These are the acceleration years. If you’ve set the right foundation in years 1 to 4, now is the time to grow.
In franchising growing from 0 franchisee units to 50 is much harder than growing from 50 unito to 100. Momentum is key and these are the years to leverage your momentum and growth.
During this period you should be building toward accelerated franchise sales growth through diversity of marketing channels that include franchise brokers, paid digital media, organic SEO, and PR. Your franchise system should be building toward royalty sufficiency and valuations that start attracting private equity investments for reinvestment in your system and next level growth.
Franchise Development Milestones for Years 4 and 5 should include:
If you’re looking to franchise your business or if you feel that your brand is not gaining the traction that it deserves, give us a call at (800) 976-4904, contact us, or live chat with us. Our legal + franchise development team can help plus we have some amazing free resources that we’d be glad to share.
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