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The Franchise Maker Guides Businesses on the Big Decision

Franchise businesses make up a sizable portion of the country’s economy. They employ more than 9 million workers across nearly 800,000 establishments.

But according to the International Franchise Association Educational Foundation, there are only about 2,500 franchisors nationwide — companies that have licensed their brand and business model to at least one other company, called a franchisee.

David Waldman, a franchise consultant, is responsible for helping more than 100 small businesses join those ranks. Waldman, unlike many consultants, doesn’t broker sales for franchisors or help them advertise offerings to potential franchisees. Instead, his firm The Franchise Maker helps business owners turn their companies into viable franchises. His clients include gyms, counseling centers and restaurants.

Even with his guidance, some companies aren’t cut out to become a franchise. Waldman says he turns away about 90 percent of prospective clients, with some lacking a business that can properly scale. A wicker furniture maker, for example, wanted to franchise his business but attributed his success to only using willow wood from his backyard. Sometimes, Waldman can tell from an initial phone call that an owner’s personality just isn’t suited to training and motivating a legion of franchisees.

“If the person is a prick and you just know because of their demeanor, it’s not going to lead to a franchise-friendly system,” Waldman said.

Entrepreneurial Enthusiasm

Waldman worked for major hotel and personal service franchisors for 18 years — serving variously as director of operations, business development and franchise sales, among other titles — before founding his firm in 2005. He became sold on the franchise model early on, seeing franchisees congregate at annual awards ceremonies, professing their dedication to franchisors for the chance to start a business.

“I saw something very powerful: loyalty,” Waldman said.

Shannon Hudson, CEO of fitness center brand 9Round, said one of Waldman’s early lessons was that earning a franchisee’s devotion was key to a successful franchise. Hudson has opened 350 locations in eight countries in part by fostering enough goodwill among customers that they are inspired to open a gym themselves.

Hudson also praised Waldman for handling the technical aspects of setting up a franchise. The Federal Trade Commission has several regulations around franchises, which include what types of financial information needs to be shared with prospective buyers.

“I didn’t know the first thing about what a franchise disclosure document was,” Hudson said. “He had a lot of resources that I needed all under one roof. That’s so important when you’re just starting out.”

Maximize Efficiency and Scale

The largest U.S. franchises are fast food and hotel chains. But the food and hospitality industries only account for about 36 percent of all franchise establishments, according to a January report from IHS Global Insight, prepared for the International Franchise Association. About half are in the services sector — think GNC or Supercuts. Another 16 percent are real estate or automotive franchises.

Franchising allows businesses to grow their footprints quickly without spending much capital, IFA Educational Foundation President John Reynolds said. One of the fastest-growing sectors right now is senior care, with small businesses trying to figure out the best way to meet large-scale needs, he said.

“You have a lot of businesses that start out in these new markets that are mom and pop, and they’re there because of a demand,” Reynolds said. “But as the demand increases, many try to maximize efficiency and scale. That’s when franchising really kicks in”

Many franchises thrive because they supply something proprietary to franchisees that gives them a competitive edge. It could be recipes for McDonald’s hamburgers or 9Round’s copyrighted workout plan. Waldman said services businesses may not have something tangible to sell franchisees, but they can still draw in buyers with their business acumen. Franchisors can provide a clear marketing strategy or a business plan that has been battle-tested.

“The franchisees bring a skill, like psychiatry,” Waldman said. “They know how to treat patients. But they have struggled with the business end of it. Whether it’s tax, dental or medical, people are buying into a system.”

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