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As a franchise consultant, when asked to evaluate a franchise opportunity for a client interested in becoming a Franchisee, one of the most important considerations is the anticipated return on investment for the particular franchise. Because this is a critical issue, consider it when you franchise your business.

When deciding to franchise your business, remember that franchises come in many sizes.

Some require an initial investment under $25,000 cash, while others involve an outlay in the multiple millions to launch. Some franchises generate annual revenues under $100,000, and some have yearly sales in the millions. With all these variables, how do you evaluate a specific franchise opportunity?

One good benchmark is the anticipated return on investment. Consider this issue when you franchise your business.

When you franchise your business, the return on the Franchisee’s investment can come in various forms, including:

  • The Franchisee’s salary
  • Perks such as
    • Car allowance
    • Insurance such as health, life and/or disability
    • Free meals
    • Reimbursable travel
    • The costs of a cell phone
    • Organization memberships
  • Dividends
  • Profits from the business

In other words, look at all the combined monetary return or its equivalent that may accrue to the Franchisee when you franchise your business.

When doing your calculations, remember that if a portion of the investment is financed, the costs will be paid out of cash flow. Explore whether a portion of the Franchisee’s initial investment can be financed when you franchise your business.

Here’s an example of calculating the return on investment for a franchise opportunity:

  1. For this example, the initial cash investment is $150,000.
  2. The franchise is expected to generate the following positive cash flow in its first three years of operations:
    • Year 1: $25,000
    • Year 2: $75,000
    • Year 3: $100,000
    • Total positive cash flow over first three years of operations: $200,000

The franchise has earned back the initial cash investment of $150,000 in under three years. While there are clearly other considerations, the franchise opportunity in the example does provide a fair rate of return. This is a big positive when deciding to franchise your business.

Remember, unless they are properly disclosed in the Franchise Disclosure Document, you cannot make financial performance representations (FPRs) to prospective Franchisees when you franchise your business.

FPRs when you franchise your business have been addressed in previous NFA blogs including:

Thinking About Franchising?

NFA Franchise Consultants have the experience to help businesses franchise.  Just watch and listen to some of our client case studies and video testimonials.  We can HELP YOU and it doesn’t cost anything to call and talk to us! 

So, if you are still asking the “should I franchise my business” question over and over with no clear direction, give us a call at (706) 356-5637, or contact us through our online form.  We look forward to helping you take your business to the next level and beyond.

The post Anticipated Return on Franchise Investment appeared first on NFA Franchise Consultants.

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Sometimes, I stop to reflect upon what a broad and diverse market segment franchising is. If you are considering franchising your business, it is important to remember that franchises come in many sizes and shapes.

For example, some franchise opportunities require an initial investment under $25,000 cash, while others involve an outlay in the multiple millions of dollars to open. Most franchises fall somewhere in between those numbers. What will be the anticipated initial investment when franchising your business?

Regarding sales, again, there can be a great variance. Some franchises generate revenues under $100,000 per year, and some have millions of dollars in annual sales. Again, the majority of franchise locations have sales between these ranges. If franchising your business, what do you predict the average annual sales will be per location?

More important when franchising your business, how much money will the Franchisee make? Some Franchisees want to supplement their family’s income while others seek to support a lavish lifestyle.

Also recognize that there can also be a substantial difference in the time commitment required by a particular franchise opportunity. Some franchises are designed as part-time businesses; however, many require a full-time commitment. Some Franchisors stipulate that the owner must work 50 hours per week or more, actively operating the business. This is another consideration when franchising your business.

Franchises with lower initial investments often are home-based businesses, frequently providing residential or business services. Examples of such franchise opportunities are carpet cleaning, senior services or blind companies.

Franchises at the upper end of the investment spectrum typically are large restaurants, hotels, childcare centers and similar businesses requiring the Franchisee to purchase land and construct a building. One NFA client has recently launched a franchise program requiring a substantial initial investment of $2.5 to $5 million, Stripling’s General Store. Stripling’s is a 7,000 to 13,500 square foot full-line grocery store plus butcher shop, gourmet items, food bar with prepared foods, convenience store items and more.

