NFA Franchise Consultants
5Oct/17Off

Franchise Sales Effectiveness

Franchise Sales Effectiveness: Success In Franchising

Stephen S. Raines
President, National Franchise Associates
Atlanta-based Specialists in Franchise Consulting & Franchise Sales

Franchise Sales

Franchise Sales

In my over three decades of experience as a franchise consultant, working in franchise development and franchise sales, I am often asked, “What makes one company succeed in franchise sales while another doesn’t?”

Rarely is there a single reason for success in franchise sales. 

Here, I will examine one of the many factors that can help Franchisors create a winning franchise sales strategy.

There is an old saying in business, “Fail to plan, plan to fail”. Nowhere is this adage truer than in franchise sales.

If you do not structure your franchise sales efforts, you will quickly lose control.

Remember, if your first few franchisees fail or are unhappy, it will be virtually impossible to sell more franchises.

We cannot stress strongly enough the importance of focusing on the success of your initial franchisees.  Part of this success is selling to the right people.

When planning your franchise sales strategy, ask yourself the following questions:

  • In what geographic area do I want to sell my first few franchises?
  • How many sales do I want to close my first year?  My second year?  My fifth year?
  • What qualities and skills will my franchisees need to succeed?
  • Will my target prospects change over time and, if so, how?
  • How can I market most effectively for franchisees?
  • What are the steps in the franchise sales process?
  • Who is responsible for each step?
  • How will we conduct each step in the franchise sales process?
  • How will we get from one step to the next in the franchise sales process?
  • If a desired prospect loses interest, how can I jump start the process?
  • How will I qualify a prospect before closing?
  • Under what circumstances should I say no to a prospect?
  • What is the most effective way to present my company’s story and benefits?
  • In the franchise sales process, how do we position the company against any competitors?
  • How can I judge the effectiveness of my franchise sales and marketing programs?
  • How can we track the sale from first point of contract to closing?
  • Once we close a sale, what steps should occur next and in what order?
  • How much time will we need to devote to getting a new franchise open?
  • After it opens, how much time should we allocate to assisting the franchisee?

As you can see, a casual approach to franchise sales is likely to fail.  The more carefully you plan out the franchise sales process, the more effective you will be both in franchise sales and the overall success of your franchisees.

More on franchise sales next time…

 

16Jan/15Off

Should I Franchise My Business?

It's a common question small business owners ask at one time or another...should I franchise my business?

Though this is a personal choice for each owner, here are just a few of the reasons that the model has been proven over the years.

  1. Faster Expansion
  2. Lower Costs
  3. Simple Management
  4. Greater Commitment
  5. Better Market Penetration
  6. International Potential
  7. Less Recruitment

If these reasons weren't enough, scaling a business at a managed pace can be quite lucrative!

In fact, a franchising concept can be one of THE best ways to grow a brand when an owner doesn't want to figure every detail out from scratch.

Why should I franchise my business, can't I just grow it on my own?

The problem with most small businesses is that the first and only location, the heart and soul of the on-site owner.  That location may be successful thanks to the instinct of the owner on location.

That is, though the business 'works' with one location (generally because the owner uses his intuition), it's generally not a formula for successful reproduction on its own.  Why?  The same thing that makes the primary location work, the owner, is missing from all the other locations!

When an owner asks 'should I franchise my business', he is generally at a point where it's clear to him that on site intuition is not the best way to take advantage of OTHER people's skills and capital to grow his brand.

What's missing?  Well, to run many 'copies' of a primary location, precision is required...the business must run like a military unit 'type of precision' in fact.

Most small businesses simply don't have the experience or know how to process steps in such an outlined and repeatable fashion.  The idea of making successful photo copies of store number one quickly unravels.

This is where franchising consultants step in with proven methods for franchising models.  In fact, sources claim that in 2007 almost 10% of all businesses across nearly 300 industries were franchises...it works.

Franchise development consultants, or franchise consultants, are often there to guide a business owner through the legalities, planning, training, documentation, marketing, the list is exhausting for a business owner to tackle alone (all the while running his business).

So, you may ask as a business owner, should I franchise my business?

We say the proof speaks for itself.  Could you do it on your own?  Sure, but why would you risk the time and uncertainty?

Call NFA today, as experienced franchise development consultants, we are here to help!

21Dec/14Off

CoachWayne! Gymnastics Franchise Launch

FOR IMMEDIATE RELEASE:

CONTACT:
Steve Raines
National Franchise Associates
(706) 356-5637
(706) 356-5180
www.nationalfranchise.com

Atlanta, Georgia, December 21, 2014 - NFA client (Savannah, Georgia based) ~CoachWayne! Gymnastics has launched its own franchise program.

~CoachWayne! Gymnastics provides group classes to children from 18 months to teenage in ballet, gymnastics and martial arts.

