Business Franchise

While surfing Internet I have met an article that made me overlook some of my views on franchise system.
It is called Marketing the Franchise and written by Edward N. Levitt, a franchise lawyer and partner with Gowling LaFleur Henderson LLP, who has over 30 years experience practicing franchise law, is a prolific writer, a noted lecturer and is currently General Counsel to the Canadian Franchise Association.
I used to consider franchises mostly from franchisees point of view. What should an entrepreneur do in order to find the right franchisor? What are the most thrilling franchise experiences in … (let’s say Australia)? What are the main rules to follow in order to be successful franchisee?
But franchise as any other system is a two-way highway. And franchisors also face a lot of problems during setting up and organizing a franchise system work.
Their problems are problems of other growth. Where should a company search for its franchisees? What are the criteria to choose the right guys to work with that business? How should business relationships be installed? Where are the responsibilities borders? What information and authority should be shared with franchisees? How should a company respond to improper franchisees?
All that topics are called franchise marketing. And a franchisor should be clear in his mind answering all that questions.
So the article is a must read to anyone thinking to install his own franchise system and highly recommended to anyone interested in franchises.

While searching the Internet for interesting information about franchising to share with the readers of my blog I found an outstanding idea that had been realized by the company called Entrepreneur’s Source. They managed to create their franchise business helping others to start-up and operate franchise businesses. I understood that I had to write about it.

The business system created by Entrepreneur’s Source can be divided into 2 parts (as I understood from the information in their web site). On the one hand they work with the companies that already have their business systems. The company offers its clients to expand their operations through creating a franchise system for their business. I really liked the way they present the idea. They explain that they are not consultants but coachers for their clients. They say that every person tries to decrease or avoid risk. It’s natural. And they promise their clients to help to decrease a business risk. Based on their experience the Entrepreneur’s Source is going to train their customers how to swim in a seethed and sudden water of business-sea. They use the idea of coaching comparing their service with the process of teaching to read. On their web site they ask a question: Did You Teach Yourself to Read?
As a sports coach develops an individual training program for each sportsman, Entrepreneur’s Source develop a franchise program for the clients taking into consideration all individual peculiarities. Their package of services includes:
1. Feasibility assessment. Analytics of Entrepreneur’s Source determine if business is franchisable in general.
2. Business plan. They create a document answering marketing, production, and organizational and financial questions concerning prospective franchise business.
3. Raising capital. They help in creation documents and calculations necessary to obtain an external financing.
4. Regulatory compliance. They check if the franchise system and all documents (including disclosure and agreements) meet all the legislative requirements.
5. Marketing & advertising. Well-developed promotion program is a key feature of any franchise system.
6. Lead generation and candidate qualification.
7. Expansion plans
8. And much more …

On the other hand Entrepreneur’s Source deals with those thinking to start-up their business. And they attract prospective franchisees not only for the franchisors mentioned above but also for themselves. Yes, before they decided to earn money while helping others to start-up franchise business (as franchisor or franchisee) they created such system for their own company. And it gave them the experience on how to qualify candidates in order to choose appropriate ones. Now they use the following scheme: they don’t use contract employees to run their satellite offices, but open each new office as a franchised business. The royalty payment is 25%, and Entrepreneur’s Source franchisees pay it from every placement fee – the money received from franchisor when the company places a candidate.

As for me I really liked this idea. The only negative thing in this business is concerned the money that prospective or existing franchisor has to pay to this consulting company. I haven’t found the exact information on the company’s web site, but the other sources say that your franchisor pays them a commission, typically 30% to 75% of the franchise fee. Certainly it is a trade-off. You can set-up your business system yourself or turn to professionals. In the latter case it will cost you and your potential franchisees, as you’ll have to increase the initial fee to cover the consulting costs.

Welcome to Wonderland! It can absolutely change your point of view and I hope make world better
OK, let’s imagine ourselves in Australia. Koala bears, platypuses and local circumstances cohabit with the lifestyle of United Kingdom and United States… And in 1946 two guys have decided to start a business there. They were going to produce and sell rubber strip matting and mats from transmission belt edges sourced from Dunlop Salvage. Nice idea, don’t you think so?
Anyway they did it and they called their company Clark Matting & Rubber.
They had been working for about 40 years. Nothing special… They earned some money I think.
But the business wasn’t too profitable as in 1982 the company was sold to The Adsteam Group.
The Adsteam Group tried to change the business but failed. So in 1990 they faced more difficulties and they decided to close the Clark Rubber retail operation.
Look, they couldn’t even find a buyer for that business. It was so nice business niche!
 

