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Overcoming the Biggest Challenge New Franchisors Face

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The most important challenge a start-up franchisor faces is selling new franchises. Learn how to meet this challenge.

After a new franchisor has completed its Franchise Disclosure Document, operations manual and marketing materials the next step is to recruit and contract with qualified franchise candidates. When speaking with business owners who are considering franchising their business their number one concern is: finding the right people to invest in their franchise.

I consider three stages to the franchise process: step 1 is validating and developing the program, step 2 launching the franchise, and step 3 operating and administering the franchise operation. Based upon my experience and after having worked with clients Iíve found that step 2, is the most challenging step in the process.

Why launching a new franchise is so challenging:

  • The majority of start-up franchisors donít have the experience and skills needed to recruit qualified prospects and sell new franchises. Itís often a case of: ďWhat do I do nowĒ?
  • A number of start-up franchisors lack the capital needed to market and promote the franchise opportunity to potential franchisees.
  • The difficulty of operating the existing business and a new franchise program becomes a burden which often conflicts with the time and attention needed to market new franchises.

The way to meet these challenges requires an objective evaluation of the franchisorís capabilities, proper planning and resources.

Here are some suggestions to follow:

  • Include franchise recruitment and development as a key component of the franchise business plan when developing the new franchise program.
  • Plan on spending approximately $3,000 minimum per month for recruiting franchise prospects.
  • Have the capital and/or staff that can lead the new franchise sales program. Without franchise industry experience it can be very difficult to sell new franchises. Donít plan on selling franchises
  • Try to work out a program with broker groups who could present qualified prospects. Larger brokers will avoid start-up franchisors since they are unproven. In any case, donít rely upon this approach as the primary way to lead the franchise development effort.
  • Consider a conservative franchise development plan that complements the operation of the existing business.

The construction of a new franchise program must include a plan for developing a franchise network. Unlike, the theme of Field of Dreams, building a new franchise program doesnít mean that people will come and invest.

© 2011 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at franchiseknowhow@gmail.com

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