Considerations Before Franchising A Different Philosophy
A franchise consultant since 1985, Mr. Siebert founded the iFranchise Group in
1999 as an organization dedicated to developing long-term relationships with
successful franchisor clientele. He is an expert in evaluating companies,
structuring franchise offerings, and developing franchise programs. Mr. Siebert
has personally assisted over 30 Fortune 1000 companies and over 200 start-up
franchisors, and has worked on projects in the U.S. and abroad. Some of the
more prominent companies he has helped include Ace Hardware, BP/Amoco,
Bridgestone/Firestone, Chevron, Circle K, Coldwell Banker, Encyclopedia
Britannica, Guinness, Hallmark, HoneyBaked Ham, IBM, John Deere, Lenscrafters,
McDonald's, Mobil Oil, National Easter Seals, Philips Van Heusen, Praxair,
Ryder Truck Rental, Shell Oil, Successories, and Texaco. He travels extensively
to meet with companies considering franchising, and regularly conducts
workshops and seminars on franchising in cities around the world.
Can franchising work for everyone?
Absolutely not. Just because a business is successful does not mean it is
franchisable. And even if a business can be franchised, a company should first
analyze the costs, weigh the options, and determine the most feasible
alternative for the company based on the growth goals of ownership.
How do you know if a company is franchisable?
A company should possess several basic characteristics. For example, it should
be a proven, profitable concept. It should be able to be taught to the targeted
franchise prospect easily. And, it should provide both the potential franchisor
and the potential franchisee a reasonable return on investment. Depending on
the risk associated with the franchise investment, we look for a minimum ROI of
between 15% and 20% after deducting a royalty and an owner/manager's salary.
How do you determine if franchising is the correct strategy?
I always ask business owners about their personal and business goals. Where do
they see themselves in the next five or ten years? Perhaps running a larger
business with multiple locations? Perhaps they desire to sell the company? Once
we know personal goals, we can better determine how many franchised locations
they will need to attain those goals and whether there are other alternative
strategies that they should consider. We then assess how many franchises they
can sell, support, and service, and what will be needed to achieve those goals
- both in terms of people and capital. The achievement of specific goals is
always the basis for any strategic plan that we create.
When is a business owner ready for franchising?
The first thing I tell potential franchisors to keep in mind is that by
franchising, they're starting a new company, and a new way of doing business.
They will no longer be in the coffee brewing, home remodeling, or sandwich
making business. They will have to be focused on the sales and support of a
chain of replicated business units, which may require an entirely different
mindset on their part. To be successful, they have to be dedicated to creating
a "win-win" relationship and committed to the success of their
franchisees.
What are the advantages of franchising?
Simply put, franchising is all about leverage. Franchising allows the business
owner to leverage off of the capital provided by their franchisees. It allows
them to find and retain highly motivated "managers" that will be with
the company long term. And it allows them to grow much faster and with a leaner
organizational structure - as the franchisor will leverage off of the time and
effort of its franchisees. Franchising allows companies to grow much faster and
with a vastly reduced investment.
Are there disadvantages to franchising?
The main disadvantage of franchising is that the franchisor will need to
"share" its profits with its franchisees, instead of realizing every
dollar that goes to the bottom line.
What does your company do to help franchisors?
Once we've determined that franchising is the right option for a company, our
industry experts develop business implementation plans, financial analyses for
fee determination, training materials, operations manuals, and marketing
materials and plans. Every one of our engagements is customized to our client's
needs, so every engagement is different. But our goal for every client is the
same - to be an integral part of their long term success.
But, I must emphasize again the importance of the up-front work that must
precede the development of any documents. The focus of the iFranchise Group is
heavily geared toward educating and guiding prospective franchisors BEFORE they
take the leap. Along with the expected consultative advice, we also offer
online multimedia presentations and other self-service tools on our Web site,
so that business owners can educate themselves on franchising.
We do this because the iFranchise Group's ultimate objective is to see
companies grow at a rate they are comfortable with, and assist them at every
stage along the way -- from initial strategy determination, to development of
operations, legal, managerial, and marketing tools, all the way through to
monitoring and improvement of existing programs. I've always thought it was
important to stick by companies before, during, and throughout their
franchising efforts. I don't subscribe to the philosophy of just setting a
company out into the wild world of franchising to fend for itself - it just
doesn't feel right.
What do you recommend to someone considering franchising?
I would encourage anyone interested in franchising to do their homework, and to
fully utilize the tools that are available, before jumping into anything
blindly. Franchising is complex, but highly rewarding if done right.