The majority of franchise opportunities fall somewhere between these two levels of investment. Many restaurant franchises have an initial investment as low as a quarter million dollars. Much of this amount is for equipment and build-out.

As you can see, if you are considering franchising your business, there are thousands of different franchise programs in a wide variety of industries, requiring different investments of time and money and varying skill sets. There is a franchise opportunity out there suitable for everyone who is willing to follow a system of doing business.

Remember, unless properly disclosed in the Franchise Disclosure Document, you cannot make financial performance representations (FPRs) to prospective Franchisees when franchising your business. FPRs when franchising your business have been addressed in previous NFA blogs.

Thinking About Franchising?

NFA Franchise Consultants have the experience to help businesses franchise.  Just watch and listen to some of our client case studies and video testimonials.  We can HELP YOU and it doesn’t cost anything to call and talk to us! 

So, if you are still asking the “should I franchise my business” question over and over with no clear direction, give us a call at (706) 356-5637, or contact us through our online form.  We look forward to helping you take your business to the next level and beyond.

The post Franchises of All Shapes and Sizes appeared first on NFA Franchise Consultants.

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As a franchise consultant, I discuss with all NFA’s clients the importance of studying your competition when franchising your business. This advice is important for two reasons:

  1. In our experience, even if the market for your goods and/or services may seem crowded, there is often room for a savvy new entry into the field.
  2. When franchising your business, do not be afraid if there are a number of well-established competitors – you can often position your franchise program to provide many competitive advantages to prospective Franchisees.

The steps in the process of studying your competition when franchising your business are often the following:

  1. When franchising your business, study any existing Franchisors in your field to determine what they are offering their customers. How do your products or services measure up? How can you position your franchises to attract customers?
  2. When franchising your business, you must also determine what are the benefits and negatives of the programs your competitors are offering their Franchisees. What advantages can you build into your franchise program to make it more attractive to your prospective Franchisees? Areas to consider are:
    • A larger territory
    • More training in terms of duration, content and/or the number of people trained
    • A slightly lower royalty or service fee
    • Deferring royalty payments for a short period of time at the outset of the franchise’s operations
    • Providing additional services to Franchisees
    • Offering more personalized contact to Franchisees
  3. When franchising your business, look at the turnover rate for franchises as listed in the particular company’s Franchise Disclosure Document. Are a number of the existing locations being sold or closed? If so, can you determine the reasons why? High turnover can be an indication of Franchisee dissatisfaction.

Remember, when franchising your business, many prospective Franchisees find being part of a ground floor opportunity is more exciting than being Franchisee number 556 or 1673. They feel they matter more. By studying competing Franchisors when franchising your business, you can offer a better opportunity.

Thinking About Franchising?

NFA Franchise Consultants have the experience to help businesses franchise.  Just watch and listen to some of our client case studies and video testimonials.  We can HELP YOU and it doesn’t cost anything to call and talk to us! 

So, if you are still asking the “should I franchise my business” question over and over with no clear direction, give us a call at (706) 356-5637, or contact us through our online form.  We look forward to helping you take your business to the next level and beyond.

The post Studying Competitors for Franchise Opportunities appeared first on NFA Franchise Consultants.

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As a franchise consultant, I discuss with all NFA’s clients that providing goods and/or services to your Franchisees can be an important income stream for a Franchisor. When you franchise your business, do not overlook this profit center.

Often, prospective Franchisors concentrate on the funds generated by initial franchise fees and on-going royalty payments. For a number of franchise programs, these two areas are the primary sources of income. But there is another area that can be very lucrative for Franchisors — selling products or services to Franchisees.

