Foreword xv
Introduction 1
About This Book 1
Foolish Assumptions 2
Icons Used in This Book 3
Beyond the Book 4
Where to Go from Here 4
Part 1: Wrapping Your Brain Around Franchising 5
Chapter 1: The Power of the Brand 7
Tracing the History of Franchising 7
What Is a Franchise, Anyway? 9
The effects of franchising on modern business 9
The success of franchising for business owners 10
What’s the Big Deal with Brands? 11
Franchise Siblings: Three Types of Franchising 12
Traditional franchising 12
Business-format franchising 12
Social franchising 14
The Roles and Goals of Franchisors and Franchisees 15
Looking at the world through franchisor lenses 15
The franchisee’s end of the bargain 16
Nuances of the Franchisor/Franchisee Relationship 18
Chapter 2: Franchises Come in Different Sizes 21
Getting Started with a Single Franchise 22
Where to start: It’s two in the morning and you can’t sleep 22
Sifting through the options 23
Paying attention to what’s hot 25
Adding Franchises, One at a Time 27
Flying solo: Single-unit franchises 27
Growing a family one franchise at a time 28
Developing a Territory on Your Own 29
Becoming a Master Franchisee 32
The Area Rep: Master Franchise Lite 34
Sharing Risks and Rewards in a Joint Venture 35
Councils, Associations, Cooperatives, and Buying Groups 36
Buying Franchisor-Owned Locations 37
Chapter 3: Mirror, Mirror, on the Wall 41
Starting Your Own or Joining a Team 42
Consider the Pros and Cons 43
Advantages of making a franchise investment 43
Disadvantages of making a franchise investment 45
Being Realistic about Being a Franchisee 48
Looking in the Mirror: A Self-Evaluation 49
Are you willing and able to learn new skills? 49
Would you rather give or take orders? 50
Can you say goodbye to corporate perks? 51
How is your health? 51
Do you like people? 52
How much can you dish out and take on? 53
Consider your family and friends 53
Chapter 4: The Legal Issues 55
Franchise Regulation: A Little History 56
The State Regulatory Landscape 57
The Franchise Disclosure Document 58
What you will find in the FDD 58
The waiting period 59
The FDD, Item by Item 60
Calling out a few key items 71
How much can I make? 73
Additional information available when an FPR is provided 74
Understanding a franchise agreement 75
The franchisor’s verbal promises 75
Finding professional advisors 75
Negotiating with a Franchisor 77
Part 2: Buying a Franchise 79
Chapter 5: Researching Franchise Opportunities 81
Digging Up the Good Information 82
The Internet is the place to start 83
Print directories 84
Publications to understand franchising 84
Attending trade shows and expositions 85
Hot and trendy, but does it have any legs? 86
The Role, Risk, and Benefits of Brokers 87
Do brokers work for you or the franchisor? 87
Deciding Whether to Buy Old or New 88
Sizing up an existing franchise 89
Investigating new franchise opportunities 91
Benchmarking Franchise Offerings 92
Going Back Home and Eyeing Locations 96
Chapter 6: Raising Capital: Wowing, Wrangling, and Winning 97
Examining Your Current Finances 98
Ask yourself some probing questions 98
Seeing what you can afford 99
Consider a “used” franchise 99
Determining Franchise Investment 100
What your startup costs may look like 101
Initial expenses to set up shop 102
Do Your Homework before Holding Out Your Cup 105
Creating a business plan 105
The SBA: What they want to see 109
Projecting income and cash flow 112
Raising Capital 114
Avoiding debt 114
Visiting the bank 115
Finding an angel investor 116
Seeking other financing strategies 117
Social Franchising and Funding 117
Part 3: Operating Like a Well-Oiled Machine 121
Chapter 7: Choosing a Location 123
Selecting a Site 124
Considering common site options 124
Working a franchise from home 126
Opting for alternate or off-street sites 127
Dual branding: Sharing your space 127
Finding Your Franchise’s Habitat 128
Finding out what constitutes a good site 129
Using the franchisor as your compass 130
Using data to evaluate a site on your own 132
Protected and Exclusive Areas 132
Encroachment Policies 134
Signing the Lease 135
Meeting Your Franchise’s Requirements 136
Implementing a franchisor’s designs 136
