What Do You Need to Franchise a Business?
Once a business is successful, the owners can decide to franchise it. Some large franchises include McDonald's, Subway, Taco Bell, Carl's Jr., and 7-Eleven. To franchise a business, the franchise creator must create a turnkey plan that can be used by each new franchise owner. The franchise creator must address exclusivity, volume discounts, worker training, legal policies, inventory statistics and advertising.
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Exclusive Concept
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The franchise creator offers investors an exclusive store concept. If you want to own and operate a McDonald's, for example, you have to sign a franchise agreement with the company. Franchise creators also provide policies to allow the transfer of a franchise license, such as when a McDonald's is sold. Fast food chains include many franchise stores.
Volume Purchasing
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The franchise creator also negotiates volume discounts. Every Taco Bell has similar items on its menu, including tacos, burritos, quesadillas and soft drinks. Because of this arrangement, the ingredients purchased by each store---such as taco shells, tomatoes, guacamole and ground beef---are also the same. A buyer for the Taco Bell franchise buys large amounts of each food and gets a volume discount, and the firm hires a fleet of trucks to deliver the products to each restaurant.
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Training Program
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Employee training is also provided by the franchise creator. One of the toughest challenges of a business owner is finding skilled managers. The business owner creates training manuals and videos and distributes them to stores in the chain, and she might also establish a training course for new franchise buyers.
Legal Policies
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Standardized legal policies are established by the franchise creator. The franchise creator sets pay scales establishing what a worker should be making at each level of experience and provides manuals about labor laws and required health and safety standards. The franchise creator also writes manuals about what to do if there is a dispute and might hire arbitrators or lawyers to settle disputes at his stores.
Sales Statistics
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Statistical information on volume and pricing is also provided by the franchise creator. The franchise management of 7-Eleven tracks how many Slurpees and corn dogs each store in an area normally sells. The franchise management tells each owner how much of each item to buy, preventing them from buying extra food that will go to waste or running out of popular items.
Advertising Campaigns
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Large-scale advertising campaigns are provided by the franchise creator. A Subway ad can show up in a Super Bowl commercial. McDonald's offers toys based on characters from Disney movies in their Happy Meals. An individual store does not have the sales volume to purchase these ad campaigns, so the franchise creator collects fees from each store and uses them to hire marketers.
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References
- Photo Credit fast food image by FotoWorx from Fotolia.com
