You’ve made up your mind to franchise your business, and now you need to decide how to accomplish that professional leap. One important component to consider is how quickly you want to develop and advance the business. To expand aggressively is a gamble and a significant expense; the risk and cost involved in developing your franchise more slowly are limited.
Slow vs. Fast
Conventional wisdom encourages new franchisors to start conservatively, reasoning that an entrepreneur necessarily risks more with no-holds-barred expansion than he or she would by taking a slower approach. Expansion is less problematic and risky once the franchise is established and has proved successful. On the other hand, a company may stake overly aggressive growth over the loss in market leadership, which may result from overly cautious growth. This is the contention of those who opt for an assertive growth model. For your franchise, it is important to analyze all the risks involved — from both sides — before you decide.
Regardless of the expansion approach that you prefer, there are ways to hedge your bets and help ensure your success as a new franchisor. However, because their wagers are so much larger, the aggressive entrepreneur will want to consider each issue more carefully than someone whose franchise growth is slower.
An operations manual is your governing document and regulates quality within the franchise system. Without this manual, your brand maintenance is in jeopardy. When properly designed, the operations manual both controls for quality and limits the franchisor’s liability in regard to the actions and performances of the franchisees and their employees.
An important note: Despite this limited accountability, successful franchises are made through the franchisees. When your early franchisees succeed, your franchise’s growth is both likely and liable. Conversely, if early franchises fail, you won’t be facing expansion but collapse.
While the planning process for a slow-growth company can be less formal and arduous, quick or large-scale growth requires a comprehensive grasp of the market and an appreciation of each business decision’s financial repercussions. You need to possess a solid understanding of the organization and to accept the costs — workforce and capital — of building that organization.
For the aggressive franchisor, small mistakes — when multiplied by hundreds of franchisees — can equal failure. Moreover, to plan for the substantial venture — and to loose it ultimately — is incredibly costly. It may be in your best interest to hire a consultant to help you work out these plans. The type and range of the research, the amount of financial footing and forecast, and various other factors will determine these costs, which may reach as high as $35,000 or more.
An important note: If you wish to sell a few franchises locally, the necessary documents can be finalized for around $50,000. More aggressive expansion plans could cost you twice as much.
Marketing and Sales
Careful vs. aggressive franchisors differ in the area of marketing, as well. If your desire for growth is moderate and you’re willing to take your time, you can allow prospective franchisees to come to you. Conversely, the aggressive entrepreneur must be proactive and resolute to market his franchise. A professional, well-designed brochure and website are essential to establishing the credibility of your franchise. Pertinent information on your franchise, along with lead collection forms, should be available in the brochure and on the website.
If your method of growth is slower, as the business founder you may act as the primary franchise salesperson, with assistance from staff. If your wish, however, is for rapid expansion, one of your first hires must be the franchise salesperson. Here again, the desire to grow quickly will cost you: An established franchise salesperson will generally expect a compensation package in the low six figures.