How Tom Gegax Used Franchising to Grow His Business

How Tom Gegax Used Franchising to Grow His Business

One of the most important things that you need to know about franchising is that the Franchise Agreement should always be treated properly because it is a document that accurately reflects the terms that have been agreed upon by both parties. Both the franchisor and the franchisee need to understand exactly what their obligations and commitments are.

Failing to do this could result in an unsuccessful business agreement, something Tom Gegax knows in and out.

Are you constantly worried about reaching all those seemingly unachievable business goals of yours, or maybe it is just that your business meetings tend to cause much more problems than they solve?
Well, there is this one man who knows a thing or two about this kind of stuff, and that man’s name is Tom Gegax!
Tom knows how uncomfortable dealing with all those business challenges can be. After spending a few years on the forefront of his Tires Plus franchise, quite unaware of how little he knew when it came to getting the most out of people and managing a highly successful organization, Tom was faced with cancer. And on top of that, Tom’s business was on the brink of disaster. However, Tom was so sure that he wasn’t ready to give up just yet, so he decided to change things around for himself — both personally and professionally.
That being said, Tom made some significant improvements to both his health and his mental clarity, and his relationships with other people went through a nice change as well.

Tom Franchised His Business

Throughout its existence, the Tires Plus brand has managed to grow into a highly successful, $200 million business with 150 upscale locations. One of the main reasons for this is that Tom decided to franchise his business. Tom knows that if you put enough focus on the well-being of both your employees and your customers, success will come to you naturally.

The Big Book of Small Business

The Big Book of Small Business is Tom’s very own book in which he shares some of his best tips and tricks on how to become an effective leader. In this book, Tom also shares some tips on how to do all the small things the right way so that all your big decisions can work properly in the end. The Big Book of Small Business is so much more than your typical book — it is an all-in-one toolbox for small businesses that is packed with street-smart tips and tough-minded practices that just about any small business owner should know.
It is one of the most comprehensive and one of the most practical small business-related books that you can find these days, especially if you are planning on franchising your business.

 

Selling Franchises

There are two aspects to selling franchises. The first one involves doing everything reasonably possible to get the attention of prospective franchisees and then vetting them to ensure that you end up with the best qualified franchisees. The second involves actually providing the prospective franchisees with the requisite information, signing documents and completing the monetary transactions that will undergird the franchisor-franchisee relationship. The first is tremendously challenging, but once it is achieved, the second is comparatively straightforward.

Tracking down potential franchisees and convincing them that buying a franchise would be the fulfillment of one of their lifelong dreams is not a remotely easy endeavor to take on. Many first-time franchisors can likely attest to having waited more than one year before they managed to sell even one franchise. This is illustrative of the fact that franchise companies do not simply build themselves. However good a franchising idea you have, you will not go anywhere with it unless you are willing to undertake the research to find out whether there is a market for the goods and services you propose. Additionally, once you have established that there is indeed such a market, you should be willing to make the effort to promote your franchise company to potential franchisees with the aim of selling franchises to them.

 

Selling Franchises with Targeted Advertising

 

Promoting franchising opportunities can be highly expensive. If you choose to follow the normal media route, you will have to pay the high rates associated with advertising on the TV or radio or with taking out an advert in a regular newspaper. The problem with these forms of media is that, not only are they expensive, but they also reach a broad, undifferentiated audience. This is an inefficient way of advertising if you want your message to reach people who are actually likely to become franchisees. This problem can be remedied by putting advertisements which indicate that you are selling franchises in targeted advertising. In other words, you should place your adverts in places where entrepreneurs and potential franchisees are bound to look.

These places include business magazines which cater specifically to business-minded audiences. They also include online directories specifically set up to include franchise companies that are currently selling franchises. A franchisor’s best bet is to have his or her franchise company listed in the more popular directories, along with the contact information of those who are interested in learning more about the franchising opportunities. Yet another option is that of targeted advertising on the internet. This could involve paying to advertise on franchising-related websites and on social networking sites like Facebook.

