External consultant: where to focus on a franchise business
Hiring of staff. The success of a franchise depends on hiring the right people. Start with your key management staff, who should be selected with the help of the franchisor. You and the management team can then work together to hire the rest of your staff. Today’s hiring process needs to be aggressive and creative, with the hope of paying employees at or above the market. Incorporate reward programs to help retain employees, so you don’t have the added burden of constantly hiring and training new people. A training. Franchises are developed by an experienced businessman with a proven track record, so build on this model of success first. Take advantage of the franchisor’s experience – and the experience of franchisees already in the system – by carefully reading manuals and attending training sessions. A representative of the franchisor should also visit you for market specific training and to help train your staff.
Financial control. There is nothing more important to the success of a franchise business than financial controls and reporting. You need to establish monthly and annual budgets (pro forma analysis), all based on the performance and projections of the franchise system. Any deviation from your pro forma should be dealt with immediately. If you don’t have a background in finance, hire someone to help you with this crucial financial piece. Don’t be frustrated.
Marketing. There is no substitute for effective marketing. In addition to paying a monthly fee (a percentage of sales set by your franchise agreement) to the franchisor, you will also have a required marketing fee, which is a percentage of sales, typically 1 to 3%. These fees are intended for marketing the concept as a whole, not just your unit. There is normally an additional requirement to spend a fixed amount on local marketing. Therefore, it is wise to find a knowledgeable local marketing agency in your area to advise you on where to spend your funds.
Franchising concepts can give you a head start in growing your business, but things don’t always go smoothly when you start up. With all businesses, there is a learning curve when you step into your niche and make sure customers know your concept and patronize it. Don’t be frustrated; give it the time it needs. And don’t forget: keep that pillow of money.
Dennis Monroe is a Distinguished Fellow of the Faculty of Law at the University of St. Thomas, and Co-Founder and President of Monroe Moxness Berg PA.
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