Franchise Feasibility

FRANCHISE FEASIBILITY AND OTHER PRE-FRANCHISING A BUSINESS STEPS FOR FRANCHISE OPPORTUNITIES

Copyright 1982-2010, Kevin B. Murphy, B.S., M.B.A., J.D. – all rights reserved
Franchise Feasibility
My three decades of experience in the franchise industry as a franchise expert, MBA, franchise attorney and successful franchise owner gives me unique insights into doing a franchise feasibility study. Most companies leap into franchising without doing one, or if a feasibility analysis is performed, it is by a franchise consultant who tells always tells all clients the good news: they’re franchise-able. This, not surprisingly, is a big red flag.

Same goes for feasibility studies done by attorneys. They are not trained to do these, are not franchise experts, nor do they have MBA’s, business degrees, or former franchise ownership experience. The most critical part of a franchise feasibility analysis deals with the business factors. Unfortunately this is also the area where attorneys are the weakest.

It is important to find out a few, simple things before engaging anyone to do a franchise feasibility analysis:

(1) how many feasibility studies has the expert done;
(2) are they truly a franchise expert; (see the checklist at Evaluating Franchise Attorneys and Franchise Consultants)
(3) over what period of time; and
(4) what percentage of the clients were told they were franchise-able.
(5) experience owning and operating a franchise

Franchise Feasibility Analysis – the two options
Our Firm offers two options for doing a Franchise Feasibility Analysis:

(1) Traditional on-site visit by Mr. Franchise, where business operations and metrics are observed first-hand, information and data are collected for review and analysis. The on-site visit is followed by drafting a written report of franchise feasibility findings as well as identifying what fine-tuning of the current business model will best optimize it for franchising. This is always the recommended approach, especially for companies that have to make a presentation to their shareholders or Board of Directors.

(2) Online, interactive, GoToMeeting presentation by Mr. Franchise that covers the same factors used during an on-site visit. This is a very cost-effective way to address feasibility issues, at a significantly reduced cost, dispensing with an hourly rate, travel, living expenses, etc. Although a written report is not included in the more affordable cost of the online version, one can be prepared afterwards at additional cost.

Special, limited time offer – get a 100% credit of what is paid for the online, interactive franchise feasibility workshop if your business ultimately retains us to do your franchising.

Actual case example: was this franchise-able?
Consider Frosty Paws, one of many hopeful, specialized retail concepts. Trying to tag along with others like Toys R Us, party stores and dog-sitting clean-up companies that have done well, Frosty Paws believed it would become the Baskin Robbins of ice cream for . . . dogs. On top of this, it wasn’t even real ice cream. The initial ads declared “It’s not ice cream, but your dog will think it is.” As if Fido even knows about real ice cream. What was this company thinking? Frosty Paws may have been the first ice cream for dogs, but being first with a stupid idea is . . . just plain stupid. And stupid ideas are never the foundation for any franchise program.

An objective franchise feasibility analysis will also document what steps, protective measures and documents need to precede the expansion effort. Many of these can (and should) be done in-house by existing personnel with a little outside assistance and expertise. This will result in the most efficient use of time and resources. It will also produce the most professional and user-friendly results.

Pre-Franchising Steps – Continued
By taking the other steps to franchise outlined below, a company can increase the efficiency of existing operations, which immediately adds value to the firm. This more than justifies the investment of time and money, whether a company ultimately franchises or not. If the company moves into a franchise development expansion program, these steps will already be done, resulting in significant savings in money as well as the time required to complete the development project. Some of the important pre-franchise steps are :

(1) Drafting an operations manual that can ultimately become the franchise operations manual. We have a unique three-step program for helping a company write its own operations manual. Besides saving $30k or more typically charged by a “franchise consultant” to write a manual for a business they know absolutely nothing about (which has never made any sense), our approach results in a 100% customized manual that will impress prospective franchise buyers and serve its ultimate purpose – a useful business resource tool.

(2) Developing a training program curriculum for training a the franchise owner in the specifics of opening and closing procedures, marketing, human resource management, business operating procedures, customer relations, quality control and other topics.

(3) Taking steps to protect the brand, logo and tag lines as registered trademarks and service marks. Although use of these marks automatically establish common law rights, registration of the marks confers a much higher level of protection. The best registration is at the federal level through the U.S. Patent and Trademark Office. A federal registration creates rights that apply throughout every state in the United States.

(4) Protecting other intellectual property (proprietary) assets like recipes, customer lists, business operating methods, procedures etc.

FRANCHISING – DIVERSIFICATION: ENTERING A NEW BUSINESS

As a prelude to strategic franchise planning (phase one of a franchise development program), a company that franchises must realize it is entering a new business, offering an entirely different service (training & support) to an entirely new group of customers (business owner-operators). This new business strategy, called diversification, requires different skills, abilities and expertise.

In the new business of franchising, it is critical to develop evaluation, documentation, training, mentoring and consulting skills, all within an ongoing, long term franchise relationship. Because these new skill sets are rarely present within existing personnel, outside experts are needed to train existing personnel and plan the transition. Like a football team, a franchise organization is made up of people who must be properly organized and trained to be effective.

Because it is highly adaptive, a functional franchise organizational structure is appropriate in many cases. These and other issues involve strategic planning to create a “blueprint” for successful expansion efforts. Experience shows that, just like a building, the foundation developed at the beginning will create lasting consequences affecting the relative success (or failure) of the entire venture.

This how to franchise a business series continues with Phase One – Strategic Franchise Planning.