Franchisor Mistakes: How to Avoid Making Them

Most first-time franchisors are unable to turn their independent businesses into successful franchise businesses. Much of the time, this is because of franchisor mistakes that they make along the way. To avoid falling into the same trap, you should tread carefully during the planning and implementation stages of franchising.

One of the significant franchisor mistakes that franchising experts describe is that of inadequate planning. Some franchisors fail to do their homework before making important decisions about the running of their franchise companies. For instance, they may fail to accurately calculate just how much money they will need to get the franchising show on the road. Various expenses come into play at many stages in the process. They include legal fees, fees for developing and producing marketing materials, and various other expenses associated with developing the franchise organization.

Other aspects of planning go into franchising. They include decisions about the fees and royalties that the franchisees will pay the franchisor.  Determining what to charge your franchisees is not a decision that you should make on a whim. You have to figure out how much money you will need your franchisees to pay you in fees and royalties in order for you to meet all your financial obligations and to succeed as a franchisor. If the figures you come up with are too low then you could easily end up losing millions of dollars in potential revenue. These losses could ultimately cost you your franchise business. Thus, neglecting to devote adequate time and effort to the different terms of your relationship with your franchisees could result in a number of franchisor mistakes.

 

Franchisor mistakes that antagonize franchisees

 

Among the major franchisor mistakes is one involving failure on the part of the franchisor to recognize that certain business decisions will set him or her at loggerheads with the franchisees. The aim of franchising is ultimately to make money. Any decisions made by the franchisor with the intention of increasing his revenue are not going to go down well with the franchisees if they require some losses on their part. You should keep this in mind as you go about the daily operations of your franchise.

You should recognize that there is potential for conflict between you and your franchisees and make an effort to minimize that conflict by laying the terms of your franchise business out clearly right from the beginning. You should also have in place provisions for conflict resolution and, in the worst case scenario, for terminating dysfunctional franchisor-franchisee relationships. Last but not least, you must realize that one of the keys to franchising success is nurturing your franchisees and ensuring that they succeed. If your sole agenda is to reap profits by fleecing your franchisees, you will only succeed in antagonizing them and undermining your entire franchise system. If, however, you create an environment in which they can thrive, you will ultimately reap the monetary rewards.

On Franchise Royalties

Franchise royalties are regular payments made by franchisees to a franchisor for the right to continue using the franchise company’s copyrighted materials and ideas. It is important to note that franchise royalties, which are calculated as a percentage, are distinct from the franchise fee. The franchise fee is a flat fee which is paid at the beginning of the franchise relationship when the franchisor and franchisee have signed the franchise agreement. The one time franchise fee is, not surprisingly, large in amount. Franchise royalties are much more manageable, but because they are paid on a regular basis, they could add up to more over the length of the franchise relationship, which could last for decades.

 

Setting the Rates for your Franchise Royalties

 

As you already know, franchise royalties are the source of income for franchisors in a franchise relationship. Thus it is important for franchisors to use care in determining what rates to set for their franchisees. If, in the process of laying the groundwork for your own franchise company, you set your franchise royalty rate too low, then that is the amount you will earn for the length of the franchise relationship. The only way you can change the royalty rates is to convince your franchisees to accept a renegotiation of the franchising terms. But how likely is it that franchisees would agree to renegotiate the terms of an agreement that is advantageous to them? Why would they agree to an increase in their franchise royalties unless you were offering them something additional (which would undoubtedly cost you some money) to sweeten the pot? Thus, the best time to do research on franchise royalties and to decide what levels to set them at is long before you ever sit down to sign agreements with your franchisees.

There are different models for charging royalties. One of them is to ask your franchisees for a percentage of their net sales. The other is to ask them for a percentage of their gross sales. Those who go for the former model tend to set the royalties at a higher percentage because net sales are, by definition, lower than gross sales. In both cases, it is evident that, the more that the franchisee sales, the higher the royalties that he or she will pay you. Hence, it is in your best interests to create conditions conducive to your franchisees’ success. These could include advertizing efforts to market your products or services and specific franchise locations. They could also include efforts to optimize territorial boundaries so that the individual franchises are exploiting their markets to the best possible effect, but not competing with each other.