Wayne Evans, founder of ~CoachWayne! Gymnastics, is a veteran professional gymnastics instructor.  He has local, state, collegiate, national, international and Olympic experience.

Coach Wayne has extensive experience, and combined with a good head for business, he has developed and perfected a method for teaching recreational gymnastics.

The system incorporates standardized systems, objective standards and an achievement rewards program to motivate students.

Wayne Evans has been involved with gymnastic education since 1977. A veteran instructor in gymnastics, tumbling and cheer-leading, he has taught private lessons, camps and clinics in both the United States and Europe.

He has produced eight instructional videos (the Amazon.com “top-seller” seven-video set Better Back Handsprings, Basic Handstand Position and seven animated eBook lessons including Benchmarks of Excellence).

His TumblingTIPS articles have been read by hundreds of thousands of students, parents and coaches worldwide. Coach Wayne knows gymnastics, and he knows how to help others to make money teaching gymnastics.

“I have helped train dozens of gymnastics instructors and consulted with many owners to open and grow gymnastics schools,” explained Wayne Evans. “Franchising is the next logical step. For our first franchise locations, we are targeting nearby markets, including Columbia, Charleston and Jacksonville. This expansion strategy will allow us to provide the most support possible to our franchisees.”

ABOUT:

Steve Raines, President of National Franchise Associates, one of the nation’s leading franchising consulting and development firms, helped create the ~CoachWayne! Gymnastics franchise system. “This franchise program offers franchisees an unparalleled level of continuing support,” said Raines. “Both the initial and the ongoing training programs are more extensive than any I’ve seen in franchising. Coach Wayne took his time to carefully craft this franchise system,” continued Raines, “and he succeeded in creating the classic win-win franchise opportunity.”

For more information on the ~CoachWayne! Gymnastics franchise program:

- END -

21Nov/14Off

Alternatives To Financial Performance Representations

In my over three decades as a franchise consultant, people have frequently asked me, “As a Franchisor, should I give out earnings claims or financial projections to prospective Franchisees to help convince them my franchise opportunity is a sound investment?”

In the previous four blogs, I tackled various aspects of this topic. In my October blog, I wrote about the role “Special Circumstances” may play in a Franchisor’s decision to compile and distribute Financial Performance Representations (FPRs) in Item 19 of the company’s Franchise Disclosure Document (FDD). NFA’s September blog addressed the cons of giving out FPRs in the FDD.

In NFA’s August blog, we discussed the pros of giving out FPRs and in July, we defined FPRs and examined the rules pertaining to them. Always remember any FPR must have a “reasonable basis”.

In this blog we discuss some alternatives the Franchisor may decide to utilize rather than compiling and distributing FPRs in the FDD.

These alternatives include the following options:

  1. The Franchisor may choose to offer one or more company-owned locations for sale as franchises. In this situation, the Franchisor can show real income statements for the specific company-owned locations that are available to interested potential buyers. When selling an operational unit as a franchise, the Franchisor can charge the new Franchise Owner the business’ value as an existing business, including its equipment, furniture, supplies, customer list, goodwill, other assets and future profits. This type of franchise sale can often be quite profitable for the Franchisor.
  2. The Franchisor can elect to reveal only the expenses for a standard franchise location to prospective franchise buyers, as long as the Franchisor does not relate the expenses as a percentage of income or sales. This disclosure of costs only is not legally deemed to be an FPR.
  3. The Franchisor can show to the potential Franchise Owner industry averages, provided that the industry averages presented are not said to be the actual income and expenses of the particular franchise.
13Oct/14Off

FPR Special Circumstances

In my over three decades as a franchise consultant, people have frequently asked me, “As a Franchisor, should I give out earnings claims or financial projections to prospective Franchisees to help convince them my franchise opportunity is a sound investment?”

In the previous three blogs, I tackled various aspects of this topic. NFA’s September blog addressed the cons of giving out Financial Performance Representations (FPRs) in Item 19 of the company’s Franchise Disclosure Document (FDD).

In NFA’s August blog, we discussed the pros of giving out FPRs and in July, we defined FPRs and examined the rules pertaining to them. Always remember any FPR must have a “reasonable basis”.

In this blog, I will review various “Special Circumstances” that may apply to a particular franchise opportunity.

These special circumstances include:

  1. If the franchise’s industry has several entrenched, thriving rivals that include FPRs in their FDDs;
  2. If the Franchisor’s location(s) has a strong, devoted following in its original market that may not be duplicated in other areas;
  3. For a newly launched franchise opportunity, if no franchised locations exist for a prospective Franchisee to contact to discuss financial operating history;
  4. If the company-owned locations for a new franchise opportunity have a long operating history, which may not be relevant to a new franchise unit;
  5. If the locations for a new franchise opportunity will be clustered geographically;
  6. If the franchise opportunity has diverse locations, making it hard to compare sales, such as units in stand-alone buildings, malls, shopping centers, pop-up stores, kiosks and seasonal locations;
  7. If new franchise units will be offering additional or different products or services from existing locations;
  8. If the franchise opportunity is not yet familiar to its potential customers; or
  9. If the franchise opportunity is confronted by regional concerns – e.g. the locations in one part of the country are more profitable than those in other areas.

