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Foundational Franchising

At Apex Franchise Development Group we believe and strive to create alignment between the Franchisor and Franchise owners. We call this alignment Foundational Franchising. We create Foundational Franchising by identifying the true purpose of the organization. Our belief is that all of us, including the franchise organization, must be driven by more than money or we risk not realizing our full potential. What we want to create is an organization where the Franchisor and Franchisees live in harmony; driven by the same common purpose and anchored with aligned interests. We have learned that there is a difference between a purpose-driven culture and business success. An organization’s purpose and vision should energize and engage franchise owners, employees, and partners and promote creativity and innovation. When done right this approach toward franchising creates an organization with a sustainable competitive advantage.

Foundational Franchising is created by three elements:

1. Vision (Big Dream)

The vision of the franchise should focus on the future and serve to keep the organization focused on what really matters. Any activity that is not moving toward the fulfillment of the franchise vision should certainly be scrutinized and most likely discarded. With a well thought vision in place, all stakeholders are afforded a clear picture of where the franchise is headed.

2. Our Purpose (Mission)

The franchisor’s purpose should identify why they do what they do for reasons other than monetary. The organizational mission should excite and motivate people to achieve a greater purpose. It should serve as one of the main driving forces behind all key decision-making.

3. Our Values (What do we believe in?)

Values represent who the franchise is at its core. Values not only serve to identify who we are as an organization, but also communicate to everyone the hills we are willing to die on. All decisions should be based on our values. Therefore, every franchise should operate in alignment with their identified values. They should hire, fire, and decide strategic initiatives based upon their values. Organizational values should dictate our actions and behaviors and communicate who we are and what we stand for as an organization. A franchisor’s values are the fundamental beliefs of our organization.

Every stakeholder (Franchisor, Franchise Owners, Employees, Investors, Vendors, Partners, etc..) in the franchise business must be aligned and buy into the Vision, Purpose, & Values of the organization. When aligned by the three elements of Foundational Franchising, the franchisor and franchise owner find themselves working in harmony toward achieving a common vision. They also become driven by a common purpose, and connected as a community through a common set of values.

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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.

Follow or Connect with Ryan on LinkedIn at https://www.linkedin.com/in/ryan-rao/

 

Why Franchisees Fail

Can I speak with a franchisee?

Becoming a franchisee is a life changing decision. For most, the purchase of a franchise means transitioning out of a career, operating your own business for the first time, and investing ones hard earned savings. The good news, in virtually all scenarios, people prior to you have already made the same life changing decision.

In my opinion, the most important due-diligence step a prospective franchise owner can take is to speak with a current (and if possible a former) franchisee of the brand.

These 8 questions will help maximize your conversation with franchise owners:

1. What was your background before you became a franchise owner?

  • Importance of this question: Do I have the experience & skill set necessary to be successful?

2. Can you explain a typical day in your role of being a franchise owner? What is the most challenging part?

  •  Importance of this question: Could I do this work day in & day out?

3. (If local) Would I be able to shadow the operations of the business for a day?

  • Importance of this question: Test drive the franchise before you own it.

4. Would you be willing to discuss your financials; including project cost, revenue, EBITDA, & how long it took to break even?

  • Importance of this question: Does this ROI align with my expectations and goals?

5. What happened after you signed the Franchise Agreement?

  • Importance of this question: Does the franchisor have streamlined on-boarding processes which sets franchisees up for success?

6. What didn’t you learn in training from the franchisor that you had to learn yourself? Did you feel prepared day one to open the business?

  • Importance of the question: Will I be prepared to operate this business successfully?

7. What is one thing you know now you wish you would of known before you purchased this franchise?

  • Importance of the question: What am I missing?

8. If you had to do it all over, would you purchase this franchise again?

  • Importance of the question: Overall happiness of the franchisor/franchisee relationship. Use their experience for better or for worse to your decision making benefit.

These eight questions can be used as a cheat sheet to maximize your time speaking with current franchisees of the brands you are interested in. The desired outcome of these crucial franchise discovery calls is to receive unbiased perspectives of what it is like to become a franchisee of the brand. After a few calls, trends will start to form which will substantially influence your decision making. Carefully take into consideration all findings before you make your very own life changing decision and become a franchise owner.

Here are some other great articles which helped me formulate my opinions and should be viewed as you consider franchise opportunities:

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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.

Follow or Connect with Ryan on LinkedIn at https://www.linkedin.com/in/ryan-rao/

Questions to ask before you purchase a Franchise

When investigating franchises to purchase it is vitally important you ask the right questions to representatives from the brand.

Here are seven questions to keep in mind when conducting due-diligence on franchise opportunities:

1. What makes your brand better than the competition?

– As a potential franchisee and business operator you need to know and believe in the competitive advantages your brand claims to offer.

2. What are the costs associated with your franchise?

– When purchasing any business the numbers are everything. Get a grip on startup and ongoing costs of the franchise system. Ex: Franchise Fee, Build out Costs, Royalty, & Marketing Fund.

3. Can you explain the training program & ongoing support?

– The reason to purchase a franchise is the operational “playbook” the brand offers. Without a sophisticated training program and documented systems the franchise offers little benefits.

4. Do you offer assistance with real estate?

– Location is one of the most important factors in any business, it is extremely important to leverage the knowledge and experience of the Franchisor.

