So, you think your restaurant concept may be the next major franchise to become a household name. Visions of Subway and McDonald’s come to mind. You may ask yourself - to what extent is this possible? Take a look at Quizno’s. Conventional wisdom held that, prior to their expansion, the sandwich market was already over-saturated. Obviously, in this case, conventional wisdom was wrong. Quizno’s grew from an emerging concept in 1994 to opening its 3000th store in 2004. In that time it went from a start-up franchise company to a company valued at over a billion dollars. Clearly this is a best-case scenario, however, it does show that under the right circumstances franchising is a very powerful growth model.
     Generally speaking, franchising is a way of distributing products and services. It provides for aggressive growth while allocating risks and spreading the expansion costs. A franchisor typically provides the franchisee with training and on-going support for opening and operating a business that utilizes the franchisor’s business systems and trademark(s) or service mark(s), i.e. names and logo(s). A franchisee typically supplies the start-up capital and manages the day-to-day operation. The franchisee will usually pay an initial franchise fee and on-going royalties for the right to use the franchisor’s marks and business systems, and ongoing support.

Under federal law franchising is defined as having three elements:

1. The franchisor has given the right to a franchisee to distribute goods and services under franchisor’s trademark, service mark or other commercial symbol.

2. The franchisor has significant control over or provides significant assistance to the franchisee’s method of operation. Examples include: location approval, requirements of site design, training programs, operational manuals, designated hours of operation.

3. Franchisee is re­quired to pay at least $500 before or within 6 months of opening for business.

     Assuming your business fits this definition, you must comply with the Federal Trade Commission Franchise Rule, which regulates the offering of a franchise business opportunity. Generally speaking, this Rule requires that a prospective franchisee be provided with specific information about the franchisor, provided in a specific document called a Franchise Disclosure Document or FDD. This document will disclose pertinent information regarding your company to a prospective franchisee and also includes all form franchise agreements used by the franchisor.
     Certain states have their own franchise regulations. In order to sell franchises in these state, you not only have to comply with the federal guidelines, but you also have to comply with the state guidelines.
     Once you have a general idea of what franchising entails, the next step involves a review of your business to determine if growth through franchising is a viable option.

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Franchising: Growing Bigger & Better

By Bob Johnston

     Chinese? How about Italian? Or maybe some fondue? People have numerous options to choose from when dining out, so how do they decide where to eat? Or perhaps the better question is how do they decide where to eat again and again?
     It’s important to deliver an emotional and memorable customer service experience to gain a base of sought-after repeat, loyal customers. This consistent delivery of the “perfect night out” — paired with good franchisor-franchisee relations — are the keys to franchise growth.
Fast food chains and sit down restaurants make up the largest and fastest-growing segments of the franchise industry. According to the International Franchise Association, franchising companies will account for more than $1 trillion in annual sales and employ more than 18 million people. So how can one franchise stand out from the pack of 750,000?
   Only the strongest brands with a committed focus on serving both of their audiences, franchisees and customers, will sustain consistent growth.
     Many franchise systems have an adversarial system in place, which creates a fair amount of resentment among franchisees. In these systems, franchisees feel the power lies with the franchisor who could take over their business at any time or become too involved in the day-to-day process. By involving the franchisee in the overall operation and making each franchisee a partner in brand development, the franchisee is more apt to feel secure and loyal to the brand. Loyal franchisees can be catalysts for growth, either looking to expand themselves with additional locations, or by advocating for the brand with prospective franchisees.
      If a franchise company wants to illustrate its commitment to nurturing relationships with franchisees, it may consider forming a Steering Committee. This effective tool demonstrates a proactive approach to involve franchisees in the decision-making process for the

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Today's Restaurant News · P.O. Box 273264
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