Franchising is a successful and proven model for many small-business owners to grow their businesses. It is rewarding for many reasons, including helping budding entrepreneurs gain a foothold in business ownership. However, that does not mean it is easy, inexpensive, or for every concept. It has potential pitfalls and can be risky to do alone. Therefore, small-business owners preparing to start franchising need the assistance of a franchise advisor, who has the experience of running successful franchise concepts.
Here are a few reasons small-business owners need a franchise advisor when starting a franchise:
- The Big Decision – A franchise advisor will help the small-business owner decide if franchising is truly right for their concept and if they are ready to begin franchising. If operations or services cannot be easily replicated at multiple locations, franchising might not be right. If sales are strong at multiple units, then franchising might just be the way to expand the business. These are things a franchise advisor will ask small-business owners to consider before deciding to franchise. How they answer will save the business owner time and money.
- Transition – The role of a small business owner and franchisor are very different. Small-business owners will have to shed some duties, such as day-to-day oversight of all locations, and take on different responsibilities. It’s not uncommon for franchisors of emerging franchise brands to be involved in the strategic vision of the company or the sales process for potential new franchisees. A franchise advisor will let the small-business owner know what to expect and how his or her job might change.
- Capital – Turning a small business into an emerging franchise brand requires expenditures even if starting small and slow. Startup franchisors will be responsible for all the costs associated with the franchise system, including:
- Accounting and legal fees
- Operational manuals
- Sales and marketing materials
- Training programs
- Personnel recruitment
- Research and development
A franchise advisor can help small-business owners determine if they have enough capital by conducting a franchise feasibility study. This study assesses the strengths and weaknesses of your business and determines whether it would be a strong franchise system.
- Support – Franchisors need to provide support for their franchisees and should have support systems in place before selling franchises. Support varies from concept to concept, but most franchisors assist with:
- Site selection and development
- Training – New store opening and ongoing
- Advertising and marketing
A franchise advisor will make recommendations on what support systems to have in place or how to improve them.
- ROI for franchisees – An exciting concept goes only so far converting curious entrepreneurs into franchisees. But a strong return on investment will get them across the finish line. In order for potential franchisees to be convinced they will receive a strong ROI, the business must have solid financials to show, particularly in operating performance. A common valuation measure of a company’s operating performance is earnings before interest, tax, depreciation and amortization, or EBITDA. Franchise advisors can help business owners prepare to become franchisors with a strong EBITDA valuation and help determine whether they are able to provide a strong ROI to franchisees.
Franchise advisors can guide and assist emerging franchisors in many other areas, as well, including:
- Creating barriers to entry
- Developing buying power
- Finding the right franchisees
- Initial preparation of a franchise disclosure document
With 30 years of franchising experience and more than 800 franchise owners representing over 1,200 locations for five brands, Winmark Franchise Partners can help get you started and improve your system’s growth with the right franchise advice. If you are interested in receiving additional information, contact us here or at (844) 452-4600.