Franchising Your Small Business - the Fly Speck Part Eight

When the Advertising Kicks In

Keep in mind that when you start out as a franchise you don't necessarily want to collect the advertising fee (some do) since you don't have a need for national franchising when you only have 2 or 3 outlets. You might want to write the fee into the agreement but not require franchisees to pay it until you have reached a sufficient size to undertake national franchising.

Support

One of the important benefits of a franchise system is the support it provides the franchisee - you want to provide the back office systems that alleviates the hassles they would have to deal with that would pull them away from doing business. So keep in mind, if you provide too little or not the right kind then you will not attract the right people. Too much and you serve as a wet nurse and your costs run high. The idea is that central office provides the economies of scale in the right areas - back end office, accounting, legal, systems, etc.

More on Support

"In general, you need to get four categories of support right in your franchise system:

• The training that you provide franshisees to get them ready to operate an outlet in your system
• Ongoing support services, such as centralized data processing and inventory control or communications mechanisms, that you offer to franchisees
• Real estate services (for the vast majority of franchise systems that have physical locations) that offer franchisees to help them to identify the right locations for their businesses
• The assistance that you provide franchisees in obtaining financing for their businesses"

-Shane

Marginal Benefits

The marginal benefits of training decline with the amount of training that you provide (200 hours of training is not likely to make you twice as good a house-cleaning franchise as 100 hours) but the costs of training tend to increase in a linear manner with the number of hours of training, there is generally an optimal amount of training that you need to provide to your franchisees.

Take the Field

"Field operations evaluation is a key tool for making sure that franchisees adhere to the rules of the franchise system. Field audits provide an early warning system to identify the need for corrective action when franchisees deviate from system rules." - Shane

Centralized Services

Centralized services include things such as centralized data processing, central purchasing and inventory control. These services are of major value to the franchisee. The economies of scale that are located here offer a significant advantage to franchisees over if they go it alone.

Site Selection

Some franchisors will provide invaluable assistance in site selection: traffic-pattern studies, preselection, etc. This is a good item to offer franchisees since it gives franshisors a mechanism to manage the flow of financial returns from your franchise system.