E-Book Franchising Your Restaurant Concept_4-1-2015

FRANCHISING YOUR
RESTAURANT CONCEPT
What’s involved?

1525 Bethel Road, Suite 201 | Columbus, Ohio 43220-2054 | 614-442-3535 | Fax: 614-442-3550 | Toll-Free: 1-800-282-9049 | www.ohiorestaurant.org
FRANCHISING YOUR RESTAURANT CONCEPT
What’s involved?
1
Let’s talk about franchising your
restaurant concept.
Franchising, when done correctly and for the right reasons, is incredibly rewarding. As a franchisor you will
provide people with an opportunity to build a great future for their families. You will form incredibly strong
relationships and impact thousands of lives. You will create a legacy that can last many lifetimes.
Before you decide to franchise your concept, you need to be able
to answer the following questions with a definite “yes.”
• Are you someone who always strives for excellence?
• Can your leadership style inspire a large number of people?
• Would you enjoy mentoring a lot of people?
• Are you open to being part of groups or forums that involve travel?
• Would you gladly invest time, money and learning in order
to ensure your system’s growth?
• Are you hungry to grow your business?
• Can you sacrifice absolute control in favor of collaboration?
These are important points to keep in mind as the leader of a franchise organization. Your role as a
franchisor will be dramatically different from that of an operator. You need to be ready to accept and
embrace this new role. If you just want to operate restaurants, franchising is probably not for you.
Now that you have decided that franchising is your future, let’s talk about what you need to do to get ready
to grant your first franchise.
David Roemer, Certified Business Coach

What’s involved?
2
Getting Your House in Order
The first order of business is to refine your business model and get it firing on all cylinders. Think of this
step like getting your house ready to sell. You need to make sure everything is in order and you are ready
for the type of scrutiny it will get from potential buyers. Unless of course you have no interest in getting the
most you can for it!
You need to get your business running like a top, and fully document the system you will eventually be selling.
Remember, when someone buys into your system, what they are paying for is not just the name. They are
paying for the operating system: how do you run this business every day and
maximize the chances of success?
Look at your operating systems first. Your recipes, preparation procedures,
ordering/inventory systems, food controls, cash controls, food safety, cleaning
systems, service standards – including times for each stage from greeting to
order taking – drink service, entrée times, and so on. If you have a bar, there are
different systems to consider on top of the aforementioned.
Consider the standards that need to be laid out and documented.
All of these standards need to be documented so there is never a question and
you protect the integrity of your brand. Part of franchising is creating systems
that work through indirect control rather than the direct control you have now.
Standardize your hiring, training and marketing systems. You need to have
a great team and a great culture. You will be the example for your franchise
system. Franchisees will look to you to lead the way and if you are not able to
maintain a team of great people operating within a culture that attracts other
great people, why would anyone want to replicate what you have developed?
How will you be able to focus on franchising, building your brand and
supporting your franchisees if you are forced to step in and run your
restaurants? Your role as a franchisor will be very different from what it is today as a restaurant operator.
Your stores need to run without you so you can focus on your NEW business, which is franchising.
Marketing
Let’s move on to marketing systems and procedures. This is best approached from more of a branding
standpoint. Franchisees expect that you, as a franchisor, will have proved what works and be able to show
tangible results. Part of the reason why they will buy into your concept is so they do not have to waste a lot
of money figuring out what works. Some topics to keep in mind are:
• Strategies
• Design/Layout
• Copy
• Past promotional failures and successes
What are your food quality
systems? For example,
what is the minimum
quality for produce?
If you sell baked potatoes,
do you spec a 70-count?
A 90-count?
What type of oil do you
use in your fryers?
Do you spec a 6x6 tomato
because it is the right size
for your sandwiches?
THINGS TO
THINK ABOUT:
GETTTING YOUR
HOUSE IN ORDER

