How to Set a Realistic Timeline and Budget to Start a Franchise
Your business is doing well. All locations are profitable and operating efficiently. Employees are happy and demand is high. Competition is not a concern thanks to the differentiators you’ve built into your concept.
You are eager to grow the brand and franchising makes the most sense to expand. But, before you do, you have to realize franchising is a marathon, not a sprint. You will need to develop an attainable timeline and realistic budget before you launch your franchising campaign. Realistically, it will take some time – from a few months to a year or more – depending on your concept and how efficient your systems and operations are. It will not happen overnight. Your timeline should include:
- Step 1: Conduct a Franchise Feasibility Study to determine if franchising is a good fit for you as an entrepreneur and a good match for your particular business model. As a franchisor, your role will likely change. You may need to work to develop systems and operations. You may have to be part of the franchise development team that recruits franchise candidates and awards franchises. While your concept works in one market, it may not work in others. If your systems have quirks, they may lead to larger challenges as your business expands. A franchise feasibility study will shed some light on whether franchising is right for you and your concept. Let’s assume you and your business are right for franchising. Next…
- Step 2: Establish a budget – for costs and time. As an emerging franchisor, you will be responsible for all costs associated with the franchise system. There are many variables that can affect the cost of your business because every franchise is different, but you can count on including costs for:
- Training programs
- Operational manuals
- Sales and marketing material
- Accounting and legal fees
- Research and development
- Support staff as you grow
- Technology investments
- Franchise development
- Step 3: Prepare your brand standards manual and standard operating procedures. This will include documenting all processes and procedures it takes to operate your business. You will need to determine all the critical items that need to be included in each location. Consider working with an experienced professional in the franchise industry to help you document processes and procedures in a brand standards manual and operations manual, as well as a training manual, a marketing manual and more.
- Step 4: Meet the legal requirements for starting a franchise. Hire a franchise attorney to help prepare and register your Franchise Disclosure Document (FDD) with the Federal Trade Commission and to draft your franchise agreement. The FDD can be an effective tool for franchise development, especially your Item 19 – Financial Performance Representation. There are many elements to the franchise agreement, including, but not limited to:
- Initial franchise fees
- Royalty fees
- Start-up costs
- Franchise candidate requirements
- Real estate requirements
- Financial performance representation
- Franchisor and franchise responsibilities
- Step 5: Assemble your support team. As your franchise system grows, so will your support team as demand will increase in each area. A support team will help with various franchise services, such as:
- Franchise development
- Field support
- Technology support
- Step 6: Begin franchise recruitment with a comprehensive franchise development process that includes a competent franchise development team. The process should take the franchisee candidate from the inquiry phase to the signed agreement and will include a thorough discovery day. You will want to budget for marketing and lead generation, which should include advertising and public relations. Your franchise development team should have franchise sales experience, be knowledgeable about the industry you’re in, and be friendly and helpful.
- Step 7: Train and support your franchisees. Once you begin signing franchisees, your training and support teams should be ready to provide an in-depth education to them and their staff on the systems and operations. This is not only necessary for a strong grand opening, but for continued success throughout the duration of the contract.
Winmark Franchise Partners, with 30 years of franchise experience and more than 800 franchise owners representing more than 1,200 locations for five brands, can help you develop your timeline and grow your brand through sound strategy and expert franchise advice. For more information, contact us here or at (844) 452-4600.