iFranchise Group

Opportunity Cost

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.

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