Consulting Services for Franchisors
Consider these concepts if you feel that franchising may be a path for your future growth.
You must have an established brand and an operating model that is both compelling and can be duplicated at scale.
The brand, products, and services must be attractive to customers, operationally viable, scalable, and financially-compelling.
Never franchise too early in your brand/business growth cycle.
Fine-tuning an immature business is difficult. It is, therefore, exponentially more challenging to “tweak” your operating business model and brand while simultaneously working with franchised partners. Not only will you confuse your franchisees, but you run the risk of backlash against continuous change efforts.
You will need many support services to ensure the success of your franchisees and to maintain the integrity of your brand.
Numerous support services should be in place prior to the commencement of your franchise effort. These services will add to your administrative expenses. Better franchisors provide all, or at least most of the following: operational field consultations, training systems and training team assistance, purchasing and procurement, marketing (particularly digital), technological platform assistance (including software and apps that add value to both the customer experience and overall operations), financial guidance, real estate guidance, prototype construction plans and project management assistance, etc.
The more complex the business, the more unlikely it is that franchising will be a good fit.
If the complexity of your business is vast, relying upon others to execute flawlessly could be risky. Ask yourself if the operating model is easily transferable in terms of the skill-sets required to operate well.
You will give up a degree of control and must be psychologically willing to do so. As you scale upwards, you are bringing on-board independent franchisees that will interpret your operating guidelines every day. You are not 100% in control, no matter how tightly-structured your franchise agreement may be. Do you have the psychological and physical stamina and mindset to lead a business that includes large multiples of franchisee partners, each with their own personalities and set of issues?
Your capital investment and ROI must be enticing.
Only franchise models with highly-favorable ROI’s (returns on investment) will resonate with smart investor/operators. If you have not yet fully worked through your economics, and are still not assured of compelling returns on the required investment, then franchising may hamper your expansion and damage your brand. Conversely, what if the economics are so strong? If that is the case, you may conclude that your returns are at such a favorable level that it may not be necessary, or even desirable, to franchise. Do the math!
Exercise Careful Judgment.
Many other decisions surrounding franchising must be made, such as defining geographical expansion areas, investor criteria, operator experience, single-unit franchises or multi-unit development approaches, royalty rates, franchise fees, marketing fund designs and mandates, and much, much more. Importantly, there are many legal issues (federal and state) to be considered in franchising, and franchising is regulated by numerous laws. So, once you have addressed all of the above issues, and if you still believe that franchising is right for you, be certain that you have capable and enlightened professionals to guide you in the critical, strategic, decision-making that will impact the future of all aspects of your business.
Is Your Restaurant Concept Viable for Franchising?
Below are parameters that lend themselves to the successful development of a franchised restaurant chain concept geared to our new reality of 2020 and beyond.
- Menu must be highly-differentiated, recognized as such by the consumer, and “craveable” in a manner that would create consumer demand on a return cadence that supports a purchase pattern (frequency) of not less than 10 times per year
- Daypart coverage: concept ideally should have 3 dayparts (lunch, dinner, and catering)
- Significant takeout and delivery component of not less than 50% of revenues must be achievable
- Strong digital capability to facilitate takeout, delivery, and touchless transactions
- Culinary operations must be manageable and replicable with consistency (co-packing and/or central commissary production considerations for more complex products)
- Financial model must be sustainable and must produce (at a minimum) a restaurant level operating profit margin > 20% (after all franchise fees and payments); and a sales to capital investment ratio (investment turnover) of > 2.25: 1
- Geographical clustering should be attempted for effectiveness and efficiencies of operations, marketing, and brand-halo impact
