As a potential franchisor you may not fully understand all of the questions or have an independent frame of reference to know what all your available options truly are. The attorneys, knowledgeable in the law and prior agreements, often will provide you with advice and direction. However, without the benefit of being able to evaluate business alternatives, conduct research, and fully explore the strategic considerations that most of these decisions require, the franchise system will often end up operating as a legal vehicle for expansion rather than what it truly should be, a business structure for expansion.
Think of the elements in a franchise system that you should be offering to future franchisees. One of the principal elements is your experience in operating the business to be franchised. If that experience doesn’t exist, or is so minimal as to be negligible, all that you are really offering potential franchisees is the opportunity of being a guinea pig. While legal counsel could develop franchise documents sufficient to offer franchises for a business that never existed, and you might even find individuals willing to buy your franchise, the risk of failure for both the franchisor and franchisee will be high. Unfortunately, with the abundance of franchise packaging firms (both consultants and attorneys) existing in franchising today, those “opportunities” exist.
When conducting a feasibility examination, we review business and financial benchmarks. The benchmarks used depend on the industry segment, the company, and other determinants but broadly fall into a few interrelated and interdependent buckets, including the underlying business; its products and services; how well the business can be systematized for new and existing franchisees; the skills required by franchisees to operate the business; the organization and support required to manage and grow the system; the potential for expansion; and, the underlying business economics.
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