You've started a successful retail business. You may even have several locations. But to get to the next level, you have two choices: Either turn yourself into a large chain, or franchise your concept and let other entrepreneurs in on your success.
For Justin Rosberg, CEO and co-founder of The Meat House, a nine-year-old line of neighborhood butcher shops, franchising offered a way to grow rapidly while retaining control of the company he and his partner had built. The company had grown to seven locations, and the founders wanted to expand further, but they faced a decision. "We could bring in a large capital partner," Rosberg says. "But for that type of commitment the partner would want a lot. Or we could listen to what a lot of our customers were telling us. They were asking, 'Is this a franchise? Can we bring one of these to our neck of the woods?'"
Today, The Meat House still owns seven of its own stores, but there will be at least 30 more franchised locations open by the end of this year, with projected sales for the whole brand of around $70 million in 2012, Rosberg says. Here are the steps the company followed to create its successful franchise:
1. Have a clear core concept.
"We work with franchisees who understand that we're in the hospitality industry," Rosberg says. "We may be working with the freshest, most sought-after commodities, but at the end of the day, they are commodities. We want to develop that relationship with customers from day one."
Developing customer relationships across franchised locations meant making a conscious decision not to "feel" like a chain, Rosberg says. Each franchised store is expected to participate in the community where it's located, supporting local charities, sports teams, and so on.
2. Pick franchisees with care.
Some of the original Meat House stores were located in tourist locations, which was handy: Vacationing entrepreneurs would visit the stores and ask about franchising opportunities. But whether you've got prospective franchisees knocking on your door or not, be very choosy, Rosberg advises.
"My business development officer would say it's character, capability, and commitment," he says. "They need to buy into the critical success factors you've learned. Franchising isn't necessarily just buying into your successes, it's about the learning any successful system requires."
3. Make a serious investment in training.
Not only do the new owners get from two to 10 weeks of training, but The Meat House sends out teams of five employees to work at each new franchise store for more than a month, getting it up and running.
Isn't that kind of... expensive? "The cost of sending people out gobbles up the franchise fee," Rosberg says. (The Meat House also earns royalties and a marketing fee on franchise store sales.) "But it's an investment in their success. It lets us provide the foundation for future successes. We're hoping they'll wind up with more than one store, so that by their second or third store, they'll know the system and won't need as much training."
4. Keep tight controls.
Even after very carefully selecting your franchisees and giving them extensive training, successful franchising still depends on maintaining a great deal of control over every aspect of the franchise stores, Rosberg says. "In certain ways, bringing the entrepreneurial spirit and your love of food is to be encouraged," he says. "But from the point of view of operating the store, we have pretty tight guardrails."
For instance, Rosberg and the corporate executives know exactly what type of space a store should occupy: 3,500 to 4,500 square feet, either stand-alone or at the end of a strip mall, with 25,000 to 35,000 cars a day going by, preferably on the side of the street where people are headed home. "We always have a level of control over site selection," Rosberg says.
The company also operates a secret shopper program to check up on stores. "We monitor KPIs, and we can tell from those trends how well each store is executing," Rosberg says. And, he adds, the corporate office is quick to step in if anything looks awry. "Any problems we've had have always been because we let those guardrails get too wide," he says. "We let the franchisee choose a location, or let an operator we had doubts about complete the training."
Stretching the rules this way always turns out to be an error, he adds. "You need to be stringent at all times on the things that made you successful."