On a regular basis, we get phone calls and emails with the same question: “I want to start franchising my business, how much will it cost?” This is a very valid question and one that deserves a straight forward answer. As with any purchase it is important to do your due diligence, but how do you know if the person on the other end of the telephone line is a real business?? How do you know whether or not the business you are talking with is not just a “documentation factory” churning Franchise Disclosure Documents?? What can you do to prevent making a huge mistake by putting the faith of your future franchise system in the hands of the wrong company?? Let’s explore this further.
If your number one concern is simply the cost of franchising and you are looking for Walmart pricing, then perhaps going to one of our competitors is your best option. If you want quality, efficiency and a long term relationship as your franchise system evolves, then let’s talk about what to look for in a company. First of all, if any company you are talking with asks or requires that you give them a percentage of your company as part of their services, turn around a run (check out our article on why you shouldn’t give away equity to franchise your business). Yes, as hard as this is to believe, I have actually heard of this happening.
So how do you know if the person on the other end of the telephone line is a real business? Ask for validation. I know of a company who just recently franchised their own business and is now hanging out a shingle calling themselves an “expert” in the field who can now franchise others (read more about the latest scams in franchising). Yep, it is happening and I have heard first hand (from one of their employees) how inaccurate and old their provisions are in the documents they produce, scary. When asking questions and probing for validation, find out if they have ever turned business away. After all, what savvy business person would turn down business, right?
This is important to know, find out if the business you are talking with specializes in creating Franchise Disclosure Documents, franchise infrastructure, offers ongoing support and if they have all the resources necessary for you to further strengthen your franchise system. Ask them if they also sell franchises, if so which is it?? Find out if they are franchise developers or franchise brokers because it is a conflict of interest to do both (learn the difference between a franchise developer and a franchise broker). Something is obviously not working right in their business model if they have to sell franchises because they are not doing well making them. Watch out, there are a handful of these businesses out there that are franchise brokers (making a large commission for each franchise they sell) who claim to also create franchise systems. More on franchise brokers later (or you can read this article for more information on franchise brokers).
When talking with other companies see if they give you answers. I mean concrete answers outlining exactly the process and costs to franchise your business (find out what to look for in someone who can help franchise your business). For each person that calls us at The Franchise Maker, once we determine if the inquiry is legit (in other words, does the person we are talking with have a business that qualifies for franchising) any of us will gladly paint a picture of process and costs. There is nothing to hide, but you would be surprised how many times I hear people say “no one would spend the time to talk to me”.
Franchising will forever change the dynamics of your business. If done correctly, it will change the paradigm in your industry resulting in very successful and loyal franchisees. Asking the right questions will help you identify the best company you wish to partner with as you embark on this next phase of growth. We will leave you with a quote our web developer passed on to me earlier this month:
