As companies seek ways to expand, franchising is considered a successful business model to implement. Considering that the cost to franchise a business can require a minimum investment of $100,000 it’s important that the new franchise achieves success. It follows that a key question to ask is: How successful are new franchisors?
A significant difference is in the success rate of franchise systems with 10+ company-owned locations. One reason could be that the systems with company-owned outlets have a better understanding of the business operations and most importantly have the sustained revenues and thus capital to offset slow franchise growth.
For prospective franchisees, investments into new franchise systems without corporate locations can be a higher risk investment. A franchisor needs to be financially healthy and stable to achieve successful growth.
For franchisors and businesses interested in franchising, company-owned outlets play an important role in the success of your business. Creating your franchised business requires proper due diligence and a comprehensive feasibility study to ensure proper structure and development strategies are in place.
We have completed a study on the changes in Ongoing Fees in the franchise industry using our data from 2013 – 2016 to publish the report.
A Franchise Disclosure Document (“FDD”) presents key components of the franchise program including the obligations of the franchisor and franchisees.
As franchise system development becomes more competitive franchise systems are employing a new strategy to grow their brand and increase franchise sales.
The composition of the franchise investment differs in key areas such as: franchise fees, royalty rates, territory protections and Item 19 disclosures.
Data has become essential to having a successful franchise development team. Those that maximize the power of data will sell more franchises.
When reviewing an FDD, we always keep our eyes out for any errors. The error that is the most troublesome for us is when we see Item 20 errors.