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Franchising vs. Opening A Company-Owned Location

Not too long ago I came across a conversation on LinkedIn that posed the question: Should I take my business to the next level by franchising, or opening a company-owned second location?  Mind you, this is not verbatim but you get the jist of it.  This one question has prompted me to tell the following story.

Disclaimer: this is not intended to be advice, it is only my experience that I am sharing and how I feel about it.  I am not trying to say do this or don’t do that, only what I would do and why.  Not everyone has the same experiences, in fact, I hope nobody will ever experience what we did.  So I will try to lay out the facts, but to be honest with you, I will be biased.

Ok so let me take this from the beginning.

A few years back we were looking for a way to grow and increase revenue, we got really excited about the concept of taking our business to the next level.  It was after the recession had hit, we survived it all, and were once again beginning to see growth in the business.  At the time, we offered both residential cleaning as well as carpet steam cleaning.  It was a great pair.  Our head of carpet cleaning went to a conference and when he returned it was like he was on fire.  He went out and worked the sales like he never had before.  It was really exciting.  It was at that time that he brought up the idea of franchising the residential cleaning business to the team.  

We could all feel the energy.  There was something amazing about the idea of sharing our processes and helping other businesses to succeed the way we were succeeding that was so exciting.  So the research began. The first answer we needed was:

How do you create a franchise?

So the seriously simplified process is this: you need two main legal documents the Franchise Disclosure Document (FDD), and the Franchise Agreement (FA).  The Franchise Agreement needs to be written in a certain way and with a certain language in order to pass a test by an approved franchise lawyer.  This is done to protect your interests as well your the interests of the potential franchisee.  Once someone reads over the FDD, they can sign the FA.  There is a mandatory waiting period between receiving the FDD and then entering into the FA.  

Basically, you have to write every detail about everything you do, how you do it, and why you do it.  And write it in a way the can be executed by anyone and you will get the same or similar results (while at the same time, telling the potential franchisee that results are not guaranteed!). When you are all done with that you then create another document that details what you cannot do.  Remember, this is a legally binding contract between two parties.

How do we write an FDA or FA?

We don’t! You hire someone to do it for you so that it can be approved by an attorney specializing in franchising.  We just tell them what to write.  This was time-consuming and expensive.  In the end, we had two giant books that detailed everything that a franchise can and cannot do, and so it was sent off to the lawyers for review.

We learned so much by creating these documents and going through the process to create the franchise…We were ready to SELL our Franchise!  (but you don’t sell it, you offer it).

But here’s the deal: when you create and offer a franchise, you are not just signing a contract, you are birthing a baby. You’re offering your DNA to another human, and you will be responsible for guiding them and nurturing them throughout the life cycle of the business.

So let’s get really real, the truth about Franchising.

The truth is, that the success of our business was not only what we did, but the way we did it.  Yes, to an extent, these things can be taught, shared, and replicated.  I can teach someone how to do what I do and to do it the way that I do…if that person is receptive and has the right personality.  Some things are super simple, like answer the phone when it rings, but there will always to be some people that you can’t get to say the right thing at the right time, when they answer the phone, no amount of coaching could change that.  Other more delicate issues, like how to not get defensive, or overbearing when something goes wrong can be harder to teach, some will never get it.

So in case, you haven’t picked up on it…I would never recommend that you turn your business into a franchise, unless you want to spend a shit ton of money and create huge headaches for yourself.  

OK so onto…

Opening a Company Owned Location

Have you ever gone on vacation, or moved offices?  If you said yes, then you are ready to open a company-owned location.

That seems simple right?  It really is.  So long as location #1 is self-sufficient, can be run without out you, and you could easily replicate your processes then you are ready for #2.  Just make sure to hire the right people, or get the right partner!

And of course, you can only do this if you have the best customer experience!  Check out this free guide: 

The Customer Experience