Structuring your business as a Franchise

A number of studies have been published to compare the success rate of independent small businesses to franchises; such as 2012 study from FranNet which claims “91% success rate for franchises, 42% higher than typical small businesses” (Yahoo). The International Franchise Association (IFA) has published studies which state “90 percent of franchisees renew their contracts to continue with their franchise” (Franchise).

While the true statistics of franchise success are debatable most agree franchises have a higher success rate than independent startup businesses.

What can you learn from franchises to improve your startup business?

Franchises do three things well

1. Sales/Marketing

“To me, job titles don’t matter. Everyone is in sales. It’s the only way we stay in business.” Harvey Mackay

Franchises understand who their target market is and how to drive and grow sales within that niche. If your business is not growing your business is dying. Franchises have documented processes which have been proven to drive sales. All businesses need a sales process. Sales processes enable companies to have predictable and repeated results.

Tips to improve sales:

  • Target a niche
  • Follow a sales process
  • Differentiate
  • Grow your current customer base
  • Become an expert

2. Operations

“If you are not taking care of your customer, your competitor will.” Bob Hooey

Operations provide the service or manufacture the product and take care of the customer. Are your processes standardized, documented, and consistently followed? Are there inefficiencies or opportunities to maximize productivity and accelerate processes? What quality control provisions are in place to ensure consistent experiences? Why is a McDonald’s just as successful in Birmingham as it is in Nashville? One reason why, McDonald’s has a standardized experience and your business should have the same.

Tips to improve operations:

  • Checklist all operational functions
  • Perform operation audits
  • Listen to your customers feedback
  • Streamline
  • Make it dummy proof

 3. Finance

“Number one, cash is king… number two, communicate… number three, buy or bury the competition.” Jack Welch

Finance controls the lifeblood of your business; the cash flow. Does your business have strong financial controls? Do you know your COGS, margins, and projections? Once these key indicators are understood it will be necessary to make systematic procedures for all functions. Are you hitting your projections? Why or why not? Which products/services are draining your cash flow? Which should you cut/expand?

Tips to improve Finance:

  • Keep a KPI dashboard
  • Budget
  • Track trends

 Wrapping it up

Sales, Operations, and Finance are the crucial functions for any business. Remember to keep it simple and document all processes. Create check lists for your processes. Systematize and duplicate what your business does well.

Some studies on franchising success:


Ryan Rao is a Principal of Apex Franchise Development Group and is a franchise development expert who has grown multiple franchise based businesses into national and international brands. Franchising has allowed him to help individuals realize their dreams of business ownership, while permitting them to experience the independence, flexibility, and freedom that comes with being a business owner. He also serves as a franchise consultant, and is a personal growth advocate.

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