Establishing foreign franchises takes more work than establishing domestic ones, especially when it comes to negotiating. The key to negotiating is building a trusting relationship. Make sure your foreign prospect understands their obligations – and you understand yours. Language is often a barrier, so review everything – and then review it again – to avoid miscommunication.
Keep cultural differences in mind when you're negotiating. It's not uncommon for people to want to establish friendships before getting down to business.
Be flexible. Fees will likely be a bone of contention. Instead of setting a bad precedent by reducing the fee, add items to make the front-end fee more palatable:
Expanding internationally before you have a domestic base is really not a good idea. If you are going to do it, proceed carefully! Making a mistake in selecting your franchisee overseas will be more devastating to your expansion plans than making a mistake domestically. Do not rely on a broker. If you do have to use a broker, limit the broker's role to making introductions.
You can rely on national franchise associations, local franchise attorneys, local office of accounting firms, knowledgeable consultants, embassies, Interpol and international credit and reference services. Some search options are:
There aren't a lot of resources for the new franchisor, and there isn't anything that details the process from start to finish from a franchisor perspective. There are resources that offer insight into different phases of the process. It's just a matter of finding them. Take the time to look through the resources listed here. See what kind of information is offered and make a note of it so when you need it you'll know where to look. If you find contradictions in the information – and you will – check with your attorney before proceeding. This is not a process you want to do wrong or over.
Franchise Organizations: There are organizations dedicated to promoting franchises. The largest of these is the International Franchise Association. They have a wealth of information on the website: www.franchise.org. Some of the information is free of charge and some requires enrollment and/or payment.
Franchise Advertising Portals: Franchise portals are in business to advertise franchise opportunities and they also provide articles and information to differentiate them from their competition. FranchiseGator, FranChoice and Franchise Direct all have resource centers on their websites.
Franchise Consultants: These are businesses offering their expert services to help you franchise. They are typically a coalition of professionals and you can contract them to customize your franchising plan. Fees and services vary widely, so comparison shop if you're going to use a consulting firm. FranCorp, iFranchise Group and The Entrepreneur's Source are all established franchise consultants.
Magazines: There are magazines dedicated to promoting franchises. Many of them offer how-to articles and have sections of their websites dedicated to the franchisor. Entrepreneur Magazine, Inc., and The Franchise Handbook are publications of interest.
Books: Most books that help the franchisee also have sections for franchisors. If they don't, you can read the books and reverse positions – if it's of importance to a franchisee, it's something you need to consider and offer.
There are literally thousands of texts devoted to the subject of leadership. Everyone knows it is paramount to success. In morale surveys, it's interesting that most managers think they are good leaders, but most employees feel they could lead better than their managers!
You have a two-fold leadership challenge. You have the traditional corporate leadership role where you ensure your business delivers on its promises to customers, behaves responsibly and makes money. You also have the challenge of coordinating the talents and ambitions of your franchisees – people who are leaders by nature.
Some guidelines to keep in mind for leading effectively are:
You have a great support network made up of loved ones and friends. They were helpful when you started your business and they're proud of your success in operating it. Now you're getting ready to franchise. Do you still need them? YES! In fact, you're going to need your support network more than ever before. Not only will your time and energy be divided between operating your business and establishing your franchise, you're also going to be under funding and timing pressure.
Keep the lines of communication open with the important people in your life. Talk freely about the pressures you're facing, the demands on your time and about risk. After all, there's no guarantee you'll be able to sell a franchise after you establish it.
Let them know why you want to make this commitment and what your hopes and dreams are. Tell them of things you may ask them to do – include both time and money investments. Make sure they're comfortable with your decision to move forward and expand. They're indispensable to you and you're going to need them.
It's not just you who is investing in expansion. It's also everyone who is close to you.
It's important that the franchisee has a business plan, but it's equally (or more) important that you do. Your business plan is a living document that provides direction for growth and a framework for operations. It should include the current year forecast, a 5-year forecast and a 10-year forecast.
Every month you reconcile actual versus forecast and thereby gauge performance. This way you know if there is a problem and you know in time to respond with a corrective action. If you operate your business – and your franchisees – without goals or measurements you're not going to be able to stay competitive. The market changes constantly. You must realize the changes as they occur and be in a position to capitalize on them.
If you decide to expand farther and need investors or if you take your company public you will have to have a current business plan. Don't let this slip – it's too critical a document.
|Sheri Ann Richerson|