Is Franchising the Right Choice?
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Franchising is an important topic about which many ORA members inquire, which is why the ORA RES is teaming up with ActionCOACH’s David Roemer to lead an Aug. 6, 2014 webinar entitled “Franchising Your Restaurant.” Roemer has worked in the restaurant industry for over 34 years and possesses vast industry knowledge. He has assisted more than 50 business owners in helping them overcome their struggles to enjoy and celebrate their achievements as both a corporate trainer and franchising business coach. Roemer will inform participants in great detail on what they need to do to get their businesses ready for franchising. This includes everything from being able to decide if franchising is right for them all the way to learning the various franchise models to the marketing and selling processes.
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Is Franchising the Right Choice?
- 1. Is Franchising the Right Choice? Aug. 6, 2014 2:00 - 3:00 p.m. Heartland Payment Systems is the Lead Sponsor of all RES events. The ORA Restaurant Education Series (RES) provides members free access to educational events that help them sustain and grow their businesses and are developed based on member feedback. RES events support a key ORA initiative: the education of our members.
- 2. Is Franchising the Right Choice?
- 3. Questions you must answer with “yes” What is the best model for me? ◦ Direct franchising? ◦ Master licensing? Is Franchising Right for Me?
- 4. David Roemer, ActionCOACH 34 Years in the restaurant industry Over 20 of those as a liaison between franchisors and franchisees ◦ Both sides of the fence ◦ What each side needs for success ◦ Difference between operating restaurants and franchising restaurants
- 5. Your Franchising To Do List
- 6. Consistent excellence Fully documented systems Operating Hiring and training Marketing Proven marketing/consistent cash flow Great team and culture Running on “auto pilot” Getting Things in Order
- 7. Who will prepare it? Your model Your agreements ◦ Franchise Agreement Rights and terms Costs – initial, ongoing, periodic Covenants ◦ Development Agreement Franchise Law and Code of Conduct Franchise Disclosure Document
- 8. Fully tested and measured Documented results Materials ◦ Style Guide ◦ Templates Marketing contribution/support Marketing Systems
- 9. Who is your ideal franchisee? Define your target market Sales team – internal or external? Your process – testing and measuring Balancing sales and operations Franchise Sales
- 10. Initial training ◦ What, how, where? ◦ How long? ◦ By whom? Certified Training Centers ◦ Criteria ◦ Certification, validation, monitoring Field Support ◦ Who, how? ◦ Standards/brand protection/food safety Training & Support
- 11. Food suppliers/standards/quality control Signage, menus Furniture, fixtures and equipment (F,F & E) Packaging Marketing material POS/BOS Uniforms Suppliers & Alliances
- 12. New product development ◦ Process ◦ Testing Franchisee participation Documentation ◦ Sales/rollout process Image changes/remodels Innovation
- 13. Again you need a documented process Site approval Standard plans and approvals Support during construction Opening support Development
- 14. What to keep: ◦ Agreements ◦ Evaluations ◦ Food safety information ◦ POS/BOS information/audits ◦ Franchisee financial statements ◦ Communications System(s) for documenting across multiple people Franchise Record Keeping
- 15. Greed – Short-term vs. long-term Poor franchisee selection Poor/inadequate training and Support Lack of innovation/lack of process Growing too fast Common Mistakes
- 16. Is Franchising the Right Choice for you? ◦ Even if it is not, there are benefits to running your concept like a franchise Find people who can help ◦ Professionals ◦ Counselor/coach Have the conversation with your spouse/ partner/leadership team Sign up for your Free Strategy Session ◦ davidroemer@actioncoach.com ◦ (740) 909-4138 Next Steps
- 17. New Restaurant Education Events are being planned. Go to www.ohiorestaurant.org/res to register or to check out past RES events! Thank you!
Notes de l'éditeur
- USE INFO ON SEPARATE PAGE
- David speaks
- 12 questions: Are you someone who always strives for excellence? Can your leadership style inspire a large number of people? Would you enjoy mentoring a lot of people? Are you open to being part of groups/forums that involve travel? Would you gladly invest time & $ learning to insure your system’s growth? Are you hungry to grow your business? Can you sacrifice absolute control in favor of collaboration?
