During the franchise development stage, it’s important to consider and implement the following strategies and best practices:
- Set Realistic Goals.
Franchising is more of a marathon than a sprint. Set realistic goals as to what franchise success will look like for you. What are realistic sales goals in your first year and over the next two, three, four, and five years? The best time to start planning your five-year strategy is before you launch your franchise. - Research Your Competitors.
You need to competitively position your franchise offering among your competitors. Within your FDD and franchise offering, you will be disclosing important cost metrics that include things like the initial franchise fee, the ongoing royalty rate, franchisee fee obligations, territory sizes, and a broad range of other legal and business factors that will influence the profitability of your franchisee’s operations and their overall rights. Evaluate your competition, understand their metrics, and work with your lawyer to ensure that your FDD is competitively positioned. - Develop Your Franchise Offering for Both Individual and Multi-Unit Sales.
Having the ability to sell multiple franchise units to a single franchisee is important. What does this mean? Many times, franchisees want to acquire the right to develop and open multiple locations or operate in multiple territories. That is, they don’t want just one location or one territory. To be able to offer and sell both individual unit franchises and multi-unit franchises, your FDD must be structured to accommodate the sale of an individual unit franchise to a single franchisee. This is where the franchisee wants just one location and signs a single franchise agreement. If a franchisee wants to buy the right to open multiple locations, they are given a development agreement. They’ll also get a schedule that gives them a certain amount of time to develop their additional locations. We call this a “dual structure.” Developing this dual structure will mean more upfront planning and work, but for the vast majority of industries, launching your franchise without the option will cost you sales and put you at a competitive disadvantage in the long run. - Make Sure Your FDD Is Compliant for Every State.
One of the most frustrating things for franchisors is being delayed and not being able to sell in their anticipated timeframe. From the start, your FDD needs to be multi-state compliant. This means it should be ready for registration and filing in every state. How to do this? As mentioned earlier, your lawyer needs to prepare your FDD on a “multi-state” basis. That is, your FDD should include – on a state-by-state basis – required addendums and modifications to make your FDD compliant with various state laws. This is especially important in the franchise registration states. Without this level of multi-state compliance, you risk compliance violations and potential roadblocks to future franchise sales. - Learn Franchising and Get Involved in the Franchise Community.
Use this time to start learning more about the franchising process. Get involved in franchise events. While your franchise lawyer is developing your FDD, during your development calls and meetings he or she should also be helping you learn to franchise and get you involved with franchise organizations, networking events, masterminds, and other professionals and suppliers that will be of value after your franchise launches.
Tip: Speak to other franchisors and always be thinking about the next steps
Source: Franchise law solutions