If one or more of these conditions exist, you may wish to include FPRs in your FDD for your franchise opportunity. A Franchisor must evaluate the wisdom of providing FPRs to help stimulate franchise sales against the possible liability if a Franchisee fails to reach the sales, profits or other figures listed in the FPR.

22Sep/14Off

FPR Negatives

In over 30 years as a franchise consultant, people have frequently asked me,”As a Franchisor, should I give out earnings claims or financial projections to prospective Franchisees to help convince them my franchise opportunity is a sound investment?”

NFA’s August 2014 blog addressed the pros of giving out Financial Performance Representations (FPRs) in Item 19 of the company’s Franchise Disclosure Document (FDD).  Here, I will discuss the reasons not to do so.

If you want more information on the legal definition of a FRP, please consult our July 2014 blog.

Before deciding whether to include FPRs in your FDD, please consider the reasons against it, including:

  1. Providing a franchise sales FPR greatly increases your liability. A Franchisee who does not achieve the financial projections given is likely to sue, claiming you gave out incorrect information.
  2. There are no precise guidelines for determining the “reasonable basis” for the franchise sales FPR. Courts and arbitrators often interpret the general standards differently;
  3. Any franchise sales FPR must accurately represent the company’s Franchisees. You must consider the size of the sample pool, percentage of Franchisees achieving the numbers quoted, time period covered and any applicable distinctions, for example, disparities in unit size, products and services offered, customer base, and market size and demographics;
  4. A particular concern of new Franchisors is the lack of an actual track record to use in creating the franchise sales FPR. Without any operating history, liability can be even higher;
  5. The procedures necessary for properly preparing franchise sales FPRs are often challenging and costly;
  6. The Franchisor is required to keep the supporting data it used in compiling the franchise sales FPR for a number of years;
  7. Because the Franchisee is perceived as the “little guy”, if it comes to a lawsuit, his arguments may be viewed more sympathetically;
  8. State regulators may consider it their role to protect their state’s citizens from dishonest franchise sales programs. FPRs may draw enhanced examination from these officials;
  9. Whenever a “material” event happens that impacts the numbers on which the FPRs are based, the franchise sales FPR must be revised; and
  10. FTC guidelines, requirements of state regulators, constraints of state and federal courts and, if applicable, the concerns of arbitration panels must all be considered when preparing franchise sales FPRs.

In next month’s blog, we will look at special circumstances pertaining to franchise sales FPRs.

15Aug/14Off

FPRs, What Are The Benefits For Franchisors?

In my over 30 years of franchise consulting experience, I am often asked if Franchisors can give financial projections, otherwise known as FPRs, that potential franchisees will use to help them determine if they should purchase a particular franchise opportunity.

In my last blog, we discussed the rules and regulations regarding the preparation of Financial Performance Representations (FPR).

FPRs, a recap:

The Federal Trade Commission oversees franchising and permits a Franchisor to provide information about the actual or potential financial performance of its franchises and/or Franchisor-owned outlets, if there is a reasonable basis for the information and if the FPR is properly included in the Franchise Disclosure Document (FDD).

An FPR can be any presentation to a franchise sales prospect – visual, written or spoken – which says or implies a particular level or range of potential income, profits or sales to be derived from the operation of the franchise. This definition can apply to information in the general media. Any FPR must have written verification, which must be furnished to a franchise sales prospect upon request.

Often, the area in which a franchise sales prospect is most interested is how much money can be made operating the business. All new Franchisors must determine if they will put a FPR in their FDDs. The FDD must be furnished to each franchise sales prospect by the first in-person meeting.

Due to the liability inherent in offering FPRs, most Franchisors decide against including a FPR in their FDDs. As with any business decision, there are pros and cons involved.

FPR pros include:

  1. Providing FPRs can make it easier to close the first few franchise sales.
  2. Without a FPR, franchise sales prospects must contact existing franchisees for information on how the franchise performs financially. A random sampling by franchise sales prospects can result in inaccurate information.
  3. FPRs can result in more informed franchise sales prospects.
  4. Projections may make it easier for the franchisee to secure financing for the new business.
  5. A properly prepared FPR can reduce the probability of a franchise sales person promising the prospective franchisee an unrealistic return on investment or income.
  6. Properly prepared FPRs may offer the Franchisor some protection from liability should litigation arise.

Remember, if a particular Franchisor-owned unit is available for sale, the actual financial performance of the specific location can be shared with the franchise sales prospect.

In our next blog, we will address the cons of offering FPRs.