Taking a thriving restaurant and extending its reach through franchising can be an effective way to spur growth. However, the process of turning your business into a franchise requires careful planning and strategizing. Here are the steps to follow.
1. Assess the “Franchisability” of Your Business
First, evaluate whether your business is suitable for franchising. Not every successful independent restaurant makes a successful franchise. Ask yourself, is your business concept repeatable? Are your systems replicable and trainable? Is there a demand for your product or service in different geographical areas? Will your business model provide enough profit for both the franchisee and you, the franchisor?
2. Develop a Robust Business Plan
Next, you must create a comprehensive business plan for your franchised business. This should be an expansion of your existing business plan, emphasizing the strategies you’ll employ to develop your franchise network. The plan should detail the structure of the franchise, your target market, growth projections, financial expectations, and the support you’ll provide to franchisees.
3. Create a Franchise Agreement and Franchise Disclosure Document
Crafting a robust and legally sound franchise agreement is integral to franchising your restaurant. This legal contract between you and your franchisees should delineate the responsibilities of both parties. Similarly, the Franchise Disclosure Document (FDD) is a legal document that provides prospective franchisees with information about the franchisor, the franchise system, and the agreements they must sign. Seek legal assistance to ensure these documents comply with federal and state laws.
Harold Kestenbaum, a franchise attorney at Spadea Law is focused on franchise law and other matters relating to franchising since 1977. He offered his insights on the topic: “I have representing franchisors for over 46 years and I have seen it all. But over those years, the most successful franchisors have done it right. First, they are well capitalized. This is important because it gives them the luxury of accepting the right franchisee and not any prospect who can simply write a check, whether they are qualified or not. Second, they can select qualified franchisees who they have properly vetted and who they truly believe can be successful. Lastly, new franchisors need to have patience. Thinking they can sell hundreds of franchises in the first or second year, are basically dreaming. They need to be realistic and understand that it is quality not quantity that matters in franchising.”
4. Develop Your Operational Manual
Your franchisees will rely heavily on your operations manual to replicate your business model successfully. It is a comprehensive guide for franchisees detailing the restaurant’s day-to-day operations, including procedures, standards, and protocols. It is a critical document for maintaining brand consistency across all franchise locations.
5. Build a Strong Support System
A good franchisor offers ongoing support to its franchisees. This might include initial training, marketing assistance, technology support, and ongoing education. Establish a solid support system to ensure your franchisees can operate effectively and contribute to the brand’s success.
6. Determine Your Franchise Fee Structure
It is crucial to decide your franchise fee structure. Franchise fees typically include an upfront franchise fee, ongoing royalty fees, and, potentially, marketing fees. The fee structure should strike a balance between being attractive to potential franchisees and profitable for you.
7. Market Your Franchise/Lead Generation
Once all the preparation is done, it’s time to attract franchisees. Develop a marketing strategy that communicates the benefits of owning a franchise. This might involve digital marketing, trade shows, franchise brokers, or direct sales techniques. Remember, attracting the right franchisees is crucial for your franchise’s success.
We asked Sean McKay the President of SiteHub, a digital marketing agency for his thoughts on marketing and lead generation for start up and emerging franchise brands. He told me the following: “Executing a lead generation campaign with precision is critical – it forms the cornerstone of the impactful connections between investors and franchisors. Our strategy leans on three key pillars: targeted specificity, the leverage of educational content, and diligent follow-through. Targeting becomes effective when backed by a data provider with reliable financial information, ensuring our reach extends only to those genuinely interested and financially capable of franchising. When it comes to education, it’s essential to offer thorough insights into the franchise landscape, empowering potential investors to evolve into franchisees through informed, confident decision-making. Lastly, once the lead’s interest has been sparked, it’s crucial to engage in a strategic follow-up process. This approach not only sustains their interest but guides them steadily towards realizing their aspirations of franchise ownership.”
8. Select Your Franchisees Carefully
Not everyone who wants to buy a franchise is necessarily a good fit. You need to vet potential franchisees thoroughly. Look for enthusiastic individuals about your brand who have the necessary capital, demonstrate business acumen, and possess the drive to succeed.
9. Facilitate Training and Support
Once you have selected your franchisees, ensure they receive comprehensive training. Training should cover everything from managing day-to-day operations and understanding the business model to using specific systems or software. Continual support and regular communication are also necessary to ensure that franchisees are up-to-date and operating at their best.
10. Monitor and Expand Your Franchise Network
Finally, once your franchise network is established, monitor its performance. Keep communication lines open, provide ongoing support, and address any challenges promptly. You can plan for further expansion as you learn and refine your system.
In conclusion, transforming your restaurant into a franchise requires careful planning and execution, but it can be a successful strategy for growth. It’s a collaborative journey where you and your franchisees work together to achieve mutual success. Remember, franchising is not just about expanding your business; it’s about sharing your vision and working together to build a lasting brand.
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