Lessons learned and a list of projects can help you build a new franchise brand.

By James Thomson

The Internet has transformed the franchise sales process forever. There is much information available that aspiring franchise owners now have at their fingertips. News articles, franchise development websites, awards, reviews and more. While it’s no doubt hard to cut through the clutter and determine what information is credible, there’s no discounting the fact that the Internet can make the due diligence process considerably easier when used effectively. But what about entrepreneurs who are looking to create a brand new franchise company, as opposed to joining an established brand as a franchisee?  How do you do your due diligence when you are creating a new company from scratch? Where do you even begin? These are excellent (and important) questions and there are considerably less “how-to” materials available for entrepreneurs looking to launch a new franchise brand.  When you are buying a franchise location or franchise territory, you have access to other franchisees and a proven blueprint of success. That’s just not the case when you create a company. To help those who are considering taking the same plunge my co-founder, Don Crouch, and I took when we created NFP Sports in 2009, we’ve compiled some lessons learned from our experiences and a list of projects you must accomplish when building a new franchise brand.

Five Key Catalysts for New Franchise Systems

In 2009, Don and I were among 200 employees laid off by former high school fundraising giant, Varsity Gold, as the company was forced to declare bankruptcy. Drawn together by our shared love for youth sports and a modified, high-impact approach to fundraising, we decided to go all-in and start NFP Sports, our own high school sports fundraising company. At that time, we were two passionate sales professionals who were dreaming big and committed to saving high school sports from crippling funding problems. Like many other new franchise brand founders, we didn’t have angel investors or any other form of significant financial support. It was up to us to bootstrap this company based on our own blood, sweat and tears. Here are the five key things on which other ambitious entrepreneurs need to focus when starting their own franchise brand.

  1. You must have a passion for the work you do and the industry you serve. Simply launching a new company is incredibly difficult. Making it successful is exponentially harder. You will have sleepless nights and work insane hours. It’s likely to take months, sometimes years, before your efforts help you turn a profit. Take it from us, if we didn’t love sports, and more importantly, the work required to sell and execute our patented fundraising program, there is no way our company would exist today.
     
  2. Similarly, make sure you know other entrepreneurial minds who share that passion.  We were very lucky on this front. Dozens of our close business associates also found themselves out of jobs when Varsity Gold went under. We knew many of them shared our passion for high school sports fundraising and they became our first franchise owners.  Unfortunately, this is not the norm. It’s up to you to engage with friends, colleagues, other entrepreneurs, and any seriously interested parties to see if demand exists for the franchise opportunity. Remember, while it is certainly important to make sure your product or service appeals to consumers and business partners, it is equally important to make sure you have a business model that attracts franchise owners.
     
  3. Ensure you have a simple and proven system that your brand can make its own. One of our biggest challenges has been differentiating our “updated” approach from the old product-based fundraising model in the eyes of our customers. Although our fundraising program has similar steps, we have created a service-based system with targeted products that enhance the experience for the student athletes who go above and beyond to raise money for their high school teams. For example, we have developed a scholarship program that rewards top performing student athletes with thousands of dollars that they put toward their continuing education. We are known for our ability to help student athletes pay for extended education while developing career ready sales skills. Figure out something specific that your company can own and create programs that share and promote that message in powerful ways.
     
  4. Make sure you develop a powerful and timely value proposition. You can find examples of successful franchise companies in a wide variety of industries that are thriving because they got this right. In today’s world, any franchise brand that caters to America’s aging population is a prime example. Obviously, senior care franchises fit this description, but so do less obvious concepts such as wheelchair ramp franchises and shelf installation franchises that make daily life easier for seniors. From our perspective, our rapid growth and success has been intrinsically tied to the dire need for fundraising in high school sports. Billions have been cut from high school sports programs in recent years and it is predicted that 27 percent of U.S. public schools will not offer interscholastic sports programs by 2020.  Our value proposition works because we are laser focused on reviving high school sports programs that are facing real problems. When building your own value proposition, do your research and make sure you are providing solutions to debilitating modern-day issues.
     
  5. Go all-in on marketing and sales programs to increase brand awareness and preference.  As mentioned, the Internet has changed franchise sales for good. It’s also fundamentally altered the way consumers search for new products and service providers.  Today, it is imperative to contribute to the online conversation about your industry and your brand. Make sure you create a quality, interactive website that represents your brand well. Hire a public relations and social media firm, or qualified in-house expert, to share your story with the masses and inspire other aspiring entrepreneurs to join your brand. Bottom line: finances will be tight when you launch your new company, so if you spend money, make sure you spend it on vendors and programs that can improve your brand’s visibility and image.

The “Top-Things-You-Don’t-Think-About-When-Starting-a-Franchise” Checklist

  • Create a franchise disclosure document and franchise agreement and ensure all corporate employees possess a thorough understanding of both documents.
  • Create detailed training programs and consistently modify them for accuracy.
  • Create partnerships with credible vendors (service providers and product providers) for the system.
  • Establish master vendor agreements at the franchisor level and organize subordinate agreements between franchisees and the vendor.
  • Create a new brand, including logos, trademarks, etc.
  • Create a consumer and franchise development website.
  • Hire professional advisors with franchise experience:  franchise consultants, franchise and general counsel/business attorneys, etc.
  • Work with an accountant and CPA firm to conduct a franchise audit.
  • Establish company-run or affiliate locations to test your program and prove that the value proposition works.
  • Never sell a franchise just to sign a franchisee; the long-term problems will far outweigh the short-term gain.
  • Take the time to fully understand your brand’s financial projections/model, cash flow, etc.
  • Define corporate team roles even if you are doing it all out of the gate. This will help you define the skill sets you need when hiring people.
  • Develop an internal communication plan and know how you want to communicate with stakeholders, whether by text, phone, email, chat, etc.
  • Work with a proven marketing and PR expert or agency to develop a strategic marketing plan.
  • Constantly create and revise short-term business plans: three months, six months and a year out from launch. Three-to-five year plans should be created once you pass the start-up cost phase and have a firm grasp of revenue streams and expenses.

James Thomson is a national high school fundraising expert and co-founder of NFP Sports, a fundraising franchise with seven franchisee-owned and four company-owned locations in the northeast United States. Find him at fransocial.franchise.org.      

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