Here are some examples:

  1. Does your restaurant have special recipe sauces, seasonings, marinades, dressings, doughs or other ingredients, that are essential to the preparation of your menu items? If so, is it feasible for the Franchisor to make any of these ingredients and sell them to your Franchisees? Think of KFC’s special blend of herbs and spices or Baskin Robbin’s ice cream. It is certainly acceptable to require your Franchisees to purchase such items from the Franchisor at a reasonable profit.
  2. For a retail store, can the Franchisor provide a buying service for Franchisees? This can be a tremendous service to your Franchisees, particularly if their profits are dependent on having the right merchandise mix to meet current trends. If you provide this service to your Franchisees, you can certainly improve their chances for success, and again, you are entitled to charge a fair profit.
  3. Many businesses require logo items to operate. These articles might be uniform apparel such as logo shirts, caps, aprons or jackets, packaging such as bags, wraps, cups, napkins, etc., or forms including business cards, invoices, marketing brochures and other printed materials. In many franchise programs, the Franchisor prints large quantities in bulk and sells them to Franchisees at a profit. Often, this type of program can save Franchisees considerable sums over printing small quantities of the necessary materials.
  4. When you franchise your business, are there services you can provide to your Franchisees? Many Franchisors do some or all of the work for their Franchisees. For example, in some printing franchises, the Franchisees sell printing jobs and the Franchisor actually prints them. At certain direct mail franchises, the Franchisee works with the clients, and the Franchisor prints and mails the marketing pieces. For many hotel franchises, the Franchisor handles the reservations for the individual locations. Or, the Franchisor might provide bookkeeping services for its Franchisees.
  5. For some restaurant franchises, the Franchisor operates a commissary that prepares all or some of the food and sells it to the Franchisees.

For any of the points mentioned above, it is accepted for the Franchisor to make a reasonable profit on the goods and services it provides its Franchisees. Many Franchisors generate very significant revenues from these products and services.

Thinking About Franchising?

NFA Franchise Consultants have the experience to help businesses franchise.  Just watch and listen to some of our client case studies and video testimonials.  We can HELP YOU and it doesn’t cost anything to call and talk to us! 

So, if you are still asking the “should I franchise my business” question over and over with no clear direction, give us a call at (706) 356-5637, or contact us through our online form.  We look forward to helping you take your business to the next level and beyond.

The post Selling to Franchisees for Extra Income appeared first on NFA Franchise Consultants.

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As a franchise consultant I recommend you answer a very important question before you franchise your business. This question is “can my business be duplicated by another person?” If your business cannot be easily replicated, it probably is not a good candidate for franchising.

When you franchise your business properly, it creates a classic win-win situation. Someone else uses your trade name, business concept and operating system. In addition, your Franchisees receive both pre-opening and on-going support. In exchange, when you franchise your business, you receive an up-front initial franchise fee and continuing royalty or service fee payments.

In essence, when you franchise your business, you are expanding using other people’s money, time and management skills; in turn, you are splitting the pie with your Franchisees. If you are going to franchise your business, it works only if you can teach another person how to open and operate a location of the business within a commercially viable period of time.

When deciding whether to franchise your business, in many instances, a concept that is extremely unique or difficult to master is not a good candidate for franchising. Examples of this type of concepts may be computer repair businesses or other technical services that can require too much specialized knowledge to be taught to another in a training program of three to six weeks. However, if your computer repair concept is run by a business person who hires computer repair technicians, it may franchise-able.

Another consideration is if your business requires an advanced degree – such as a medical license or contractor’s license. In some cases, such as weight loss clinics, the Franchisee may be able to hire a doctor to serve part-time. In other franchise concepts, such as an eye glasses store or vision clinic, the target Franchisees may be doctors.

So, if you are examining whether you should franchise your business, think carefully about whether you can teach others how to perform your services or produce/sell your products.

Thinking About Franchising?

NFA Franchise Consultants have the experience to help businesses franchise.  Just watch and listen to some of our client case studies and video testimonials.  We can HELP YOU and it doesn’t cost anything to call and talk to us! 

So, if you are still asking the “should I franchise my business” question over and over with no clear direction, give us a call at (706) 356-5637, or contact us through our online form.  We look forward to helping you take your business to the next level and beyond.

The post Can Your Business Be Duplicated? appeared first on NFA Franchise Consultants.

