Strategic Franchising–an Overview

Franchising can be lucrative when executed well but the inverse is also true. Adopting and executing the wrong franchising strategy can be costly and that’s why preparation, performing due diligence, and hiring a reliable partner or employees is key.

Most successful franchisors consult a top franchisee attorney at every step of their journey. Unfortunately, most prospective franchisors consider legal consultation a waste of money and end up paying dearly. Besides seeking legal counsel, you should aim for strategic franchising. But what is strategic franchising?

What is Strategic Franchising?

Strategic franchising can only be achieved with a well-thought-through plan that includes various aspects, such as cost-benefit analysis, financial & technical analysis, and others. A wrong strategy can be costly, as aforementioned, and may result in:

  • Running short of operation and maintenance funds before the expiry of a franchise term;
  • Losing several investors due to breach of trust, such as improper disclosure;
  • Facing lawsuits thanks to improper closure of the business;
  • Investors fail to renew their contracts because of poor management and administration of the business by the franchisor.

The above-bulleted scenarios can be avoided if the franchisor had reliable support. Establishing and running a franchise successfully are two different things that can be very involving. Succeeding in a sole proprietorship is not a guarantee that you’ll succeed in franchising; the two business models–franchises and sole proprietorships, have different needs. Unlike in sole proprietorships, you’ll need the following in franchising:

  • Legal agreements;
  •  Business name or trademark registrations;
  •  Marketing brochures;
  • Significant finances;
  • Control and monitoring systems;
  •  A thriving online presence and more.

A strategic plan involves capitalizing on the experience and knowledge of the prospective investor and new hires to avoid costly trial and error mistakes associated with startup franchises. Expert advice can be invaluable when establishing a franchise and will also increase the chances of success of your brand.

The experts can include accountants, attorneys, web developers, marketing experts, and other consultants having franchising experience. You can also hire the services of recruiting agencies to ensure prospective candidates for different roles have the necessary skillsets and experience. Each member of your support team makes a different, but significant, contribution. The aforementioned experts have individual strengths but they should work as a team to achieve a common goal.

How can Franchise Consultants Help?

Franchise consultants help in the development of the business model–the consultants can assist in:

1. Business Performance Analysis

Franchise consultants can tell whether it’s worth franchising your business or whether the business is lucrative by studying your competition in that industry.

2. Cost Estimates

The consultants can inform you about the estimated costs required to establish the franchise.

3. Market Research

Market research helps you understand different aspects of the target market, including competition & competitive advantage, market hostility, and others.  You will also know what differentiates your brand and leverage.

4. Poaching Ideal Candidates

Consultants can help you create an ideal profile for prospective franchisees and other support staff who will fill other advertised positions.

5. Recruitment

The consultants can an active role in the recruitment process, such as shortlisting and interviewing candidates to help the franchisor make informed decisions.

Other roles of franchise consultants can include:

  • Assisting in developing a strategic plan for the success of prospective investors;
  • Establishing controls and measures to ensure the brand is a going concern;
  • Drafting operation manuals outlining the expected business operation strategy to be adopted by the franchisee, including the best practices;
  • Acting as the support department during the establishment of the franchise until a professional support team is hired;
  • Recommending professionals that they’ve worked with, such as attorneys, ad agencies, public relations service providers, and others.

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How can a Franchise Lawyer Help?

A franchise lawyer can help with the legal aspects of the franchise once the strategic plan is in place. Franchise lawyers can help in:

1. Registering Trademarks

A registered trademark provides sufficient proof the person named thereon is the legal owner of the named business. A trademark allows prospective buyers or investors to operate a business under the name of the franchisor. Your lawyer must ensure that proposed trademarks are not in existence or are not used by other businesses.

2. Helping to develop a corporate structure to promote delegation of duties and limit liability;

3. Drafting a legal, balanced, and fair franchise agreement to avoid future conflicts between the franchisor and franchisee;

4. Drafting disclosure documents according to franchise law;

5. Updating the franchise agreement to align with changing franchise statutes;

6. Providing legal counsel to the parties within a franchise on different matters;

7. Liaising with the government on all legal matters of the franchise;

8. The lawyer helps in dispute resolution by arbitrating the conflicting parties.

A strategic plan evaluates and addresses all the aspects of a franchise business model to determine whether establishing a franchise is worth the effort.