Lately, I’ve been thinking about franchises—what it takes to create one, how to scale a franchise effectively, why some fail, and why others don’t. These aren’t easy questions to answer. Each of them may not even have a single right answer. But there are some key things to know and effective strategies that can help you go from point A to point B.
I recently spoke with my good friend Brett Trembly, Esq. of Trembly Law Firm here in Miami. Brett’s years of experience in the area of business law give him special insight into the inner-workings of franchises. As an active member of the legal and general communities in South Florida, serving in leadership roles in both, Brett is committed to not only helping business owners reach their goals, but also giving back.
Take a look at the conversation we had about the nature of franchises. You might learn something that could help your business.
Emilio Diaz: When someone comes to you and wants to scale their small business into a franchise, what are some of the key success factors you discuss?
Brett Trembly: Process, process, process. Before you attempt to start a franchise, you need to systematize your business, and simplify as well. Early franchisors will likely be selling to franchisees without significant experience, so the more simple and predictable the business, the better.
Emilio: How can a franchise create business efficiencies as they grow?
Brett: The same way any business can, document procedures, test, improve, document again. Many business focus solely on sales and growth, and they neglect putting the same effort into growing and improving their product or service. Once businesses hit a certain stage, it becomes about the team and the players.
Emilio: In your experience, what are the top reasons why franchises fail?
Brett: Three main reasons. First, franchises fail because they franchise before they’re ready. There should be at least two, if not three, successful (profitable) locations before a business should consider franchising. One successful location doesn’t mean you should franchise. Many businesses get sold a bill of good by companies that promise to turn them into a franchise and make a lot of money, when the business simply isn’t ready.
The second reason is that franchises hire outside sales companies, and those salespeople make promises the franchise can never uphold. That sets up the makings of a terrible relationship between franchisor and franchisee. Outside salespeople will say anything to make a sale, because they have no duties once the sale is made.
The final reason is under-capitalization. A franchise is a new business altogether, and it cannot and should not be funded strictly with the sale of franchise units. Franchisors needs the financial wherewithal to pay support staff to help the franchisees, to conduct training, to help implement systems, etc. When a franchise gets into a major dispute with a franchisee within the first few years, it’s tough for that franchise to continue.
Emilio: What can Trembly Law Firm do to help franchisors to succeed and grow?
Someday we may do more advising and consulting, but for now, we’re not the total franchise solution by any means. Franchises need a team around them—someone that knows how to market, how to sell, and how to run systems. We do the legal work for the Franchise Disclosure Documents and the Franchise Agreements, and we help with legal matters, i.e., the non-sexy stuff! But what we do is treat the entire foundation of the business, so we’re as necessary as any other piece of the franchise puzzle. We certainly can’t do it alone, though, and the franchise that surrounds itself with the best team is the franchise that will be the most successful.
Are You Thinking of Scaling Your Business into a Franchise?
Are you a franchisor (or would you like to grow your multi-office business into a franchise)? nQuery can help you with a telephony and connectivity solution to scale your business and make it more profitable. Get in touch with us by writing to email@example.com or by calling 305-910-2324.