Franchise Basics

Franchising your business is not easy. Even with a checklist of franchise basics to keep you on track, it is a long, drawn-out process. It also involves a lot of research, preparatory work and requires tremendous courage and resources to make radical changes to the business that you have already poured your heart and soul into. However, if you do it right, the effort will eventually pay off. Once the franchise system is well-established and your franchisees are raking in revenues, you will be able to enjoy relative financial security. Furthermore, you will be able to take pride in hearing the name of your business on the lips of hundreds upon thousands of new customers regionally or nationwide.

 

Defining Franchise Basics

 

To get to a situation where you can lay back and bask in your franchise success, you must ensure that you persevere through all the necessary work and that you accomplish it well. Everything you decide at the beginning of the franchising process will have implications for the rest of your career as a franchisor. Thus, you must get certain decisions right at the beginning. Some of these decisions are pretty obvious, even to somebody who is not a specialist in franchising. Thus, it makes sense to call them franchise basics.

Perhaps the most important of franchise basics is making sure that you do your franchising ‘homework’ then review it multiple times as necessary. You must tread extra-carefully, making sure to research everything, and to countercheck the solutions you are given. Seek a variety of informed opinions about issues that you are not 100% certain about before agreeing to anything legally binding.

Another basic step in the franchising process is to make sure that you come across as a credible franchisor. The franchise package that you give your potential franchisees must contain every single relevant document. You should have thought out all the likely eventualities, and even the unlikely ones in the drafting of your contract and other documents. This includes making sure you have an exit plan. If a particular franchisee proves to be a terrible match for your franchise company, you should have the option of letting go of him or her through a set of legal steps that you have both previously agreed to. Another important point on the list of franchise basics involves coming up with a suitable brand for your franchise, and subsequently protecting it from being exploited by others.

Market Your Franchise

One of the greater challenges in franchising, and ultimately the one which will decide whether a franchise will succeed or not, is the question of how to market your franchise company. If you do this the right way, then you will have no shortage of potential franchisees applying for the opportunity to purchase franchising rights from you.

It is important to realize that many franchise companies have gone bust simply because they were not able to develop a large pool of franchisees. They failed to sell their respective concepts to their target audience. If you do not want to end up in a similar situation, then you must take the initiative to market your franchise effectively. Make sure that you are promoting it to people who are likely to be interested in it, and who will actually make the effort to invest their resources in it.

 

How Can You Market Your Franchise Effectively?

 

How will you identify the ideal audience for your marketing efforts? Well, it certainly won’t hurt to engage in some preliminary research. Find out who is likely to want to buy a franchise unit by talking to the franchisees of your competitors or of franchise companies similar to your own. The idea is to find out from them what exactly convinced them to buy franchising rights from particular franchise companies rather than others.  What features did they find attractive in the proposed franchising deals?

One of the things that you are likely to find out in your research efforts is that, for every franchise company that has been successful in gaining franchisees, there is a feature that makes it stand out when it is compared to similar franchising companies. The product offered might be unique. Alternatively, it may be the services offered which stand out. Ultimately, the franchise company has to have a unique selling proposition. If you have one of these, then you will fare better in your attempts to market your franchise.

Another critical part of effective marketing entails paying attention to such details as your franchise trademarks and to the terms you offer your franchisees. Your franchise trademark should be simple, distinct, and easy to tie back to whatever it is that your franchise company does. This will make it easier to remember and will, consequently, facilitate your efforts to market your franchise to a sympathetic audience. As for the terms that you offer your franchisees, it should be obvious that, the more favorable these are, the more likely they are to want to read your franchise disclosure document and to eventually buy franchising rights.

