As a business owner with a licensable business model, you may be considering starting a franchise as a means of growing the company at a wider scale. But with everything from legal regulations to quality control at stake, it's worth conducting a thorough assessment before signing a franchise agreement and making that initial investment.
Five executives offer their top tips for successfully getting your franchise business started.
Set up an accounting standard.
"A simple accounting system standard lets owners focus on what they are good at in the business instead of trying to be bookkeepers," says Marjorie Adams, president and CEO of consulting and tax service business Fourlane. Adams frequently assists franchisers with cleaning up the systems of their franchisees to create consistency in their financial reporting.
"It is much easier to get people aligned when they are entering the franchise than when they are several years in and have created their own processes," she says.
Provide a resource center.
In addition to setting up standards for your accounting and other financial records, consider storing all of your resources in one central place that is easy for everyone to access. Dalip Jaggi, founder of marketing agency Devise Interactive, believes having these pieces in order is critical to achieve franchise success.
"Setting up a digital resource center will be valuable to hold a directory of files, provide brand guidelines, search approved vendors, find the latest company news and promotions, and allow for open digital communication." says Jaggi. "Maintain a forward-thinking database so you'll be able to provide answers and resources immediately."
Make sure you can run the day-to-day.
Kristopher Jones, founder of SEO agency LSEO.com, understands the value of being a hands-on franchise owner from his own experience: Several years ago, he joined three business partners to invest in a refrigerant recovery franchise.
"Our thought was that with all of our previous business success, a franchise would be easy money," Jones recalls. "The problem was none of us were willing to manage day-to-day operations, and we quickly found that the most successful franchises are owner-managed."
Jones advises against starting a franchise if you aren't willing to have a heavy hand in getting it off the ground: "Unless you intend to run the franchise, consider alternatives."
Ensure that you are in legal compliance.
If you're considering operating a franchise, the business must meet the guidelines outlined by the Franchise Rule, regulated by the FTC. Getting legal counsel will help ensure your new operation doesn't find itself in hot water.
"You definitely need a lawyer to help you draft your franchise disclosure document (FDD) and help you with a host of franchising issues," says David Mainiero, co-founder and director of operations at admissions consulting business InGenius Prep.
He also recommends planning out expected costs ahead of time.
"One thing that many young businesses overlook is establishing a slush fund reserve for national advertising and other marketing costs. Build these in on a percentage basis (percentage of the gross) from the outset."
Consider the alternatives.
If you're still on the fence as to whether you'd like to launch a franchise or not, assess whether the lengths you'll go to to set up the franchise are, in fact, worth the investment. You may consider going down a different path than your originally conceptualized franchise model.
Chris Brisson, co-founder of SMS marketing software Call Loop, advises would-be franchise owners to proceed with caution before signing on the dotted line: "If you are wanting to franchise, I'd first look into whether it can be considered a 'business opportunity' needed to scale the company. You may find out that it's too expensive to truly become a franchise."