Ready to Franchise? Consider This First

3:49 PM ET

By: BusinessNewsDaily Staff

 

 

Going from a one-unit business to a franchise can be a big leap. Pierre Panos, founder and CEO of the upscale fast-food chain, Fresh to Order, knows all about it. His company, which was founded in Atlanta in 2005, recently began franchising. It currently has two franchised units and has agreements to franchise several more in 2011.

Panos offered BusinessNewsDaily readers a few do's and don'ts to consider before franchising their own business idea. 

Do's:

• Ensure your unit economics work for you before franchising. You should feel comfortable opening your own stores when you've proven your financial model can work. After opening the first Fresh to Order in 2005, we spent the next five years perfecting the concept and opening additional locations before we began franchising.
• The concept must be fully developed before you start franchising. Once you start, you cannot make major changes, but minor tweaks are okay.
• Ensure you get a well-respected business attorney , familiar with franchising, to prepare your Franchise Disclosure Document (FDD) and related paperwork. If not, one unhappy franchisee could ruin the entire system.
• It is imperative to have all your training manuals and operations procedures perfected before you start franchising. Doing this on the run will negatively affect the cohesiveness of the brand.
• Start a franchise association early. All good leaders listen and collaborate with their teams. Franchisees are your partners, not your employees. Listen to and collaborate with them. Some of the best ideas in franchising were developed by franchisees.

Don't:

• Don’t grow too quickly from a small base of stores. Franchises that grow too quickly often lose control of their brand standards.
• Don't grow all over the country or world before you can support the stores effectively. Grow concentrically around your home base. A common complaint from franchisees who are geographically isolated from their franchisor is the lack of marketing and operational support.
• Be very selective when accepting franchisees into your system. Don't [just] take anyone who can fog a mirror. Just because someone has the money doesn't mean they will be a good operator for you.
• Don't outgrow your support structure. Bring seasoned professionals on board just before you think you need them.
• Don't run out of cash. You need to be fully capitalized when your business is in growth mode.