Franchising Without A Franchise Consultant - Is It Playing With Fire?

If a business were to look at franchising as a method of expansion, most probably it would engage a specialist franchise consultant for development work. This should ensure that the business has the necessary knowledge, skills, tools and system in place for the franchisor's journey ahead. But franchise consultants don't come cheap. So some business owners, even without the necessary technical know-how, may just take reference from current market offerings and and choose to create their own franchise system themselves. But with the business at stake here, is it a good idea? And for the consulting fees that are being charged, what exactly does the consultants do? Let's take a look.


What Professional Services Do Franchise Consultants Perform?

Knowledge Transfer

The very first role that a franchise consultant will take on should be one of an educator. This is where they will provide market knowledge and expert insights to the owner looking to expand through franchising. More importantly, the franchise consultant should explain the basics of franchising and the responsibilities that come along with it. On top of that, the business owner must completely understand the additional resources and manpower they will need to invest to provide the necessary support for the franchise system. This basic introduction to franchising will help the business owner to visualize and initiate internal planning. In other words, the prospective franchisor must know exactly what they are getting themselves into from the very start. Selling a franchise is one thing, maintaining the franchise system is a totally different matter.

Data Gathering & Analysis

As with any business plan, having a sound understanding of the business is critical to developing a practical and feasible system. The franchise consultant will look to gain a thorough understanding of areas pertaining (but not limited) to operations, revenue streams and costs. Some business owners may feel that by taking on franchising, they will lose their proprietary items or methods. So this is where the franchise consultant may come in to provide value-added advice on protecting your business' intellectual property if necessary.

Franchise Model Configuration

Coming up with the structure for franchise fees, royalties, necessary marketing contributions and other associated fees, is not simply plucking numbers from the sky and putting it into a franchise offering format. Through analysis of the business and income streams, the franchise consultant will appropriately structure the franchise model in a manner that is not just viable but, perhaps more importantly, specific to the business' situation and needs. The key is to create a model that balances between maximizing profits for the franchisor while ensuring prospective franchisees view the financial benefits attractive enough to invest in the franchise. A small percentage difference in recurring payments to the franchisor may even lead to the franchisee's business success of failure.

Development Of Operations Manual

An operations manual will be a reference point for franchisees and their employees whenever they are in doubt of any processes or procedures. It will also help those within the franchise system to learn and understand their roles and responsibilities. Although the company may have within their ranks experienced personnel, these personnel may lack the necessary skills to deliver knowledge in an easy-to-understand written format. Insufficient or incorrect descriptive information could lead to disastrous outcomes for both brand and business. The franchise consultant will be better equipped to deliver the operations manual with their own techniques.

Development Of Franchise Agreement

While the franchise consultant may not necessarily develop the franchise agreement (as drafting the contract requires legal qualifications) they will be able to identify and highlight major terms and conditions that should be included within the contract. Most franchise consultants will be able to provide a document to highlight the major points within the franchise agreement and this saves the business owner both time and money. Furthermore, strategic assessment and planning by the franchise consultant, coupled with developmental knowledge will ensure that the agreement being developed is specific to the business, objectives and situation.

Typical Problems That Could Arise From Not Engaging A Franchise Consultant

  1. Recruitment of unsuitable franchisees as the franchisor is unable to define recruitment criteria for suitable franchisees.
  2. Difficulty in identifying roles and responsibilities within a franchise system, both of a franchisor and franchisee.
  3. Franchisees unsure of operational methods to replicate the successful concept due to insufficient training or lack of reference materials.
  4. Unhappy franchisees who feel they are not getting what was agreed upon may seek compensation from the franchisor.

Franchising has proven to a popular business expansion model but it should be done right to benefit both franchisor and franchisees in the long run. Businesses looking to franchise should understand that developmental planning and execution by a specialist franchise consultant represents a key function to any franchise system and it requires specific knowledge to encompass practicality and sustainability.

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