Considering franchising? Avoid top missteps to achieve success
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Retailers and restaurant operators mulling the move to franchise their brand should be aware there are nearly a dozen mistakes that can quickly sink the franchise strategy, and just as importantly, hurt the foundation brand.
The mistakes range from back-end operational and business strategy miscues to not realizing how critical the customer experience is at every franchise put into play.
One of the top biggest mistakes, according to Brian Schnell, an attorney with Faegre Baker Daniels, is when a brand operator doesn't realize, from the start, that the business of franchising is very different from the core foundational business being expanded.
"Franchising is a different business, with many, many more differences than your initial business. One reason emerging franchisors don't succeed is that they don't master the franchise relationship that's required for success," he said during a panel session at the International Franchise Expo held May 31-June 2 at the Javits Center in New York.
Emerging, or start-up franchises, typically don't realize the importance of a happy franchisee – an investor that has made the commitment to run a franchise, added Schnell. An unhappy franchisee can hurt the franchisor and the brand if they aren't satisfied with the business relationship, he explained
During his 90-minute talk, Schnell, who has spent the past 31 years as a legal advisor to franchisors (his first client was Dairy Queen back in 1987), listed out the top 10 mistakes new franchisors often make and shared insight on what traditionally goes askew when a brand begins to franchise.
Trademarks, franchise recruiting play critical roles
One of the early missteps is not creating, and protecting, a brand's trademark. It's a critical aspect to ensuring a competitor doesn't impede and thwart the franchise strategy, explained Schnell.
"It [the trademark] is the cornerstone of your franchise so you need to choose wisely as you will need to protect it," said Schnell, nothing emerging franchisors often tend to forget to budget for that legal protection.
"You need to design it, so it makes most sense for the brand, for both the franchisor and franchisee," he added.
Registering a trademark in the U.S. costs a few thousand dollars but can hit upward of a hundred grand on the international level.
Another big misstep is poor choices when it comes to signing on franchisees, said the attorney.
"The goal is to recruit ‘ace' franchisees," said Schnell, but this is a hard 'get' as there are fewer qualified franchisees as more franchisors are striving to find brand investment partners.
"There are more and more franchisors and few qualified franchisees," he noted, adding that a franchisor is doing well if they can identify two to three out of a pool of 100 prospects.
And 'qualified' doesn't just mean the prospective franchisee has the funding needed for starting the business. A qualified franchisee must also have the same level of passion and drive and commitment that the franchisor has, said Schnell.
Not only must they have passion, but there needs to be a strong connection between the franchisor and franchisee.
"That is critical," said Schnell, and it often involves a franchisor to "trust your gut," he added.
Franchisors should also be wary and careful when recruiting and not creating unrealistic expectations — such expectations are what lead to unhappiness and ultimately the failure of a franchisee.
Another big misstep is when franchisors take on the role of problem solver for a franchisee — it's a role that ultimately will lead to a demise as the franchisee must solve their own problems. Oftentimes this happens when a franchisor sells the franchise as a plug-and-play scenario which gives new franchisees the impression it won't be hard work and there won't be major challenges, explained Schnell.
Once franchises are up and running, Schnell recommends a franchisor visit each franchisee at least once a quarter to ensure the passion and commitment and focus is on track. Such in-person interaction keeps strong communication in play – another critical aspect to success.
"Your build a brand one customer at a time and your brand is impact by every customer touch point," he said, "so you have to instill that in the franchisee and their employees as the brand must deliver on its promise."
Judy Mottl is an experienced editor, reporter and blogger who has worked for top media including AOL, InformationWeek and InternetNews. She’s written everything from breaking news to in-depth trends. She loves a great pitch so email here, follow on Twitter and connect on LinkedIn.www