- As I begin, I want to tell you just a little about me so you have an idea of my qualifications 34 years in industry starting behind the counter in a DD. Ran a 24/7 business Was a trainer teaching new franchisees how to operate Most important I worked for 3 different franchisors and with over 52 different franchisees for more than 20 years. I have seen the good, and the bad franchising My experience has taught me what both sides of the equation – franchisor and franchisee need to succeed. In many ways they are the same. In some ways they are different. Ultimately, the best franchisors understand that success is a function of what is best for the BRAND and the brand is everyone combined. As a restaurant operator you make decisions based on what is best for each of your locations. As a franchisor you may not be able to always do that.
- So let’s take a look at what needs to happen for you to Franchise your concept successfully
- The first order of business is to refine your business model and get it firing on all cylinders. Think of this step like getting your house ready to sell. You need to make sure everything is in order and you are ready for the type of scrutiny it will get from potential buyers. Unless of course you have no interest in getting the most you can for it. So..you have to get your business running like a top and fully document the system you will eventually be selling. Remember, when someone buys into your system, what they are paying for is not just the name. They are paying for the operating system, how do you run this business every day and maximize the chances of success? Look at your operating systems first. Your recipes, prep. Procedures, ordering/inventory systems, food controls, cash controls, food safety, cleaning systems, service standards including times for each stage from greeting to order taking, drink service, entrée times and so on. If you have a bar there are some duplicate and some added systems. Then there are all your standards that need to be laid out and documented. What are your food quality systems for example what is the minimum quality for produce. If you sell baked potatoes do you spec a 70 count? A 90 count? What type of oil do you use in your fryers? Do you spec a 6x6 tomato because it is the right size for you sandwiches? All this needs to be documented so there is never a question and so you protect the integrity of your brand. Remember part of franchising is creating systems that work through indirect control rather than the direct control you have now. You need to do the same with your Hiring & Training Systems, and your Marketing. This will serve as the basis for your standards in these areas. You need to have a great team and a great culture. You will be the example for your franchise system. Franchisees will look to you to lead the way and if you are not able to maintain a team of great people operating within a culture that attract other great people, why would anyone want to replicate what you have? As important, how will you be able to focus on franchising and building your brand and supporting your franchisees of your are forced to step in and run your restaurants. Your role as a franchisor will be very different from what it is today as a restaurant operator. Your stores need to run without you so you can focus on your NEW business which is Franchising
- While all of your systems, procedures and standards are being refined and documented, you can be working on your Franchise Disclosure Document or FDD. Decision #1 here is who will prepare it. While the FDD is a legal document, you do have to pay an attorney to create it for you. In fact, it would be foolish to do that. There are people who will do that work for far less than you pay your attorney. Have one of them write it. Then have your attorney review it. Decision #2 is what will be your franchising model? Will you grant licenses directly to franchisees? Will you license rights within territories and allow sub-franchising? Will you do both? Then you need your Agreement(s). What are the terms/how long will the agreement last? Any renewal rights? If so, under what terms? What about costs? IFF, royalties, marketing and when are these paid?. What are the covenants/what do you agree to do for your franchisees and what must they agree to do. There are other agreements as well. For example some chains have a separate Development Agreement that governs the terms under which a new restaurant is built. Because the development period can beas much as 18-24 months, you need an agreement to govern that process. Franchisees will not want the first 1-2 years of their agreement to be over before they open their doors. The FDD is required by the Federal Trade Commission and there are certain key elements required. In addition, many States require you to register specifically in that State in order to grant franchisees. For example, Ohio does not require your to register. It only requires you to issue your FDD at least 14 days prior to signing any documents. Your FDD will include information on your company, its officers and history and description. Your business philosophy and a description of your culture is also part of this. Prospective franchisees need to know what they are buying into and need to be confident it is a good fit. By the way, so do you. It will have historical financials so franchisees can gauge the worthiness of the investment. While it is illegal to make earnings claims, you do provide representative P&L’s It will have a summary of your Franchise Agreement and all other agreements as well as a copy of the agreement as an addendum. It also includes things like past and pending lawsuits against you as a franchisor and a list of franchisees including contact information. When you are new these will obviously be blank. It further includes start up costs (typically a range for some things, actual for others). So Initial franchise fees, training cost, FF&E, licenses & fees, initial food orders and so forth.
