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Critical Franchise Decisions

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There are certain key steps that ought to be followed whether youíre a business owner considering franchising a business or an existing franchisor looking to go international.

In the world of franchising there are certain decisions that are fundamental to having a successful franchise company. For independently operated business owners looking to franchise their concept, certain steps are key. An existing franchisor making strategic decisions should also proceed in a particular way in order to achieve a positive outcome.

Here are some key items:

For New Franchisors:

  1. Before franchising an existing business, register the trademark. In fact, unless the business is a simple business concept with no expansion plans it makes sense to register the marks whether or not the business will be franchised.
  2. Construct a viable and accurate franchisee pro forma income statement that is realistic. Donít expect the first group of new franchisee to perform as well as the founder of the business.
  3. Have the funds necessary to market franchises. A number of start-up franchises lack the capital required to generate franchise leads and recruit qualified candidates and as a result they have little or no growth.
  4. New franchisors should expand outward from their headquarters versus granting franchises in disjointed geographic areas and markets. This allows the franchisor to nurture new franchisees and also gain brand recognition by confining initial growth to a specific market.

For Existing Franchisors:

  1. Encourage rather than discourage the formation of a franchisee association.
  2. Do obtain financial information and income statements from your franchisees in order to know who is profitable.
  3. Franchisors considering international expansion should commit to a country only after a market study is completed and trademarks registration is filed.
  4. Donít dismiss franchisee complaints out of hand but rather thoroughly investigate serious complaints with the objective to reach resolution. Itís important for franchisors to put their ego aside from time to time in order to prevent a problem from getting out of control.

These are a few examples of certain decisions that should be made before taking action. Existing franchisors and business owners considering franchising would be wise to follow these suggestions.

© 2011 FranchiseKnowHow, LLC

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

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