McYou

Create a Culture

Inevitably, the single most important factor for a successful franchise chain is happy franchisees making a profit. If your single unit dynamics don't work, even the cutest concept is doomed. Satisfied franchisees will encourage others to join, so do everything in your power to make sure the deal stays sweet.

You have to realize you lead an entire culture. At the same time, the most profitable franchisors are those able to bolster their own economics so long as it's not at the franchisees' expense. In other words, a good franchisor is always looking for "win-win" situations when adding goods and services to the business. For example, if you can negotiate a bulk purchasing contract with a vendor-and retain a percentage of the savings while still providing the franchisee with a great price-that's good business.

Avoid the Pitfalls
Franchising is a highly regulated business covered by federal and various state laws. For the unwary, you can break the law in the amount of time it takes to finish a cup of coffee, merely by sitting down with a potential franchisee and having an earnest discussion about your opportunity. Get legal counsel before beginning your sales effort. Laws make franchising anything but a get-rich-quick scheme.

Lead With Professionalism
In a franchise relationship, the franchisor is counted on to set and enforce high standards. Franchisees want a leader, a teacher and a visionary. The essence of franchising is using other people's money and hard work to grow beyond what everyone can achieve independently. Don't be afraid to hire experienced management to help you achieve that.

Use reputable accountants and a fair-minded lawyer, and stay above reproach. Don't play favorites, as franchisees constantly compare notes. Ultimately, you're running a service organization whose customers are its franchisees.

For Everything Else...
...HOPEFULLY YOU HAVE SOME MONEY SAVED UP. THE BARE ESSENTIALS FOR GETTING A FRANCHISE SYSTEM OFF THE GROUND COST A PRETTY PENNY.
ITEMLOW ESTIMATEHIGH ESTIMATE
Trademark search and review$375$750
Logo design and federal trademark registration$1,000$5,000
UFOC and franchise agreement preparation$10,000$35,000
Operations manual$10,000$75,000
Annual audited financials$1,000$15,000
Corporation information$750$5,000
Web site design/annual hosting$400$25,000
Office equipment$2,000$15,000
Brochures$400$3,000
A great conceptPricelessPriceless

Todd D. Maddocks is a franchise attorney and small-business consultant. For more information, visit www.franchisedecision.com.

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This article was originally published in the January 2002 print edition of Entrepreneur with the headline: McYou.

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