5. What is my protective area?

– Understand where you will have the right and protected area to conduct business under the brand.

6. Can I see the FDD?

– The Franchise Disclosure Document (FDD) will lend information on the history of the company, executives, ownership structure, any litigation’s/bankruptcies, fees associated, assistance/training, territory, trademarks/patents, financial performance representations (be careful with these), and financial statements of the Franchisor.

– Under the Franchise Rule, which is enforced by the Federal Trade Commission (FTC), a prospective franchisee must receive the Franchisor’s FDD at least 14 days before they are asked to sign any contract or pay any money to the Franchisor.

7. Is there a current Franchisee I can speak with?

– The Franchisee can provide you with insight the franchise sales representative cannot. The Franchisee is able to speak about the numbers related to the performance of the business, discuss support the Franchisor provides them, and offer unbiased reviews of what it is like to be a franchisee. Maximize your time speaking with current franchisees.

These 7 questions are a starting point for investigating franchise opportunities. It is important to conduct your own research and speak with multiple brands before deciding which franchise to purchase.

A franchise is very much a marriage (at least for ten years- in most cases) make sure to “date around” before proposing the brand of your dreams.

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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.

Follow or Connect with Ryan on LinkedIn at https://www.linkedin.com/in/ryan-rao/

I want to own a business; What are my options?

Three different roads to business ownership are possible each with challenges and opportunities.

1. Startup

Attempting to start a business from zero is the riskiest of the three but in certain scenarios it offers the highest upside. Having an idea is just the start. The business will need to consider corporate and production processes, accounting standards, business advisors, marketing, and REVENUE generation. How about the fact that a staggering 95 percent of small business will close their doors before they hit their fifth year of operation? If you are contemplating a startup seek out advisors who have been there and done it. If you are considering a startup, know that you must be agile and willing to embrace the ability to adapt.

Keys to success for a startup

  • Find a mentor
  • Have a strong personal network
  • Raise sufficient capital
  • Solve a problem, fill a need
  • Be the expert
  • Can you save someone money, can you make someone money, can your product or service make their life easier?
  • Identify your customer needs and wants and the value they associate with them
  • Value Proposition – Differentiate your offering based on unmet needs within the market place
  • Establish go to market strategy
  • Build processes
  • Be consistent
  • Sell absolutely everyday
  • Communicate any and all directions in writing
  • Surround yourself with people smarter than you
  • Track gross and net profits monthly

 

2. Buy an existing business

Generically a business acquisition is a greater financial cost in the short term than a startup. Because of the increased cost; risk is in theory mitigated. Depending on the sector, business valuations range. Due diligence is key. Mindset of the takeover must be larger than one person. The new owner has to communicate with each and every person in the company. A great majority of your time should be spent conducting a human capital audit by mentoring and coaching current employees. The major challenges in buying an existing business are getting the staff to buy in, shifting the company culture, improving communication gaps, and dealing with the resistance to change.

Keys to success

  • Due Diligence – Hire a professional if you are not an expert in valuing a business opportunity
  • Release control to capable supervisors and lead them
  • Create an advanced financial reporting and projection system
  • Instill a team-based mindset
  • Overhaul the business model
  • Strengthen all communication
  • Identify the strength and value of the existing brand/name
  • Speak to current clients/customers to gain an understanding of why they choose to do business with your target. Ask them, what needs to be improved and why? What are they best at and Why? What is that important to them?
  • Speak to current employees. Ask them why they choose to work there? Ask employees what can be improved and what impact would that have on their performance and for the customers of the business?
  • Develop an actionable strategic plan that incorporates all you learned while exercising your due diligence to acquire the business

 

3. Buy a franchise

Owning a franchise allows you to go into business for yourself, but not by yourself. A franchisor provides franchisees with a certain level of independence where they can operate their business. A franchise provides an established product or service which may already enjoy widespread brand-name recognition. This gives the franchisee the benefits of a pre-sold customer base which would ordinarily takes years to establish. A franchise increases your chances of business success because you are plugging into proven products, processes, and methods. Franchisees are required to operate their businesses according to the procedures and restrictions set forth by the franchisor in the franchise agreement. In exchange for the turn key opportunity most franchise systems require an initial franchise fee and ongoing royalty. Since the royalty is directly correlated to sales, franchisors have skin in the game to help the business run at optimal levels.

Keys to success

  • Follow the process and systems set forth
  • Believe in proven blueprint that others are successfully utilizing to achieve their dreams
  • Understand levels of support from franchisor
  • Interview successful franchises
  • Have clear expectations for the financial performance of the franchise
  • Community involvement
  • Be passionate about the service or product you will be offering to the marketplace
  • Embrace the franchise model

 

All of the above offer the freedoms of being your own boss. Which avenue do you want to pursue?

Checkout the census data here http://www.businessknowhow.com/startup/business-failure.htm

and here http://smallbiztrends.com/2012/12/start-up-failure-rates-the-definitive-numbers.html

 

Checkout these articles http://www.entrepreneur.com/article/227394

http://www.statisticbrain.com/startup-failure-by-industry/

http://www.businessknowhow.com/startup/business-failure.htm

http://www.franchise.org/what-are-the-advantages-and-disadvantages-of-owning-a-franchise

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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.

Follow or Connect with Ryan on LinkedIn at https://www.linkedin.com/in/ryan-rao/