How Franchise Your Business Model Early On

When you sell your first franchise, the initial development efforts typically consist of franchisees who wouldn't necessarily make the cut later in your franchise system's life cycle.  Mature franchise systems are much more aggressive and diligent as to who is allowed into the franchise network.

This isn't necessarily a luxury that new franchisors can afford.  The largest single point of failure for a new franchisor is to not sell the initial five units that start to validate the business model and brand.  This puts a significant amount of pressure on new franchise systems to get these initial units sold and as a result, typically the failure rate is higher for early-stage franchisees.

  1. Who typically buys the first five franchises of a new franchisor? They usually are a bit more entrepreneurial than they probably ought to be. They are willing to take more of a risk and see the longer-term vision of the brand and the leadership of the franchise company. They want to negotiate the fees, territory and other material items in the franchise agreement. As a new franchisor, you need to be careful with who you sell these, while not screening too hard, you also should be able to spot the landmines who really exhibit poor character traits for a franchisee. You also should be conscientious of how large and how exclusive you make territories as these early agreements sometimes become a thorn in growing franchisors' sides as they gave away too much or were too generous with early franchisees.
  2. What kind of terms should be considered when negotiating a franchise agreement with early-stage buyers? We have seen anything and everything negotiated in a franchise agreement, I wouldn’t rule out any possible terms as negotiating points if the buyer is right and the long-term opportunity justifies the deal. Make sure that you get enough money up front and try not to touch royalty structures as the long-term revenue stream will have an exponential impact on your bottom line and in most cases don’t make as significant of an impact in the negotiations of the franchise sale. Look first to the initial franchise fee and territory size, most early-stage franchisees will respond to these offers.
  3. How do you find early-stage franchise buyers? Most of the time, early franchise investors come from the same channels from that the majority of franchise sales originate. We recommend the franchise lead portals (www.FranchiseConduit.com, www.BizBuySell.com, www.FranchiseDirect.com, etc), although they are not necessarily the best leads all the time, they are consistent and with the right sales process will produce sales for an early franchisor. Organic leads will many times play a large role in early franchise sales, pay attention to customers who ask about the franchise, leads that come in off your corporate site or referrals that come to you asking about franchises.
  4. Managing the franchise registration process while you sell your early franchises, you should be careful with managing the franchise regulatory process. First, you need to make sure that you have a good franchise attorney involved in your sales and transactions with each of your new sales and make sure that you have a solid franchise disclosure document. Cover yourself to make sure that the sales are managed appropriately and also that you are careful to manage the franchise registration process.

We recommend limiting any communication with potential franchisees in franchise registration states as soon as you find out what states they are located in. Know the franchise registration states and understand that your franchise must be registered in these states prior to any marketing or sales activities taking place with a potential franchise buyer.

For more information on how to franchise your business and how to sell your first franchises, contact us:

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Splash and Dash Franchise

In 2009, Dan Barton approached Christopher Conner with a unique concept.  Mr. Barton had been in the gym business and had successfully worked his way to the top levels of management with the Gold’s Gym franchise organization.  He was CFO at the time and was making a transition into the pet industry. 

It was a risky move for anyone to leave a global franchise organization as CFO and step into an entirely new business.  The new concept was to be Hollywood Premier Pets, which was in effect a failing pet retail business located in Palm Desert, California.  Mr. Barton had purchased the business and was instituting his new marketing model to help the business come back to life and franchise the model out to other pet stores that were ailing from similar circumstances. 

Dan Barton would be at the time, the first client for Chris Conner and Franchise Marketing Systems. Mr. Conner had to be sold on the concept and being that Franchise Marketing Systems was a new business at the time, it was imperative that the first client be a success.

What was of particular interest about the Splash and Dash model was the residual, repeat business that was created through customer acquisition and loyalty programs.  Mr. Barton had effectively leveraged his experience in the gym business, famous for memberships and recurring billing and utilized the model for the pet industry.

The pet retail business was plagued with what is the primary issue for most retail businesses, how do you get customers in the store often enough to achieve critical mass volume, cover your overhead expenses and ultimately see a consistent profit?  The Splash and Dash concept fixed this dilemma.  In three short months of owning Hollywood Premier Pets, it became clear that the model worked.

The first order of business was to develop a brand that could be scaled globally.  The pet business was big, but it was getting significantly bigger every year, Splash and Dash had what it took to be a global brand, but Hollywood Premier Pets did not.  The organization transitioned entirely to Splash and Dash and the franchise model was created to offer the platform to other stores.

With Franchise Marketing Systems, Splash and Dash developed a strategic plan for franchise growth that focused initially on marketing to existing pet retail and grooming businesses.  This was what all parties involved saw as the low-hanging fruit and immediate opportunity for the pet franchise model.  These businesses were already in the industry and for the most part, were struggling, the value proposition of Splash and Dash would be extremely relevant. 

The franchise fee structure, territory model, support programs and infrastructure were designed to support this growth and allow for duplication of the Splash and Dash model.  

Next was the packaging of the Splash and Dash franchise model.  The systems needed to be documented and organized so that virtually anyone could pick up the franchise operations manual and understand what steps 1 through 20 were and become Splash and Dash of their market. 

The business model was heavily focused on developing clients and therefore had a strong sales component.  Dog Groomers and pet retail owners traditionally were not good salespeople and needed heavy training programs in place to teach, train and then maintain their sales model. 

Good systems were developed to be able to manage the sales and understand what metrics should be in place so that a store could be gauged as to how successful they were in implementing the pet services franchise system.  Branding, marketing, collateral and all associated materials were then developed to be used in all of the Splash and Dash franchise locations and to add value to franchisees.

Then, Franchise Marketing Systems developed the marketing, business development and franchise sales models to go out into the market and recruit new franchise owners.  Within a very short time period, it was obvious that Splash and Dash was a brand with the ability to grow quickly as a Master Franchise was sold in Australia, another in Canada and by the end of the first year of franchising, 23 units franchisees had purchased the model in the U.S. 

New strategic initiatives, technology and management were put into place to support this growth and manage the growing number of responsibilities that came with this growth. In 2014, Mr. Conner and Mr. Barton held strategy meetings again for the purpose of redefining the model which had reached almost 100 locations. 

The new version of the Splash and Dash franchise was a from-the-ground-up retail franchise model that could be offered not only to existing pet industry professionals but also to entrepreneurs who wanted to get into the pet retail and pet services franchise market. 

Today, Splash and Dash have over 100 locations of the business model in operation around the world. Mr. Barton has written books on the industry and is asked to speak at pet industry conventions on how to market and build your pet business more effectively.  Splash and Dash continue to add new franchisees on a rapid scale and the organization has been proven to be one of the industry leaders in the entire pet services franchise market.  Splash and Dash is a perfect example of franchising allowing a new business model to scale quickly and capture market share.

 

For more information on how to franchise a pet business, Contact Us.