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As a franchise consultant, a question I commonly hear is “I have a great concept for a business.  Should I go ahead and franchise it now?”

Although as with all general rules there are exceptions, we usually counsel prospective Franchisors that they should be in business for at least one year before franchising a business.

There are many reasons we recommend that you operate the concept for at least one year prior to franchising a business, including the following:

  1. Proving the concept works. Many ideas look foolproof on paper. Before franchising a business, it is critical that you verify it is viable through actual operating history.
  2. Proving there is a demand. No matter how confident you are, you really do not know that there is a demand for your products or services until you test them in the marketplace.
  3. Proving that you can master the challenges of your particular market segment. Seldom can you command the respect of your Franchisees without demonstrating that you can operate the business.
  4. Working out the bugs. Rarely does the concept work exactly how it is conceived on paper. There are issues that must be addressed and resolved through practical applications. This on-the-job training is critical before franchising a business.
  5. Showing the concept has growth potential. Ideally, when you launch a new business, it should display steady growth in sales and profits. Of course, there could be exceptions for seasonal concepts or businesses with another valid reason for periodic spikes and dips in sales.
  6. Understanding how to most effectively market the business. Anyone who has ever promoted a company knows that you cannot predict with any certainty what marketing methods will work and what do not. It is critical before franchising a business that you understand how to maximize the bang for your bucks.
  7. Proving the concept in order to sell franchises. How can you convince others to purchase a franchise if you have not invested your time and money in the business yourself?
  8. Understanding the staffing issues. Often, staffing is one of the most difficult aspects of operating a business. When franchising a business, you must comprehend how Franchisees will hire, train, motivate, schedule and retain their employees. This knowledge can be proven only through actual operating history.

As you can see, when franchising a business, it can be difficult to succeed unless you have proven your concept through operating experience.

Thinking About Franchising?

NFA Franchise Consultants have the experience to help businesses franchise.  Just watch and listen to some of our client case studies and video testimonials.  We can HELP YOU and it doesn’t cost anything to call and talk to us! 

So, if you are still asking the “should I franchise my business” question over and over with no clear direction, give us a call at (706) 356-5637, or contact us through our online form.  We look forward to helping you take your business to the next level and beyond.

The post Proving the Concept Before Franchising a Business appeared first on NFA Franchise Consultants.

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As a franchise consultant, a question I commonly hear is “What steps should you take when you franchise your business?”

Often, new Franchisors become so focused on the details of their franchise programs, they forget to look at “the big picture”. One of the most important issues when you franchise your business is how to market your franchise program and sell franchises. To answer this question, you must first identify your target franchisees.

Granted, the requirements of the business you are franchising will, to a large extent, help shape your target franchisee profile. However, to succeed when you franchise your business, you must focus on the characteristics common to the people:

(a) most likely to be attracted to and
(b) most able to effectively operate one your franchise locations.

Perhaps the most compelling reason to carefully consider who are going to be your most likely prospective franchisees is simple: if you know who you want to reach, as you franchise your business, you can fine-tune your program to be more attractive to them.

For example, if your franchise is intended to be a part-time business providing supplemental household income, it could be a competitive advantage to build some time flexibility for busy franchisees with families into your program when you franchise your business.

Example two: If your franchise requires the owner/operator to be physically fit, such as a workout center, structure your program to provide opportunities for the franchisee to exercise while on the job.

Another reason considering your target franchisee’s wants and needs is so important when you franchise your business: few emerging Franchisors have unlimited marketing budgets.

In order to most effectively spend your marketing dollars and time, you must know who you are trying to attract. Once you know your likely prospects, you can then decide how to reach them most efficiently when you franchise your business.

Who are your most probable franchisees?

