Built to Last for Endurance
Strategies for creating long-lasting franchises that grow at the right pace.
By Ted Rippey and Jon Gaiman
Building a lasting franchise is a test in organization, research, preparation and learning from best practices. We’ve both worked with franchised brands for most of our careers. Whether you’re building a franchise from a handful of prototype corporate-owned stores, or looking to grow via greenfield development across an entire region, there are a few lessons we have learned from launching these different franchising programs.
Know your business model inside and out
To build a lasting franchise, you need a proven business model – a business in a box – that can be replicated with as little variance as possible. With Take 5 Oil Change, we had a large base of corporate-owned stores (nearly 300) and during decades of building and managing Take 5 locations, we were able to identify what metrics drove success in real estate, training, operations and marketing. You don’t have to have that many corporate stores to know what drives success, but having some helps you get a true sense of the model and how it will work in various environments.
“To build a lasting franchise, you need… a business in a box that can be replicated with as little variance as possible.”
Solidify the numbers, be realistic
Franchises are investments, so you need to be able to answer three key questions about your business’s economics: 1. How much does the business cost? 2. What is the cash flow at maturity? 3. How long does it take to ramp up?
Taking a hard look at these three data points of your business will also determine how competitive you’ll be compared to other franchise opportunities.
Establish measurements for success
Having a successful franchise model will attract franchisees, so defining what “success” is will be critical. We are big proponents of data. Begin measuring everything about your business, whether it’s the time customers wait for their oil change, the ticket time at a restaurant, online reviews, average spoilage, etc. At Take 5, we were able to showcase data from hundreds of locations over many years – metrics directly correlated to success. We found that our most successful locations also had the fastest oil change times. This metric plus many others are published in an online dashboard for our store managers and franchisees to use and monitor. Having access to this dashboard allows for real-time decision making; plus, being able to showcase the dashboard to prospective franchisees helps cement the notion that you’ve built a turnkey business model for them to follow.
Identify your ideal franchisee
Next, identify your target franchisee. Are they a multi-unit operator with a high net worth or a single-unit owner operator? Someone with industry experience? Do they need to live in the market? With the level of investment we needed for Take 5 and similarly high cash flows, we’re looking for higher net worth candidates who can handle multiple store operations. However, you may determine that your franchise model will work best with an owner operator who owns just one unit and is in that store daily.
Target those franchisees
Once you’ve identified your ideal franchisee, think about how you will find them and evaluate them. If you’re targeting first-time franchise buyers, you will likely be marketing in different places than if you were looking for higher net worth, multi-unit operators. Think about their geography, income and net worth, and professional experience. Thinking through these questions will help refine your advertising and inform how you reach those people.
At Take 5, we want a track record of success, real estate expertise, and net worth over $2M. And before we spend money on development advertising we ask: “Will this campaign reach the candidate we just defined?”
Does royalty provide value to franchisees?
This is one of the biggest questions you’ll need to answer for lasting success – if you can quantify where franchisees get value from the fees they pay, then you’ve answered the million-dollar-question. We learned a lot building our first franchise model from scratch with 1-800-Radiator – so much so, that we had a list of “dos” and “don’ts” when it came time to do the same for Take 5.
With Take 5, we wanted to leverage our enormous buying power, so we made a requirement that all products had to go through our system of approved vendors. This allows us to pool all of our purchases – corporate and franchisee – within a few vendors, so we can pass those additional savings on to our franchisees. Operating like this puts more administrative costs into our system; however, without it we lose a huge value-add to our franchisees. When you are rolling out a new brand, no one knows about you, so showing this value makes all the difference. You may find that a similar opportunity works perfectly for your business – build that into the FDD so it is uniform across the board.
“Start with perfecting your business model, and don’t rush into franchising too quickly.”
These are a few tips we’ve learned over the years building different franchise models. Start with perfecting your business model, and don’t rush into franchising too quickly. Not every business is meant to be franchised. The best business for franchising should check the following boxes: easy to operate, defined real estate model, great investment and quantifiable franchisor value-add. If you’re able to show success in these areas and across multiple locations over an extended period of time, you may be on the right track. Just be sure to measure it.
Ted Rippey is VP of Franchising for Take 5 Oil Change, part of Driven Brands. Jon Gaiman is Chief Development Officer for Driven Brands, parent company of brands including Meineke Car Care Centers, Maaco, CARSTAR North America, 1-800-Radiator & A/C and Take 5 Oil Change.