There are numerous books that teach you how to build a franchise, what to expect, and the successful organizational structures of past brands. There are numerous professionals that travel the world giving talks, seminars, and speeches touting their plan or the industry’s best practices. There is a never-ending stream of advice from people who have had various levels of success before you.
But there is nothing like the experience of building a franchise brand that grows faster than your wildest dreams.
It’s a lot like having a kid. You’ve read the books. You’ve talked to your sweetest Aunt and Uncle about how they raised such amazing kids. You bought all of the gear and surrounded yourself with friends and family to support you. But when they hand you that baby at the hospital and let you leave with it, it all hits you at once—we’re not ready. However, after a few weeks at home, you can’t imagine your life without them and feel a sense of joy that cannot be explained.
That said, there’s a few things you need to know if you are going to build the next big thing…
Don’t always listen to experts.
This might sound counterintuitive at first since we run a franchisor incubator predicated on the idea that we are experts in the space but hear me out.
There’s no one that knows what your brand should look like as well as you do. There’s likely nobody that has put as much thought into what you want to build as you have. So, why would you think it’s a good idea to take advice from someone that is telling you what they did at a completely different brand?
Sure, there are similarities in how things can go between brands. There are certain parts of franchising that are brand agnostic and platforms like FranchiCzar have built numerous successful brands by consolidating teams between seemingly disparate business verticals (after school programs, gyms, and esports, for example). But at the heart of your brand beats a drum that should be very unique. A resonating pulse that is the tempo of its core.
Years ago, when I was building Code Ninjas, I attended a conference for “emerging brands.” At the conference, experts told me that we were not going to sell more than a dozen units in the first year without their assistance.
Experts told me that no parent was going to pay over $100 for a coding school for their kids where all they do is build video games.
Experts said that building a proprietary curriculum was foolish since there was so much content online.
All of these experts were 100% wrong.
To be fair, I did get a lot of really great advice from people who were genuinely just trying to help. From here, I will focus on the good stuff that the experts showed me.
Be rock solid in your FDD/FA/ADA and don’t change a word of it, for anyone.
So many young brands mess this up. When they first get their shiny new franchise agreements approved and start selling it to the public, their excitement is through the roof. Then, reality sinks in. Getting those first ten franchisees will take you longer than the next 90 sometimes. It’s insanely frustrating to have such an amazing idea and nobody is jumping on board!
This is the exact time that most brands start cutting corners by waiving franchise fees and reducing royalties, but it’s absolutely the worst time to do so.
First, you need those revenues in your young brand. Every franchise fee you collect is technically a liability on your books because you have to support that franchisee throughout the entire franchise agreement. However, you still get the cash, which will hopefully snowball your marketing and PR efforts into more franchise development leads and ultimately more franchisees. By reducing these fees and royalties, you are hamstringing yourself into a situation where you don’t have the consistent cashflow to properly market your brand and you can’t hire the right people to build your business either. Early franchisees don’t get properly supported, becoming aggravated, and losing brand support. It’s a downward spiral.
Second, you will have to keep track of these amendments that have changed your agreements. This is highly frowned upon by Private Equity groups that will one day look to buy your brand. The reason is that maintaining those agreements becomes more and more difficult with each one that you modify. It’s not multiplication, it’s exponential.
Lastly, if you’re not standing up for your rules now, what are you going to do when policies are enacted, and franchisees don’t want to do them later. By changing the agreements in the beginning, you are telling franchisees that you have a flexible relationship with your policies and procedures to make them happy. To me, that’s a terrible idea.
Brand advocates will come. Your first early pioneer franchisee is just a phone call away. Don’t rush it. Be patient.
Hire franchisee support people that have been operators.
It may seem obvious, but you need operational franchisee support members that have actually worked in the businesses that your franchisees are running. At our brands, we require our franchise support directors to spend at least a day a week working in one of our corporate locations. This gives them the perspective necessary to do the work.
If you can, hire elite managers from your corporate locations to help with field support and training. Their enthusiasm for the brand will be infectious and franchisees will start seeing them as the brand experts since they can always say that they’ve been there before, and they can truly empathize with the franchisee’s dilemmas.
After hiring the managers, make sure they keep up with what the real work is like. They don’t get out of the biweekly days in the weeds of operations. This is important because your brand is changing over time, and they need to see how those changes are affecting the operations guides and best practices that they are preaching to franchisees.
Without marketing, your brand will die.
So many brands forgo the brand fund in the first few years because that’s an expense that they don’t think they can justify. Another reason they drop it early is because their competition doesn’t have one. This is backwards thinking.
Lean into your marketing and brand funds. Don’t run away from them. If your competition doesn’t have a brand fund, create a marketing flyer in your discovery day package that explains how your competition is about to get smoked because of the collective marketing efforts of the brand fund. Show how franchises with brand funds statistically have 20-30% higher revenues than those that do not. Show how you’ve built an amazing team of marketers who know the ins and outs of selling your brand, so that the franchisees can focus on supporting their customers.
Honesty is harder to come by in franchising than you might think. People inflate or omit numbers to make things look like they are performing better than they are. Companies communicate good news and hide bad news from the system, leading to distrust when the bad news inevitably comes out (it almost always does). Executives take lavish “field trips” to “see franchisees” when really they just need a break from everything – and everyone sees right through the charade.
What I’ve found is that being honest with franchisees, vendors, and candidates when it’s not easy always has positive effects that I could not have foreseen. Even if you show them a few blemishes, candidates are likely to still become franchisees. Even if your numbers are trending lower than you’d hoped, whether it’s the franchisor’s fault or not, your franchisees will still rally around your next initiative. Even if your franchisee hasn’t listened to your advice before, they will still appreciate the honest and tactful truth on what they need to do next. Even if one of your locations literally blows up while you are in the middle of your national convention, you will see a system that comes together to help you in your time of need. Even if you grew way too fast to support all your franchisees properly—they will give you grace.
None of it happens without complete and total transparency and honesty.
There’s a lot to this franchising business that takes years to understand and a lifetime to master. Every day I learn something new and I’ve been at it for over a decade. This year, as we launch three new brands—Valhallan, Iron 24, and Math Reactor—I’ll surely learn a few more. I hope that these few lessons help you in your franchising adventure.
Programmer and serial entrepreneur David Graham has decades of experience building successful software and businesses—including the largest youth STEM franchise. Based in Houston, TX, Graham lives with his wife, Missy, and two sons.