What’s involved?
3
You need to have a style guide that lays out acceptable and unacceptable use of your logos and
trademarks as well as templates for print ads, website design etc.
Define how franchisees’ marketing contributions will be spent. What percent will go to administration and
support? Will you require marketing co-ops within designated marketing areas (DMA), and how many
stores will trigger the co-op? What approvals will they need from you for local advertising? What support
will you give them in terms of advice and best practices? Some brands require
a small national contribution. Franchisees are required to spend a minimum percent
locally, and knowing how to enforce this among your franchises is important.
Franchise Sales
It is time to decide who is your franchisee audience and how will you sell your
concept to them. Just as you want to describe the traits and characteristics of an
ideal server in one of your locations, you want a picture of your ideal franchisee.
Decide what qualities your franchisee will possess. For example, you do not
want people who are true entrepreneurs. True entrepreneurs will not follow your
system; they will want to re-create it.
Define your qualifying process by deciding if you’ll use internal salespeople or
being with a franchise broker to locate and define your target audience.
Balance the need and desire to grant franchises with the need to minimize
your risk of bringing a bad franchisee into your system. Hold your sales people
accountable for bringing in prospects who meet the operating qualification.
There is a natural conflict between franchise sales and operations. Your
processes will determine whether or not that conflict becomes a weakness or
strength. Once a franchisee is in your system, it is possible to get him/her out of
your system. However, it is time-consuming and costly.
Training & Support
Training and ongoing support is a critical piece to the puzzle. How you
initiate training and orientation into your brand builds a strong foundation of
expectations for the future.
You will need to certify training centers and trainers, and decide if you will
recertify annually to maintain standards.
Field support and checking in on
your franchises
• Protecting your brand
• Assuring there are no food safety issues
• Choose if you will create your own system or use a system, such as
EcoSure, to provide on-site evaluations and help maintain a high
standard of safety
Who conducts the interviews?
How many times will you
interview prospects?
What about personality
assessments?
What are others doing that is
successful?
You will need to test different
processes and measure results to
come up with the best methods.
THINGS TO
THINK ABOUT:
FRACHISE SALES
What will you train them to do?
What about service, inventory
and controls?
What will be the length of
training required, and what
is its structure?
How will you determine readiness
and evaluate management and
leadership skills?
THINGS TO
THINK ABOUT:
TRAINING

What’s involved?
4
Supply Chain
Maintain a list of approved suppliers for everything your brand needs. This will ensure quality, consistency
and protect your brand. The list below is not complete, but gives you an idea of the types of suppliers you
will need. It is wise to have more than one supplier for each item to maintain leverage in your favor.
Types of Suppliers Needed:
• Food Suppliers/Standards/Quality Control
• Signage, Menus
• F,F & E (Furniture, Fixture and Equipment)
• Packaging
Innovation
Innovation is essential to the continued growth of a brand. A major area of innovation is menu
development. Understanding what fits your brand and staying within those boundaries is significant. Your
customers will only allow you to do what makes sense. Years ago for example, Arby’s tried to do burgers in
order to compete with the big boys. It failed, because burgers did not match what the company stood for,
which was being different from typical fast food.
As a franchisor you will have a responsibility to create, test and document results for new products. If
your Franchise Agreement requires it, you can force franchisees to participate but why would you want to
do that? It is always better to help franchisees see why and how a new product is good for them and the
brand, especially if there is new equipment needed.
Stay current with your décor. We’re not not talking about maintenance and making needed repairs. This is
about updating/refreshing your image and remodeling. This is a big expense.You will need to prove the Return
on Investment (ROI), which you can require of your franchisees. Many times when
you see stores close their doors, it is because a franchisee chose not to renew
their license because of a remodel requirement.
New Store Development
Develop a documented process for important activities such as site approval,
approval of plans and drawings, construction support and opening support.
Generally, franchisees will bring you a site for approval. You may also work with
a commercial broker to bring you sites that you will award to franchisees. In all
cases, be sure to document what makes a good site, such as the minimums for
traffic counts, frontage, demographics, and so on. Provide written guidelines
and logic for decision making. If you leave out such guidelines, if/when you
decline a site, you may have a fight on your hands.
Franchisors are expected to have standard drawings for various types of
buildings. If you are doing free standing buildings or strip centers, you need
different sizes to fit on different lots. How the restaurant looks and feels is up to
you. You know how the business flows and how the layout impacts that flow.
Franchisees need to know what to expect from you with regard to construction
and opening support.
• Marketing Material
• POS/BOS (Point of Sale/ Back Office System)
• Uniforms
Whattypeofhelpwillyouprovide
during the opening period?
How many days pre-opening
and post-opening will you
have your people there.
How many people? What will
they do? This is an exciting and
important time for a new store
and a new franchisee; it has to
be planned and organized if it
is to be successful.
THINGS TO
THINK ABOUT:
NEW STORE
DEVELOPMENT

