Building your franchise support team

Written for Canadian Franchise Association as a Franchisor Tutorial

Franchising is a proven business model for expansion when done well. However, when executed poorly, the results can be costly.

A few real examples:

  • A company begins franchising, only to discover after a year it lacks the funds to provide the support as promised to franchisees
  • A start-up franchisor is faced with having to refund several franchisees their entire investment due to improper disclosure
  • An established franchisor learns that, after 10 years, the majority of franchisees are not planning to renew their franchise agreements

Each of these scenarios could have been avoided with the assistance of a strong, experienced support team. Starting and operating a franchise involves a lot of details. The business skills and experience gained by running a successful retail or service business are different from those needed to properly develop a franchise system. You will need legal agreements, trademark registrations, marketing brochures, financial models, control monitoring systems, website development and more. All of these should be based around a sound business strategy. When done properly, a strong, well thought out franchise system will save you money and headaches down the road.

A strong support team will allow you to capitalize on the franchise experience of others and avoid costly mistakes of trial and error. A team of qualified franchise advisors can play a critical role in your franchise development while adding credibility to your franchise brand. Your team can include an accountant, lawyer, consultant, real estate experts, website developers, marketing experts, and others – all of whom should have franchising experience and expertise. You may work with several individual firms or one firm that can offer the complete set of required skills and experience. Each member of your support team makes a different, but significant, contribution. All should work together in alignment with a common strategy and goal.

 

Your Franchise Consultant

A franchise consultant will often be a part of your support team. A franchise consultant will work with you in developing the business and strategic aspects of your franchise model. Areas in which the franchise consultant can assist include:

  • Conducting an evaluation to determine if your business can be franchised and providing you with a sense of the total cost to bring the business concept to market as a franchise
  • Executing market research to strategically determine how to differentiate your business from others in the marketplace, both to the end-user customer and prospective franchisees.
  • Clearly defining your branding elements and assisting in the development of a strategy to set yourself apart from the competition in the mind of both the customer and the prospective franchisee
  • Creating a profile of the ideal prospective franchisee for which you should be looking and developing a marketing plan to find qualified franchise candidates.
  • Establishing an application process that will take candidates through a mutual review process, allowing the franchisor and prospective franchisee to gather the information required to make informed decisions.
  • Developing an ongoing support program to assist and guide franchisees to success.
  • Defining control systems to ensure brand consistency.
  • Writing operation manuals that clearly outline what is required to duplicate the proven success model and outlining best practices.
  • Acting as an outsourced franchise recruitment and/or support department during the start-up phase of the franchise or until cash-flow permits you to bring on full-time employees to carry out these tasks.
  • Recommending lawyers, ad agencies, public relations firms and other consulting firms as they have developed long lasting relationships with them.

Says Gigi Harding, CEO of Kwik Kopy Printing Canada, “The franchise consultant can also play a role in assisting the Franchisor to determine their own staffing structure as they grow.”

Greg Lawrie, President of Pro Fleet Care adds, “A franchise consultant should be the first person you put on your team. They will save you a lot of time and money as they will help guide you around the many pitfalls of franchising. Their knowledge and guidance will help you determine what your true needs are from the other support services consultants you will have on your team.”

 

Your Franchise Lawyer

Once your business strategy is clearly defined, a lawyer can develop the legal requirements. As laws are constantly changing, a lawyer specializing in franchising can guide you through the legal aspect of franchise development. Areas in which a lawyer can assist include:

  • Registering trademarks. With the franchise business model, franchisees are licensing the use of your brand. You want to ensure that you own and can therefore protect your marks.
  • Your lawyer will ensure that others are not currently operating under the same name and that your trademarks will not be challenged. Advice can be provided as to which marks should be registered (and in which formats) so as to ensure the best protection.
  • Creating a corporate structure so as to minimize your legal liability.
  • Creating the legal franchise agreement.
  • Writing disclosure documents that meet the regulatory requirements of the provinces in which you are contemplating granting franchises.
  • Providing a summary of other laws and licensing requirements of which you and your franchisees need to be aware that are applicable to your specific business.
  • Developing miscellaneous documents such as confidentiality and non-compete agreements, sub-lease agreements, general security agreements, employment agreements and other documents that protect the proprietary aspects of your business.

 

Your Accountant

An accountant will often be a part of your franchise support team. A good accountant with franchising experience can assist you in the following areas:

  • Preparing financial models to determine the pricing of the initial franchise fee and royalty structure, based on the level of support that you will be providing. The financial models will ensure that both the franchisee and franchisor are generating sufficient long-term returns on investment.
  • Preparing a business plan to ensure that you are sufficiently funded and/or to help you arrange financing.
  • Outlining the best corporate structure to minimize your taxes.
  • Creating financial control systems to ensure full payment of royalties.
  • Contributing a standardized chart of accounts for franchisees to use so as to permit proper benchmarking and comparisons of franchisee performance.

 

Other Members of Your Team

In addition to the consultant, lawyer and accountant, you may also work with real estate experts to find great locations; an advertising firm to assist with the development of the branding materials and brochures; a public relations firm to help generate public and media awareness for the brand; a banker to assist both the franchisor and prospective franchisees with financing and a website development firm to create web pages that will provide information to customers, prospective franchisees and existing franchisees.

Greg Lawrie says, “I have learned the hard way that good franchise support team is worth their weight in gold. But you do need to do your homework.”

Each member of your support team brings specific experience and expertise to support the overall franchise growth strategy. When selecting members of your support team, ensure they have the experience you are looking for. Questions to ask include:

  • Do they specialize in franchising?
  • How do they keep current with the changes that are happening within franchising?
  • What is their professional background and experience? What are their qualifications?
  • How long have they been in business? Ask to speak with references.
  • Are they a member of the Canadian Franchise Association?
  • Have they presented at franchise industry events? If so, get details.
  • Are they prepared to give a firm quote for total cost of the project or will it be based upon an hourly rate? Get an accurate idea of cost to budget adequately.
  • Will the support member be outsourcing aspects of the project? If so, who will be working on it and what are their qualifications?
  • Do you feel comfortable with them?
  • Do they take the time to understand your business or are they applying a “one-sizefits-all” approach?

Ask the potential support team member for references and confirm that they have delivered what they promised to their other clients. Be wary of companies that use a package or “one-size-fits-all” approach. It may appear that you are saving money and getting things done quickly but it is often at the expense of long-term viability. Franchising requires clear strategy, careful development and great execution. Even small mistakes can end up being costly. Shortcuts, like using a template document or copying your competition, do not take into account the specifics of your circumstances and your business model. If you cannot afford the professional fees required, consider if you are really ready to franchise. In order to franchise your business properly, it may mean seeking outside funding or putting your growth plans on hold for awhile.

Once your franchise is more established, you can still benefit from a strong support team. Bringing in outside professionals can often challenge the status quo and push conventional thinking within the organization. Outside resources can often encourage companies to move beyond their comfort zones and can assist them in enacting positive change. Even mature franchisors must
be continually and strategically evaluating and evolving their brand due to changes in competition or consumer needs and tastes, for example.

Outsourcing allows you to draw upon wellqualified resources in a typically more costeffective way than hiring the same experienced professionals as full-time employees. Franchising is complex and requires attention to detail; a strong team of franchise experts and advisors can help you avoid costly mistakes and grow your business using a structured approach aligned with a sound strategy. This will result in the creation of a solid brand and franchise system that can offer long-term viability to the franchisor and franchisees.

Franchising Demystified

For more helpful tips and valuable guidance on franchising, check out Wayne’s book Franchising Demystified.