As you franchise your business, some or all of these questions may apply:

  • When you franchise your business, will your franchisee need specific skills, education, experience, background or license/certification to operate the business (for example, be able to obtain a liquor license?)
  • What income can a franchisee reasonably expect to make?
  • Is your target franchisee likely to be satisfied with the anticipated income?
  • When you franchise your business, do you want single unit owner/operators, investor franchisees or multi-unit owners?
  • What kind of experience is needed to successfully operate a location of your franchise? How much?
  • What initial investment will be needed to open a franchise location when you franchise your business?
  • Does your franchise program offer emotional or other intangible benefits (working with pets or children, providing a community service )?
  • How does your franchise program compare to other direct competitors, especially well-established competitors?
  • When you franchise your business, what attributes will your franchisees need?
  • What attributes do you want to avoid in your prospective franchisees?
  • What type of person do you think will be most interested in your franchise offering?
Thinking About Franchising?

NFA Franchise Consultants have the experience to help businesses franchise.  Just watch and listen to some of our client case studies and video testimonials.  We can HELP YOU and it doesn’t cost anything to call and talk to us! 

So, if you are still asking the “should I franchise my business” question over and over with no clear direction, give us a call at (706) 356-5637, or contact us through our online form.  We look forward to helping you take your business to the next level and beyond.

The post Identifying your Target Franchisees appeared first on NFA Franchise Consultants.

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As a franchise consultant, a question I commonly hear is “What mistakes are frequently made when you franchise your business?” Here are some blunders to avoid when you franchise your business:

  1. Selling a franchise just to generate money
  2. Ignoring prospective Franchisee red flags
  3. Franchising your business simply to get out of a financial hole
  4. Spreading franchises too far apart
  5. Not getting to know the prospective Franchisee well enough
  6. Overselling your franchise opportunity

In my previous blog, I addressed mistake five above: Not getting to know the prospective Franchisee well enough when you franchise your business.  In this blog, I will address mistake six.

Overselling your franchise opportunity when you franchise your business:

At National Franchise Associates, we recommend you go slowly when you first launch your franchise program. When you franchise your business, determine in advance how many franchises you want to sell your first year of franchise operations. Stick with your plan.

Here are our top two reasons for starting out conservatively when you franchise your business:

  1. When you franchise your business, you have to learn how to be a Franchisor. While a good franchise consultant can prepare you in this area, you must learn what works and what doesn’t work for your particular industry and franchise program. When you franchise your business, it is best if you work out your issues with one or two franchises rather than several dozen.
  2. When you franchise your business, the Franchisor’s income is often primarily derived from Franchisee service fees and Franchisee purchases from the Franchisor. When you franchise your business, you must sell at least one franchise and get it open in order to start earning service fees. Therefore, at the outset of their franchise programs, most Franchisors do not hire full time personnel. Rather, new Franchisors typically rely on themselves and the employees in their company-owned locations to provide the services promised to their Franchisees, such as site approval, training, pre-opening assistance and field support. Limiting the number of franchises sold initially ensures that you and your team have adequate time available to service the new Franchisees in addition to your on-going duties in the original company. Following this strategy allows you to avoid spending money on salaries for full-time employees in your franchise company who you cannot fully utilize. Typically, in franchising, the ratio is one full-time field rep for every 20 franchise locations.
Thinking About Franchising?

NFA Franchise Consultants have the experience to help businesses franchise.  Just watch and listen to some of our client case studies and video testimonials.  We can HELP YOU and it doesn’t cost anything to call and talk to us! 

So, if you are still asking the “should I franchise my business” question over and over with no clear direction, give us a call at (706) 356-5637, or contact us through our online form.  We look forward to helping you take your business to the next level and beyond.

The post Avoid Overselling your Franchise! appeared first on NFA Franchise Consultants.

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As a franchise consultant, I’m often asked “What mistakes should you avoid when you franchise your business?” Here are some frequent missteps when you franchise your business:

  1. Selling a franchise just to generate money
  2. Ignoring prospective Franchisee red flags
  3. Franchising your business simply to get out of a financial hole
  4. Spreading franchises too far apart
  5. Not getting to know the prospective Franchisee well enough
  6. Overselling your franchise opportunity

In my previous blog, I addressed mistakes three and four above (a) franchising your business simply to get out of a financial hole and (b) spreading franchises too far apart when you franchise your business. In this blog, I will address mistake five.