Getting approvals, permits, and licenses 137
Beginning construction 137
Getting help with the opening 138
Chapter 8: Getting the Goods 139
The Basic Requirements 140
Meeting Approved Standards and Specifications 141
Making mandatory purchases 141
The Role of Buying Groups and Purchasing Cooperatives 146
Receiving merchandise 147
Receiving deliveries 147
Checking the goods after they are in your location 148
Verifying invoices 149
Maintaining Inventory 149
Back of the house 149
Front of the house 152
Chapter 9: Training and Hiring 153
Getting Good Training for Yourself and Your Management 154
Getting good initial training 154
Receiving effective ongoing training 156
Understanding Joint Employment and Why It Spooks Franchisors 157
Who is the employer anyway? 157
The role of the franchisor in human resources policies 158
Training Your Staff 160
Taking responsibility for getting your gang in gear 161
When English isn’t an employee’s first language 162
Finding a method to the madness 163
Building and Leading Your Team Effectively 164
Recruiting the right team and rewarding them in the right ways 166
Following equal opportunity guidelines 168
Conducting Interviews 169
Asking the right questions 171
Continuing an interview 173
Doing background checks and other post-interview diligence 173
Retaining Good Employees with a Good Work Environment 174
Fostering a good work environment 175
Hiring good managers 176
Thinning the herd: When terminations need to be done 176
Ensuring workplace safety 177
Chapter 10: Working with Franchisors and Fellow Franchisees 179
Playing by the Rules 179
Meeting franchise system standards 180
Supporting and watching the system 182
Attempting to change the system 184
Building a Relationship with Your Franchisor 185
Being a team player 186
Getting what you need from the relationship 187
Dealing with Change 191
When the franchise system changes 191
When conflicts occur 192
Reaching Out to Your Fellow Franchisees 194
Joining advisory councils and associations 195
Being number one in a class of one 197
Chapter 11: Attracting and Keeping Customers 199
Creating an Effective Marketing Plan 200
Evaluating National and Local Advertising Strategies 204
The franchise system ad campaign: Collective marketing dollars at work 204
Local marketing options 206
All Hail Customer Service 210
Knowing your customers 210
Showing honesty and integrity 212
Making sure customer experiences are positive (and fixing ones that aren’t) 213
Looking beyond your cash register 215
Part 4: Expanding or Cashing Out 217
Chapter 12: Acquiring Other Franchises 219
Assessing the Advantages and Disadvantages of Multi-Unit Operation 220
The advantages 220
The disadvantages 221
Checking Your Franchise Agreement: Can You Buy Another Franchise? 222
Reviewing Your Resources 223
Be honest: Are you really ready? 223
Look at your business and finances 224
Understanding Your Purchase Options 227
Starting from scratch 227
Investing in multiple units 228
Buying a franchise from another franchisee in the system 229
Measuring proximity to yours 230
Retrofranchising: Buying a company-owned location 231
Converting a competitor’s location 231
Acquiring an area 232
Chapter 13: When the End Is Nigh 235
Decisions, Decisions 236
Going for Round Two (or Three or Four): The Successor Franchise 238
Paying the successor fee (if there is one) 238
The successor franchise agreement 239
Changes that have sparked controversy 240
Bowing Out at the Right Time 244
Getting personal 244
Examining your world 245
Leaving It to Your Children 246
Selling Out 247
Sprucing up the joint: Getting the most return on your investment 248
Figuring out how much it’s worth 250
Playing by the franchisor’s rules 251
Selecting a sales method 253
Now That the Party’s Over 254
Reflecting on the experience 254
Making the next move 255
Part 5: Building Your Own Franchise 257
Chapter 14: From Small Business Owner to Franchisor 259
Turning Your Small Business into a Bigger Chain 260
Deciding whether your business should be franchised 261
Putting the preliminary legal requirements in context 261
Criteria for Becoming a Franchisor 262