Ideas for Business Success: What is Franchising?

What is franchising? The word “franchising” is etymologically descended from the 14^th century Anglo-French word, “franchir,” which means “to set free.” One could therefore speculate that the franchising business model is based on a “setting free” or “liberation” of sorts.

Strictly speaking, the correct response to the question, “What is franchising?” is that it is a business model by which an individual gains the right to market the products or services of a given company for a specified period of time in a specified place.

Franchising has existed for a long time. Some say that franchising goes back to America in the mid-19^th century, when Albert Singer founded the Singer Sewing Machine Company. Singer would distribute his company’s sewing machines to customers far and wide and train them to use them. He would also sell entrepreneurs licenses that gave them the right to distribute the Singer sewing machines. However, there is evidence that franchising was practiced before that in Germany, among German brewers who conferred upon particular taverns the right to sale their ale.

Others trace the concept of franchising much further back in time, specifically to the Middle Ages. They view the practice by which leaders granted people the right to operate various commercial interests as a precursor of the present day practice of franchising. Perhaps a better example is that of the church and its expansion through Europe. Some might consider it offensive to describe the church as if it were a business, but there are certainly parallels to speak of. One might say that these parallels prove that successful ideas can be adapted to all sorts of situations.

 

Reconsidering the Question “What Is Franchising?”

 

However one chooses to answer the question, “What is franchising?” it is widely agreed that it is a popular business model. The success of franchising can be attributed to a number of factors that make it easy for entrepreneurs to get established in business. To begin with, franchising involves selling goods and services to a pre-existing market. Hence, one does not have to create a customer base from scratch. Also, with franchising, a successful business model has already been established, as has a brand name. Furthermore, the franchisor or originator of the franchise often invests in training the entrepreneurs to whom he or she sells the franchise. All of these factors save entrepreneurs time and resources.

So, in response to the question, “What is franchising?” one might respond that it is an innovative idea that has the proven capacity to “liberate” hardworking entrepreneurs and make successful businessmen out of them.

How 2 Franchise a Business

For those looking to jumpstart their businesses’ growth, franchising could be a solution. However, they must first learn how 2 franchise before they can tell whether it is worth their time and resources.

Franchising does not guarantee success for every business owner who ventures into it. Because it is a long process and costs a significant amount, it makes sense to learn what kind of business makes a good franchising “candidate” and the logistics involved in transforming it into a franchise.

The best business to turn into a franchise is one that has shown consistent success after being expanded to encompass more than one unit. Thus, an ice-cream store with units at three locations, each of which has been raking in considerable profits for four consecutive years is likely to be a good candidate for franchising. Such a business will already have demonstrated that the idea behind it is capable of succeeding in different contexts.

This is not enough, though. The product being sold or the service being offered must be unique enough to make the business stand out, but it must also be appealing enough to guarantee that customers will be drawn to it. In addition, it is important to do market research to establish that there is a demand for the kind of franchise being proposed. These are all critical steps in figuring out how 2 franchise a business successfully.

 

How 2 Franchise: The Ideal Franchisor

 

Successful franchising has to do with much more than the business itself. It also has to do with the business owner. Thus, if the owner of a given business, say, the ice-cream store described above, is not comfortable with the idea of ceding some control, he will have a hard time franchising it. A business owner who likes her business just as it is and is not itching to see it grow is also better off maintaining the status quo. Learning how 2 franchise would simply be a waste of time for her.

Franchising is ultimately a course of action for a successful and ambitious person who has made a splash with his or her innovative ideas. A prospective franchisor also has to be able to envision himself or herself in the managerial position. This is because, once the franchise is established, he or she will be responsible for marketing it to prospective franchisees and playing a supervisory role. For the prospective franchisor, learning how 2 franchise will mean learning to play a lesser role on the operational side of things and adopting a primarily supervisory role.