What’s involved?
5
Franchise Documents
While all of your systems, procedures and standards are being refined and documented, you can be
working on your Franchise Disclosure Document, or FDD. While the FDD is a legal document, you do not
have to pay an attorney to create it for you. There are people who will do that work for far less money than
you pay your attorney. Have one of these professionals write the document; have your attorney review it.
You have an FDD in place and a model in mind. What’s next? It’s time to put
a franchise agreement in place. Included in your franchise agreement will be
the term or the number of years the agreement will last. It will address what
will happen at the end of that term and whether the franchisee is able to renew
or buy a new term and the cost(s). The agreement will cover things like the
amount of the Initial Franchise Fee (IFF), royalties, marketing, grounds for
termination, and how disputes will be handled. Another important element is
keeping the franchisee informed about what is expected in order to maintain
good standing and what they can expect from you as the franchisor.
Some chains have a separate development agreement that governs the terms
under which a new restaurant is built. Because the development period can be
as much as 18 to 24 months, you need an agreement to govern that process.
Franchisees will not want the first one to two years of their agreement to be
over before they open their doors.
The FDD is required by the Federal Trade Commission (FTC), and therefore,
certain elements are required. Many states require you to register specifically in
that state in order to grant franchisees. Ohio does not require you to register. It
only requires you to issue your FDD at least 14 days prior to signing any documents.
Your FDD will include information about your company, its officers, history and description. Your business
philosophy and a description of your culture is also part of the FDD. Prospective franchisees need to know
what they are buying into and need to be confident it is a good fit, as does the franchisor!
The FDD will have historical financials so franchisees can gauge the worthiness of the investment. While it
is illegal to make earnings claims, you do provide representative profit and loss sheets.
The FDD will have a summary of all of your agreements, as well as a copy of the Franchise Agreement as
an addendum. It will include records of past and pending lawsuits against you as a franchisor and a list of
franchisees with contact information, start-up costs (typically a range for some things, actual for others).
Initial franchise fees can include training costs, furniture fixture & equipment costs, licenses and fees, and
initial food orders.
Relationship Documentation
Documentation is an area most franchisors do well except for one detail: communication with franchisees.
Documenting conversations is not as easy as keeping copies of emails and letters, but is at least as
important. This is an activity every member of your team who has contact with a franchisee does
consistently and thoroughly. If there is ever a dispute, you as the franchisor will be at the disadvantage
unless you have great documentation.
Will you grant licenses
directly to franchisees?
Will you license rights
within territories and
allow sub-franchising?
Will you do both?
THINGS TO
THINK ABOUT:
FRANCHISE
DOCUMENTS

What’s involved?
6
Common Mistakes
Watch out!
Here are a few of the more common mistakes franchisors make:
• Greed and short term vs. long term thought process. Don’t go into franchising to make a quick
buck. Go into the business to create a great brand and have great relationships. The rest will come
to you as you continue to build the business.
• Poor franchisee selection. This is probably the biggest mistake made by franchisors. Take your
time, and do your homework. Use assessment tools like DISC, Gallup, or Zero Risk, as well.
• Poor/Inadequate training and support. The first six months is a critical time for a new franchisee.
Spend the money to provide great training and support and set them up for success.
• Lack of innovation/Lack of process. Don’t let your brand go stale. Stay up-to-date with trends;
keep a steady flow of new product news flowing to create excitement.
• Growing too quickly. Outgrowing the ability to operate great restaurants has been the demise of
many companies. It is better to slow down growth in order to build a strong operating foundation.
Next Steps
• Decide if franchising is the right choice for you
– Even if it is not, there are benefits to running your concept like a franchise
• Find people who can help
– Professionals
– Counselor/Coach
• Have the conversation with your spouse/partner/leadership team
Wishing you much success!

What’s involved?
7
About Dave …
Dave is a subject matter expert for the Ohio Restaurant
Association’s Restaurant Education Series and is a supporter of
the foodservice industry in Ohio.
He has 34 years in the restaurant industry, starting behind the
counter in a Dunkin’ Donuts shop. He worked his way up to
manager, and ran a Dunkin’ Donuts location, which in those
days was a 24/7 business! For several years, Dave was a trainer
teaching new franchisees how to successfully operate their own
donut shops.
Essential to his level of expertise, he worked for three different
franchisors and with over 100 different franchisees for more than
24 years.
Dave’s experience has taught him both sides of the equation –
franchisor and franchisee – and what they both need to succeed.
Dave Roemer, MBA, BGS
Certified Business Coach
DDR Group, Inc. dba ActionCOACH
752 N. State St. #236
Westerville, OH 43082
Main: (740) 909-4138
Cell: (740) 972-9841
Website: www.actioncoach.com/davidroemer
“I have seen the
good and the bad
of franchising.
I have seen franchisors that care only
about making money and not a lot
for their franchisees. I have seen the
courts used as an everyday tool to
push franchisees out of business so the
franchisor could make money flipping
the location. On the flip side, I have
witnessed franchisors that are highly
focused, helping franchisees succeed
and giving them all the tools they need
for success. I have experienced the
support of franchisors when I wanted
to help a franchisee out of a troubled
situation and take a chance on them
turning things around.”
– D. Roemer
Content provided exclusively by the
Ohio Restaurant Association
for its members.

E-Book Franchising Your Restaurant Concept_4-1-2015

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