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Franchising: To Consultant or Not?

It seems simple enough, you have run a business for years and years, and people keep telling you — “I sure wish we had one of these in our town.” So eventually someone says it – FRANCHISE! This seems easy, right? You have mastered your business and may have even opened multiple units in your town; and they all have been successful so you would assume that if you were to franchise it would work out well. Here are some things that every potential franchisor should keep in mind when deciding whether or not to franchise their business- and if so, whether or not to work with a consultant.

Truth: Franchising is an Arduous Process

What no one is telling you is that in the beginning, the success of your new franchise venture has more to do with your franchise infrastructure and the early strategic decisions you make, than the business concept you have developed and the experience you have been accumulating over the years. There are many quality franchisors that are very successful, whose actual core products or services may not be the best in their industry, but they perform important aspects of franchising well so they thrive.
Most emerging franchisors spend a significant amount of time deciding to franchise, and then get in a hurry to make up for lost time when they start the process…I sure wish it was the other way around. I founded Upside Group over 15 years ago by working with emerging franchisors who were struggling in their first few years of business. Most of these initial clients had 15 units or less and would pay just about anything for a time machine to go back and make some different initial choices. The expense of the time machine would be minuscule compared to the cost of the early mistakes. Some of the initial choices the time machine could change pertain to the creation of franchise documents, creating franchise sales processes and choosing the right franchisees. Franchising is not a transactional process. Franchising is a long-term relationship that requires the original seeds planted to either blossom in to beautiful flowers or grow in to thick, unmanageable weeds.

Consultants, Lawyers, Paperwork- Oh My!

Let us get back to the original question, to consultant or not to consultant? No, this is not a typo. When you begin your journey into franchising, you likely will hire an attorney, but do you hire a franchise consultant to help create all the other critical items and assist you in making those original strategic decisions? You do not have to retain anyone with franchise experience. You actually can lay out your own operations manuals, design and write the copy for your website and even create the franchise development process for recruiting franchisees on your own. With only a few choices for formal franchise education, would you hire a franchise consultant to educate you on franchising? Do you seek out a franchise professional to help you understand the franchisor – franchisee relationship? Or a franchise professional that will assist you in creating a development process that not only sets the proper expectations with new prospects but follows a franchise compliance program and allows you to find the top franchisees that match your culture and system? It can start to sound daunting, so why wouldn’t every new franchise company hire “franchise experts” to work along with them? From what I deduce, it is for a few reasons.
The first reason typically is cost. Most companies converting to a franchise model do not budget to hire a franchise consultant, so when faced with going at it alone or paying a franchise consultant, they roll the dice. The second reason is the false belief that success in their current industry is the key to franchise success — the idea that if I make a great pizza I will be a great pizza franchise. The final reason often is, emerging franchisors do not know what they do not know and no one is telling them. A franchise consultant might tell them but it is a slippery slope. How do you encourage the entrepreneur that franchising is a great industry without extinguishing their excitement as you begin explaining how many moving parts need creating and the intricacies involved? How do you balance telling a new franchisor how much you like their concept while at the same time if they do not slow down and build the proper franchise infrastructure they will almost certainly fail at this new endeavor? Imagine the scenario from the emerging franchisor’s perspective; up to this point all they have ever heard was how great their business is and how they would be a great franchise — no one has ever mentioned any negatives. The first person informing the franchisor of the challenges is the same person who wants them to sign a contract to help them avoid all the pitfalls they just pointed out! Franchising is a tremendous model for expansion and if the proper respect is given to the education and creation of your franchise system it will pay dividends early in your growth and for years in the future. So back to the original question — to consultant or not to consultant?

 The Role of the Consultant

For me it is a simple answer, do you think your new franchise system has value to a burgeoning entrepreneur? Should someone join your franchise system or go at it alone? Would the new franchisee in your system benefit from your years of knowledge? You have probably forgotten more about your industry than a franchisee will ever know…why wouldn’t they want to get all of your knowledge and not make all those expensive mistakes you made? The proposition of franchising is simple. Instead of trying it alone, pay a reasonable fee, (franchise fee), and I will provide you the necessary training and documentation making your chances at success much greater and shortening your time to profitability. We will continue to work together and I will use my experience to recommend services and vendors who will aid in your ongoing success, in return, you pay me a reasonable continuing fee (royalty fee). This seems very similar to the consulting relationship.
If you believe strongly in the franchise concept, you, by default, have to agree with the benefits of the franchise consultant relationship. Starting any business has its challenges; if it were too easy, everyone would do it. So for the same reasons a franchisee seeks out support from a franchisor to start a business, doesn’t it stand to reason a franchisor who already agrees with that ideology would seek out an expert for their new endeavor and hire a franchise consultant?
So to consultant or not to consultant likely depends on how committed you are to the ideology of franchising as the best model for starting a new business.