Analyzing the “Franchising” Definition

One of the more appealing contemporary business models is that of franchising. The reason for the success of this business model is encapsulated in the “franchising” definition given in the online Business Dictionary: “Arrangement where one party (the franchiser) grants another party (the franchisee) the right to use its trademark or trade-name as well as certain business systems and processes, to produce and market a good or service according to certain specifications.”

The “franchising” definition above establishes an important point: Because the “trademark or trade-name” is already in use, and because the franchiser has already established certain “business systems and processes,” the franchisee can skip over the preliminary steps that are typically involved in starting a business. In doing so, the franchisee saves a lot of money and time. The franchisee has, at his or her fingertips, a formula that has already succeeded for others before. It is even possible to do research on other franchisees and see what worked for them and what did not. Franchisee networking is greatly beneficial to them.

Other advantages of franchising follow: any advertising done by the franchisor benefits the franchisee. There is also the fact that franchisees have exclusive rights within a specified territory. So there is no risk that they will have to compete with other franchisees for customers in that area. Another advantage of franchising has to do with financing. Individuals starting businesses often experience difficulty borrowing money from banks because there is no guarantee that they will succeed. Sometimes getting into the franchising business opens the doors for them: Some banks are willing to lend money to franchisees if the franchise in question is reputable.

 

The “Franchising” Definition and the Implied Limitations of the Business Model

 

The “franchising” definition highlighted at the beginning of this article emphasizes the benefits of franchising arrangements. However, there are certain limitations that come with franchising. These are also implied in the “franchising” definition. One such disadvantage is the fact that the franchisee is restricted to following the formula established by the franchisor. Any significant deviations from it would dilute the franchisor’s trademark. Hence individual creativity is somewhat restricted.

Another characteristic of franchising is the fact that the financial aspect of the franchiser-franchisee relationship endures for as long as the franchisee operates the business. Consequently, the franchisee has to share part of the profits with the franchisor. This is only fair. After all, the franchisee continues to benefit from the franchisor’s advertising, training and other franchise-related efforts. Hence, this is not necessarily a disadvantage. Put simply, it is a business expense like any other.

How To Franchise: Meaning and Method

A successful business with a unique, easily replicable model is the perfect business to franchise, meaning that it can be expanded regionally or even nationally without overtaxing its owner. If you own such a business and have been toying with the idea of franchising it, you should read on. What you learn below will give you some insight into the process.

Franchising your business entails drawing up a license that allows other parties access to your business knowledge, model and trademarks. By granting these parties a franchise, you essentially allow them to provide customers with goods or services under the name of your business. This might worry you somewhat if you do not want to cede control over your business reputation to relative strangers.

Fortunately, though, franchising is not an endeavor that you go into completely blind. If you follow the right steps, you can maximize your chances of creating a successful franchise, meaning you will have much less to worry about than you imagine. As a franchisor, you would have the primary say over who you sold the franchise to and the circumstances under which your franchisees could operate the license. You would be able to vet potential franchisees to see that they met your expectations.

Heading 2: Turning Your Business into a Franchise: Meaning and Method

One of the keys to successful franchising involves starting to think like a franchisor, even before you set into motion the process that will make you one. You must be able to derive from your business experience a model that can be replicated by those who purchase the franchise, meaning you have to be able to explain to your franchisees exactly how your business works and why it works that way. You also have to set down detailed instructions for them to follow.

This is easier said than done. Most business owners are so immersed in their businesses that they cannot describe them in objective terms. They may have a hard time setting out in precise detail all the actions entailed in running their businesses. Many of them are likely to describe their most brilliant business decisions as intuitive decisions. You are likely to find yourself in this situation. If that is the case, you will likely need some time to orient yourself to this new way of thinking about your business.

It is an involving process turning your business into a franchise, meaning that at some point you will have to consult a professional for advice and guidance and to look for franchising resources. One such professional is a franchise consultant. Another one is a franchise lawyer. Both have training and experience specific to franchising and can save you much heartache. As for resources, you should turn to the International Franchise Association for useful information on the legalities of the process and for guidance.

Next Page »