Not getting to know the prospective Franchisee well enough when you franchise your business:  It is incumbent upon a new Franchisor to get to know a franchise prospect before granting him or her a franchise. When you franchise your business, your success as a Franchisor is dependent upon the success of the first few franchises. If franchise locations #1 and #2 fail, it will be virtually impossible to sell franchises #3 and #4.

Because your Franchisees have a big impact on determining your success when you franchise your business, you must get to know them before granting a franchise. They must have the necessary values, work ethic, financial resources and experience to do well in your franchise concept. They must be willing to follow your system. If not, their chances of succeeding are substantially reduced, negatively impacting the overall viability of your franchise program.

Remember, when you franchise your business, you must list all current Franchisees in your franchise legal documents as well as any Franchisees who left your system within the past year. Unhappy current or former Franchisees make it difficult, if not impossible, to sell additional franchise locations when you franchise your business.

Thinking About Franchising?

NFA Franchise Consultants have the experience to help businesses franchise.  Just watch and listen to some of our client case studies and video testimonials.  We can HELP YOU and it doesn’t cost anything to call and talk to us! 

So, if you are still asking the “should I franchise my business” question over and over with no clear direction, give us a call at (706) 356-5637, or contact us through our online form.  We look forward to helping you take your business to the next level and beyond.

The post Getting to know your franchisee appeared first on NFA Franchise Consultants.

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As a franchise consultant, a question I commonly hear is “What mistakes are frequently made when you franchise your business?” Here are some more common franchising blunders to avoid:

  1. Selling a franchise just to generate money (covered last blog)
  2. Ignoring prospective franchisee red flags (covered last blog)
  3. Franchising your business simply to get out of a financial hole (covered below)
  4. Spreading franchises too far apart (covered below)
  5. Not getting to know the prospective franchisee well enough
  6. Overselling your franchise opportunity

In my previous blog, I addressed the first two mistakes: selling a franchise just to generate money and ignoring prospective franchisee red flags. In this blog, I will address mistakes three and four.

Franchising your business simply to get out of a financial hole:

Companies that create franchise programs simply to solve a financial problem in the parent company seldom succeed. When you franchise your business, it is an investment in the future, a long-term growth strategy. Typically, using franchise fees to pay for financial shortcomings in your core concept is similar in outcome to a pyramid scheme. Using money from new franchisees to pay off past financial missteps will usually end badly when you franchise your business.

Further, achieving success when you franchise your business is usually based on your franchisees being satisfied with their investment. You must list all current franchisees in your franchise legal documents as well as any franchisees who left your system within the past year. Unhappy franchisees are likely to share their opinions when they are approached by people considering buying your franchise. Unhappy franchisees make it difficult, if not impossible, to sell additional franchise locations when you franchise your business.

Finally, if the franchisor is financially strapped, it is unlikely to possess the requisite financial resources to enable it to provide adequate training and assistance to its franchisees. It is this training and assistance that usually make new franchises profitable when you franchise your business.

Spreading franchises too far apart when you franchise your business:

For many franchise concepts, it makes sense to cluster your franchise locations when you franchise your business. If your franchises are too far apart, the cost of servicing them (usually visits by field reps) goes up exponentially. These costs are paid by the franchisor. It is also much easier to realize economies of scale, such as savings on inventory, supplies and marketing, when your locations are close enough to utilize the same vendors. In addition, when you franchise your business, if your locations are grouped, it is easier to build the brand name and reputation. For these reasons, for many franchise programs, it is better to place your franchises closer together when you franchise your business than it is to scatter them across too many markets.

Thinking About Franchising?

NFA Franchise Consultants have the experience to help businesses franchise.  Just watch and listen to some of our client case studies and video testimonials.  We can HELP YOU and it doesn’t cost anything to call and talk to us! 

So, if you are still asking the “should I franchise my business” question over and over with no clear direction, give us a call at (706) 356-5637, or contact us through our online form.  We look forward to helping you take your business to the next level and beyond.

The post More Franchising Blunders To Avoid! appeared first on National Franchise Associates, Inc.

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