Do you have an operating business? 265
Will consumers need or want your products and services tomorrow? 265
Are you committed to franchising? 266
Do you have enough potential franchisees and do you know who they are? 268
Do you have a system? 270
Can you teach others how to operate your system? 271
Are your products and services any good? 272
Will the economics of the business support a franchise expansion strategy? 273
Beginning Your Franchise Program: Who Should Take the Reins? 275
Doing it yourself: Success or sure failure? 276
Watching out for “franchise packagers,” wolves in pros’ clothing 277
Finding professional advisors to guide your way 280
Passing Go with Your Franchise Idea 282
Brainstorming a strategic plan 283
Fleshing out your strategies 284
Creating a plan for action 284
Developing the legal documents 285
Chapter 15: Recruiting Franchisees 287
The Essence of the Ideal Franchisee 287
Focusing Your Market Strategy 289
Reeling In Great Franchisees 291
Defining the franchisee profile 291
Doing it yourself or through third-parties 293
Reaching out through the right media 294
Developing the Recruitment Organization 301
Contact management software 303
Finding the right franchise recruiting professional 304
Staffing your recruitment organization 304
Ten Steps to Franchise Recruitment 308
Steps 1–4: The introductory phase 309
Step 5: Discovery Day 311
Step 6: Follow up after Discovery Day 311
Step 7: Follow up again 312
Step 8: Make a decision 312
Step 9: Close the deal 312
Step 10: Complete the process 313
Working the Validation Process 313
The Franchise Sales Presentation 315
Finalizing the Selection Process 318
Chapter 16: Expanding Abroad: International Franchising 319
Taking Your Franchise Abroad: Know What You’re Getting Into 320
Investing capital 325
Working with third-party intermediaries 326
Budgeting for capital investment 328
Understanding the necessity of hiring an experienced attorney 331
Considering the implications of language and culture 334
Getting your money out 336
Product sourcing 337
Protecting trademarks, trade secrets, and other valuable brand assets 337
Decisions, Decisions: Whether to Make the Leap 338
If You Decide to Cross the Border 341
Finding the right franchisee 341
Entering a foreign market 342
Negotiating the deal 344
Bringing Foreign Franchises to the United States 346
Chapter 17: A World of Good with Social Franchising 349
BOP: The Base of the Pyramid 352
The Challenges for Social Franchising 355
CFWshops: An Example of a Social Franchise System 356
How CFWshops got started 356
Using the hub-and-spoke and other variations of commercial franchising 358
Who Are the Franchisor and Franchisee in a Social Franchise? 360
Financing and Developmental Benchmarks for Social Franchises 362
Stage one: Developing and proving the concept 362
Stage two: Proving the replicability of the concept 363
Stage three: Developing the franchise system 364
Stage four: Expanding locally and nationally 365
Stage five: Expanding globally 365
Delivering on the Brand Promise 366
Resources for Social Franchising 367
Government funding agencies for global development 367
Private philanthropic foundations 368
Corporate philanthropists 369
Impact investors 370
Part 6: The Part of Tens 373
Chapter 18: Ten Keys to Franchisee Success 375
Make Sure You Have Enough Money 375
Follow the System 376
Don’t Neglect Your Loved Ones 376
Be Enthusiastic 377
Recruit the Best Talent and Treat Them with Respect 377
Train Your Employees 378
Give Customers Great Service 378
Get Involved with the Community 378
Stay in Touch with Your Franchisor and Fellow Franchisees 379
Pay Attention to the Details 380
Chapter 19: Ten Questions to Ask before Becoming a Franchisor 381
How Good Is Your Product/Service? 382
Can You Manage the System? 382
Do You Have the Commitment? 383
Can You Systemize Your Business? 383
Can You Train Your Franchisees? 383
Can You Localize if Needed? 384
Do You Have the Necessary Capital? 384
Are Enough Franchisees Out There? 385
Do You Understand Franchising? 386
Are You Willing to Hire Proper Franchise Professionals? 386
Appendix: Glossary of Common Franchising Terms 389
Index 397