And now welcome to Wonderland.
In 1994 Chris Malcolm had taken a license of the Clark Rubber brands and decided to try franchise model to this business. The franchise system has absolutely changed the long-winded history of the company. No more time to think over. The pace of company development has increased drastically. In just 1 year there were 25 franchised stores. Five years later, Chris Malcolm purchased the Clark Rubber brands from its owner.
Let’s evaluate the achievements of the company highlighted at their internet site:
1998
Clark Rubber Franchising opens its 50th franchised store
1999
Winner of the Franchise Council of Australia’s Franchise System of the Year Award, Category Entry Capital over $200,000
2002
Highly Commended - ACA Australian Catalogue Award, Home Repairs and Outdoor Catalogue
2003
Chris Malcolm became one of the inaugural inductees in the FCA Hall of Fame
2003
Finalist in the FCA Franchisor Retail and Business Category. (21 - 100 Outlets)
2003
Certificate of Merit - Australian Catalogue Award, Amazing Christmas Catalogue
 

Today, Clark Rubber Franchising has 70 stores throughout Australia and is growing. Retail sales growth percentages have surpassed national averages year after year. Our high quality support services from our Franchise Support Office are constantly being refined and improved, with an intranet system making access to up to date information a breeze.
Clark Rubber recognizes that the success of any franchise system very much depends on the success of its franchisees and is full of praise for the enthusiasm, commitment and contribution made by the Clark Rubber Franchisees that have helped make this great Australian brand the success that it is.
 

Is there anybody going to argue my idea that franchise system could resurrect dead business?

So, I decided to continue the Internet franchising topic using the example of the most (as I think) well-known company in the sphere of web-consulting. I mean the WSI  or (as they call themselves) #1 Internet and Technology Services Franchise.
 And what do they mean by Internet and Technology Services?
The first thing I need to speak about is their target market and the problems they are trying to solve. WSI helps small and middle-size private companies to use the Internet resources as efficient as possible. Does it mean that many of them are using the Internet inefficiently? Unfortunately, yes. Global network provides a lot of opportunities to decrease costs and to increase sales at the same time. It allows to increase productivity and to improve the communication with the clients, suppliers and partners. It opens a wide variety of different marketing instruments (not only just web page registered in Google…).
But for most middle and small-size companies my previous paragraph brings nothing more than a disappointment. They understand that do not have enough experience in e-business and Internet technologies and have no time to study it.
 

So, WSI decided to present solutions that assists these businesses. They’ve created proven and patent pending Business Systems and established an outstanding Franchise System to reach as many small and middle-size companies as it’s possible!
 What do you need to know before making a decision if the become a WSI franchisee? I hope the following summary can be helpful.
 

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Number of current franchisees: 1,000 franchisees in 87 countries around the world. More than 1500 offices of the company.
Franchise fee: $49,700 USD
Founded: 1995
Franchising Since: 1997
Estimated total cost of franchise: As the franchise is a home office based enterprise, costs on top of the initial fee are small. I can even say that it’s equal to franchise fee, not more.
Territories Available: There are franchises available both nationally and worldwide.
Royalty fee: 10%
 The main idea:
As new Internet technologies appear and will continue to appear, as a trained and certified WSI Internet Consultant, franchisee is positioned to assist businesses in capitalizing on these new possibilities.
WSI franchise program includes compulsory training of all potential franchisees to become Professional Internet Consultants, allowing them to act as a one-stop shop of internet solutions for small and middle-size businesses. Consultants help boost firms’ internet profits by offering a variety of web-based services, while still being able to work from the comfort of their own home.
As they say
“WSI liken their Internet Consultants to ‘architects’, who assess their clients’ business needs using WSI’s Lifecycle System. Each client is then provided with a tailor-made internet solution, which aims to both reduce business overheads and increase revenues.
Once the internet solution has been formulated, it is then independently built at one of WSI’s Global Production Centres, located in a low-cost, high-tech area such as India or Australia. The clients are then delivered a results-orientated, technologically advanced internet solution at an economical cost”.
To train the company also uses the Internet technology called e-learning or on-line education. It provides additional benefits to the potential franchisee as this variant is much cheaper (no transportation costs, you can choose better time and stay with your family).
 

Following current support:
WSI uses developed by themselves Client Support System. It can provide franchisees with an on-going stream of reoccurring revenue from each client. The company also helps franchisees by offering an on-going support program that is custom-made to meet the unique needs of each new franchisee.
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 As for me, I think that I’d buy the franchise license. Why not yet? Maybe because I still see a very serious competition in that field. Certainly, the WSI company has a well-known brand and a wonderful advertising campaign, but…
Small business owners are trying to save every dollar and pound. And there are too many freelancers in the consulting sphere (undergraduate and graduate students and even former employee of WSI franchisees) that can provide that services for lower costs. I agree that in most cases WSI-trained companies using good software and technologies will perform better quality. But I’m still afraid…. Can anybody overpersuade me?