6 Steps to Franchising Your Business

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When a franchise wants to grow, Mulgannon said, they have to consider where their business model will work and how far they can expand their brand into unfamiliar territory. He worked with a company called Erik’s DeliCafe, a popular sandwich shop and caterer in northern California. The company has reliable brand recognition in California and some surrounding states, and they decided, with Mulgannon’s help, to expand in California and into northern Nevada. They grew, but within the scope of their brand recognition.

At the other extreme is international franchising, something Mulgannon says he has explored with Junk King. "I put together a deal with a Panamanian investment group to develop Junk King throughout Central America," Mulgannon says. "They sought us out, and I spent twelve days there negotiating an international master license." Mulgannon is confident that this deal will allow Junk King to spread its brand beyond the United States with minimal risk. 

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4. Screen your franchisees.

That someone wants to open a franchise with your company's name on it does not mean you should let them. They're going to be representing your brand, so be sure to have a system in place to make sure they'll take your company in the right direction in a new market.

Farid says he has a way of knowing whether or not someone will make a good franchisee. "I used to call it the googledy-eyes test. If someone would come up to me and say, ‘I want to build a franchise, I think it’s going to be great!’ and they didn’t realize the hard work involved," Farid says, he would pass. 

Over enthusiasm is as common in franchising as it is in any realm of business. Apart from the documents and financial information supplied by potential franchisees, Mulgannon says, he considers the personalities of the business owners. He, like Farid, doesn’t want someone who’s all passion but no substance. Better that they’re thoughtful and measured, as well as enthusiastic about their business."Most franchises go to market with a shotgun approach," Mulgannon says of his approach to choosing clients. "Often they’ll sell to anyone. That’s a big mistake."

"We get about 20 inquiries a day and we eliminate about 75 percent of those," Mulgannon says. "Most of the people are looking for a job where they can work on the truck." Mulgannon described Junk Kings as much more of a white-collar franchise. Contrary to what one might expect, Junk King is not interested in franchisees who are primarily interested in putting on a pair of work gloves and getting on the truck. Mulgannon says he and his staff will scour over data supplied by applicants in the search for certain qualities. "One of the big indicators for us is what are their previous income expectations," Mulgannon says. "If they’re looking to replace six figures, that’s good for us."

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5. Set the right restrictions.

Even after giving franchisees very specific instructions on hiring, training, and other practices, there will be, and should be, certain freedoms they are allowed. They are small business owners, too, and as the franchisor begins to step back from daily operations, he or she will have to rely on the judgement of the franchisees as they explore new business opportunities. Give them freedoms, but keep those freedoms circumscribed. 

Different franchises will have different ideas about the restrictions they want to place on their franchisees. They struggle with how to balance preserving brand identity with the touch and sensibilities of individual franchise owners. Mulgannon says he turned down one business that wanted help becoming a franchise because they were going to set very narrow limits on who could become a franchisee. "The requirements on the franchisee would have been much too stringent," Mulgannon said. "The pool of franchisees would have been much too small."

Growing the brand is always the end goal, Mulgannon says, and so one requirement Junk King does place on all franchisees is that they spend a minimum amount on advertisement, whether television, radio, print, or some other medium. "They have to reinvest back in their market ten percent of gross revenue," Mulgannon says. Junk King provides about 90 percent of the promotional materials required, he said, and companies can get other ideas approved through the corporate office. 

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6. Support your franchisees.

Even as the franchisor begins to remove him or herself from the daily business of the franchises, he or she should spend extra time getting to know the franchisees.

A franchisee is unlike other types of small business owners. He or she has opened a new store or service provider and is responsible for its performance within a designated area. He or she derives a livelihood from the business, and oversees all daily operations. Yet, there is always a larger corporate structure overhead, and how the franchisee works within that structure varies from franchise to franchise. 

A franchise model presents some particular challenges because, if business is good and new stores are opening, the company is always working with new recruits. Farid says Edible Arrangements has a department that works with franchises on the sourcing of their materials. Another handles training, and other worry about problems that may be coming down the road, unexpected variables of any kind. Ensuring that all the cogs spin together requires constant communication. "We’ll spend a lot of time communicating with them [the franchisees] online in terms of what’s happening this week, what are some of the challenges, and where to look for them," Farid says.

Farid says sometimes his employees say he’s too paranoid, too attached. The boy who wanted to find a way to sell more long-stemmed roses still finds it hard to fold up his apron at the end of the day. It wasn’t until Edible Arrangements had reached 500 or 600 stores that he began to take a step back, Farid says. "I still visit the stores because that is what I enjoy most," he says. "Beyond that, when you get to the size we are now, the franchisees have bought into you to start the next grand thing." Farid wouldn’t reveal what that next horizon may be for Edible Arrangements. But he would say that the hunt for it never ends.

Dig Deeper: How to Build Your Dream Franchise

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