- Who will you franchise to and what will be your process? Just as you want to describe the traits & characteristics of an ideal Server in one of your locations, you want a picture of your ideal franchisee. What qualities will they have and not have? For example, you do not want people who are true entrepreneurs. They will not follow your systems. They will want to re-create it. Do you only want people with restaurant experience? Do they need multi-unit experience? Will you use internal salespeople or start with one of the franchise brokers out there? Define your qualifying process. Who interviews? How many times? What about personality assessments? What are others doing that is successful? You will need to test different processes and measure results to come up with the best methods. Finally how do you balance the need and desire to grant franchises with the need to minimize your risk of bringing a bad franchisee into your system. Once they are in it is not impossible to get them out but it is time consuming and costly. Some States more so than others.
- Who will you franchise to and what will be your process? Just as you want to describe the traits & characteristics of an ideal Server in one of your locations, you want a picture of your ideal franchisee. What qualities will they have and not have? For example, you do not want people who are true entrepreneurs. They will not follow your systems. They will want to re-create it. Do you only want people with restaurant experience? Do they need multi-unit experience? Will you use internal salespeople or start with one of the franchise brokers out there? Define your qualifying process. Who interviews? How many times? What about personality assessments? What are others doing that is successful? You will need to test different processes and measure results to come up with the best methods. Finally how do you balance the need and desire to grant franchises with the need to minimize your risk of bringing a bad franchisee into your system. Once they are in it is not impossible to get them out but it is time consuming and costly. Some States more so than others.
- Training and Ongoing Support is another critical piece to the puzzle. How will you conduct initial training and orientation into your brand. What will you train them to do? Obviously the food. What about service? Inventory, controls, etc. How long will training be? What will they do day 1, day 2 etc? How will you evaluate readiness? Will you test them? Written test? Practical tests? How will you measure their management skills and how they lead? Where will you train? How will you ensure the integrity of your training? You will need to certify training centers and trainers. How will you do that? Will you recertify every year to maintain standards? What about field support? Will you check on your franchisees to make sure they are succeeding? How? How often? How will you protect your brand to ensure standards are upheld and there are no food safety issues that will threaten your brand? Will you create and manage your own systems? Will you use a company like Ecolabs? Or both?
- As a franchisor you will want to maintain a list of approved suppliers for everything your brand will need. This will ensure quality, consistency and protect your brand This list is not complete but gives you an idea of the types of suppliers you will need. It is also wise to have more than 1 supplier for each item to maintain some leverage in your favor.
- Innovation is critical to the continued growth of a brand. A major area of innovation is menu development. Understanding what fits your brand and staying within those boundaries is key. Your customers will only allow you to do what makes sense. Years ago for example, Arby’s tried to do burgers in order to compete with the big boys. It failed because burgers did not match what they stood for…being different from typical fast food. As a franchisor you will have a responsibility to create, test and document results for new products. If your Franchise Agreement requires it, you can force franchisees to participate but why would you want to do that? In my opinion, it is always better to help franchisees see why and how a new product is good for them and the brand. Especially if there is new equipment needed The same is true for staying current with your décor. I am not talking about maintenance and making needed repairs. This is about updating/refreshing your image and remodeling. This is a big expense and so you will need to prove the ROI. Again, you can require it as many brands do. Many times when you see stores close it is because a franchisee chose not to renew their license because of a remodel requirement.
- Systems for everything Poll question #3 Where would you say your systems are currently at? 100% I’m golden 75% I’m in good shape 50% I’ve got some work to do 25% I see late nights in my future 0% OMG!
- Documenting is an area most franchisors do well except for one detail. One area many franchisors fail to document is communication with franchisees. Keeping copies of emails. letters etc. is easy. Documenting conversation is not so easy but at least as important. This is something you will need to be sure every member of your team who has contact with a franchisee does and does thoroughly. If there is ever a dispute, you as the franchisor will be at the disadvantage unless you have great documentation.
- Short term – selling a franchise to make a sale. Long term – Bringing the right zee into your system
- I’d like to take this opportunity to thank Dave for providing his expert advice. Please take a moment to fill out the survey link that will pop up after we end this webinar. We really appreciate your time in completing this as we continue to plan future RES events Thank you for your participation today and for your continued investment in the Ohio Restaurant Association through your membership.