Franchising can be a smart business move, but not just any business can effectively scale their operations to become a franchise. Some franchises fail while others succeed, and it’s not always apparent why. However, there are a few factors that can predict whether your business is a good candidate to become a franchise operation.
A few weeks ago, I had a short yet illuminating conversation with Eric Gros-Dubois, Esq. of EPGD Business Law in Miami. As a business attorney specializing in finance, Eric is well acquainted with the challenges that business owners face when they decide to scale into a franchise.
Here’s the conversation we had:
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?
Eric Gros-Dubois: The biggest obstacle to creating a franchise is preparing an effective operations manual. The goal is to be able to replicate your success, package it, sell it, and then have your franchisees find their own success—using your formula. So organization, hard work, and putting in the time to write down “the secret sauce” are the keys to successfully starting a franchise. Also, we need to make sure the branding is easy to distinguish, properly registered, and regularly protected by the owners.
Emilio: How can a franchise create business efficiencies as they grow?
Eric: Running a franchising business is completely different, most of the time, from whatever the underlying business is. For example, a successful coffee shop is great at making lattes. When we turn that coffee shop into a franchise, the business will be successful if it can sell franchises, and then effectively run them. Technology is key. Often all of the POS machines will be linked to the franchisor so they can measure revenues and calculate profits. The marketing will be coordinated on a regional, state, or national scale. Training must be developed and regularly offered to the franchisees. Sometimes the owner of the franchisor will be so busy that they will end up selling the original business!
Emilio: In your experience, what are the top reasons why franchises fail?
Eric: Some franchises fail because they fail to recognize the challenges in changing from “selling coffee” to “selling businesses.” The legal risks and challenges are far greater. There are important legal issues that need to be understood, and laws that need to be followed. And since most franchise laws are local, a company that expands into another state might have very different rules to follow. The training and marketing needs to be uniform for all of the franchisees. Also, in the exuberance to sell the franchises, sometimes the franchises might be sold to people who don’t have what it takes to be successful at business. Having unsuccessful franchises leads to legal problems and then issues that hurt the reputation of the brand.
Emilio: What can EPGD Law Firm do to help franchisors to succeed and grow?
Eric: We aim to be there for our clients from when they are planning and in the startup phase, to when they expand and experience growing pains, to taking the steps of franchising their businesses. The legal steps necessary to create a franchise are daunting, but our goal is to make life as easy as possible for our clients. From company creation, contract drafting, tax planning, trademark and copyright registration, to franchise creation and management, we are there every step of the way.
Considering Turning 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 firstname.lastname@example.org or by calling 305-910-2324.