How advisors can help get your new franchise system off the ground.
You've built a thriving business from the ground up and have relied on your own business know-how, hard work and decision-making skills. But now that you're ready to share the business with others by franchising it, can you handle it on your own?
Many entrepreneurs turn to franchise advisors to get the help they need in setting up a franchise system that will not only work, but will also be successful in keeping the quality and uniqueness of their operation. I spoke with Mark Siebert, founder and CEO of the iFranchise Group, a consultancy that aids companies seeking to franchise for the first time as well as companies that already franchise. A franchise consultant since 1985, Siebert has assisted more than 200 startup franchisors.
FranchiseZone: What are the benefits of having advisors help you franchise your business?
Mark Siebert: The biggest benefit, if you use the right advisor, is that he or she has been there before and done it. Whatever business you're in before you become a franchisor, you're going into a different business when you go into franchising; you're going into the business of selling franchises, servicing franchisees. It involves a development of a different type of organization, a different type of organizational structure and different skill sets than most companies who have never franchised bring to the table. So the most valuable part of advisors is that they have a background in selling franchises.
The other advantages of using an advisor, in essence, is you have an opportunity to leverage off of a group that frequently provides a one-time-only service fee. You don't have to hire someone to write an operations manual or a training program and have them on your payroll for the next 10 years. You can have them on payroll short term.
In using an advisor, you're able to keep your eye on the ball, in terms of your core business, without having to spend time on this. Some operations manuals take 1,500 to 2,000 hours just to develop. That would be a full year for most people.
FranchiseZone: How many advisors-and what kind-should you have?
Siebert: If you're thinking about franchising, you're going to need at least two: one to help you with the business aspect, such as developing marketing plans, financial analysis and operations and training-and a second one from a legal perspective. You should have an attorney who will advise and assist you on all matters legal and that should not be the same person as your business advisor.
FranchiseZone: What specifically does an attorney do for you, and can they offer similar advice/help as franchise advisors?
Siebert: Franchising is a highly regulated industry, and attorneys are essential to navigating the complex legal environment created by this regulation. Their advice, however, is largely different from that of a business advisor in that their role is to make sure you comply with the law and generally keep entrepreneurs out of trouble. A business advisor works under the general constraint of that advice, but his role is to show an entrepreneur how to make more money.
You need a franchise attorney, not just your corporate attorney. The best franchise attorneys are all going to be members of the IFA, and are members of their Supplier Focus.
FranchiseZone: What are your thoughts on using advisors to help launch a franchising system, but then hiring an in-house person to run it? Aren't there advantages to hiring an in-house franchise sales director?
Siebert: Most franchise companies take this route. Advisors can greatly aid in the launch of a franchise program but are often too expensive to retain full time. And while they may supplement a franchisor's efforts, you can't rely exclusively on brokers for your success. Running the franchise program is a core competency of the franchisor, and as such should not be outsourced. And since franchise sales are vital to any growing franchise company, this is a function most franchisors should keep in-house.
FranchiseZone: Should that in-house advisor have experience?
Siebert: Experience is a tradeoff. The more experience a new hire brings to the table, the more likely he or she will be able to meet your goals. At the same time, that advisor is more likely to be expensive.
FranchiseZone: What should you expect out of a good advisor, and what should you look for?
Siebert: First and foremost, you should expect unvarnished honesty-someone to tell you the truth, regardless of whether it's in their best interests to do so. If all they're going to do is tell you what a great job you're doing, you're wasting your money. Second, you should expect someone who's been there and done it, someone with the kind of experience appropriate for your particular needs, a track record of success. Third, you should expect an individualized rather than a cookie-cutter approach to whatever the situation demands. Different situations don't require the same solution, although some advisors do take that kind of perspective.
The most important thing to look for is the background of the people who are actually going to be doing the work. When you hire an advisor, it's just like hiring somebody on the staff-the only difference is that that person is going to be temporary instead of permanent, or at least part time. Some advisors take long-term roles. In working with anybody, you want to look for the credentials of the people actually doing the work, not just the person who sells you the work. I tell people to start by looking at who's doing the work. If someone's going to be your strategic planner, has that person actually grown a business from the ground up or was he or she simply a middle manager at a franchise company? References, of course, are the other thing-you want to make sure you talk to people who've worked with these people. Also, how well do you get along with these people? Because you may have a long-term relationship with them.
FranchiseZone: What advantages come with having a long-term relationship with a franchise advisor?
Siebert: The longer advisors stay with a client, the more intimately they're familiar with the operation and the less time it takes for them to get up to speed if an issue arises. For example, in our case, if we're intimately familiar with a franchisor's organization, and a year or two later they want to have a franchisee convention, we might be in a good position to coordinate that, because we know what their particular needs are going to be. If they're looking to have a franchise advisory council or if they need help in administering their ad fund, again, we'd be in a good position to help with those things. All those are things where having an existing knowledge of that business shortcuts the process.
Also, certain things are trend-analysis-oriented. One easy example is franchise lead generation. You want to look at lead generation efforts over time, to determine effectiveness as you change the various campaigns you're using to generate those leads. Having a good knowledge of what's worked and hasn't worked in the past helps you make those kind of judgements in the future.
FranchiseZone: What are some basics that an advisor is helping you do in establishing a franchise?
Siebert: At the most basic level: market research, business plans, financial analysis and fee determination, development of operations manuals and training programs, marketing and sales strategies, and development of materials to assist in the franchise sale.
FranchiseZone: Do you think even the most business-savvy or intelligent entrepreneur still needs an advisor to help in franchising?
Siebert: A lot of time, if they had the time and the inclination, they could probably come up with it on their own. The fact of the matter is, the reason you go to an advisor is they can do it faster, better and without you having to take your eye off the ball. If I've got a business and it's going to take six months of my time [to franchise], it doesn't make much sense to do that if someone else can do it in half the time. Pay them, get it done with and make sure they do a better job. You're paying for speed, expertise and for a second set of eyes to make sure you're dotting your I's and crossing your t's.
FranchiseZone: Could a lot of these things they go to an advisor to get help with have been avoided had they had an advisor in the beginning?
Siebert: Yes, a lot, but not all of them. Some of these things are just market changes, or things that would be pretty hard for anyone to anticipate. But some of the things we see are things that could have been avoided by good advice initially.