Tag: success

HOW TO SELECT THE OPTIMAL VALUATION TECHNIQUE FOR YOUR STARTUP

Posted on by Franchise Strategist

Revenue multiples are helpful for both private companies (which lack stock prices) and public companies (for which stock prices are readily available). They’re also beneficial for businesses with low sales because they’re less affected by fluctuations in gross margins and other financial metrics that may fluctuate based on industry trends or economic conditions during the analyzed period.

How To Select The Optimal Valuation Technique For Your Startup
By FMM Contributor, Johnny Dey

Introduction

It is simple to focus on the day-to-day operations of your business when launching a business. You should not spend too much time contemplating the value of your business or the amount you could receive if you sold it. However, valuing your venture is crucial to operating a successful business, as it helps you determine how much capital you need to raise to develop and sustain your business. When it’s time for an investor or potential acquirer to make an offer on your company, valuation is an essential part of the negotiation for the selling price.

The Market Strategy

The market approach is founded on the value of comparable businesses. Therefore, this method is optimal for entrepreneurs with a proven business model or who have already raised capital.

The market approach can be utilized to determine the value of either a startup or an established business. For example, an early-stage company has yet to achieve profitability. As a result, it may not have any revenue. In contrast, a mature company has already achieved profitability. As a result, it generates sufficient cash flow to pay its obligations and reinvest in itself without raising additional capital from investors.

Revenue Multiple

Revenue multiples are a straightforward strategy for valuing a business. The multiple revenue formulae divide a company’s annual revenue by its market capitalization, which is its stock price multiplied by its outstanding shares. For instance, if your company has $1 million in revenue and a comparable company has a market capitalization of $10 million, then your company would be valued at ten times revenue, or $10 million.

Revenue multiples are helpful for both private companies (which lack stock prices) and public companies (for which stock prices are readily available). They’re also beneficial for businesses with low sales because they’re less affected by fluctuations in gross margins and other financial metrics that may fluctuate based on industry trends or economic conditions during the analyzed period.

EBITDA Multiple

Multiples of EBITDA are based on a company’s earnings before interest, taxes, depreciation, and amortization. EBITDA is an excellent indicator of profitability because it is less affected by accounting decisions than net income.

The calculation for this multiple is as follows:
Earnings Before Interest Taxes Depreciation And Amortization (EBITDA) Multiple = (Earnings Before Interest Taxes Depreciation And Amortization) / Enterprise Value

Comparable Organizations Technique

The analogous companies method is the most prevalent method of valuation. It’s founded on the presumption that your venture is a “normal” business, so you can use other comparable companies to determine its value.

This method is very time consuming, as you must identify analogous companies and compare them to yours. In addition, this method needs to account for the risk and ambiguity related to your startup’s business model and product/service offering.

Pricing Strategy

The cost approach is a method of business valuation that compares your company to others in the same industry to determine its worth. This strategy depends on tangible and ethereal assets, such as technology, team, and brand, in addition to the customer base.

Identifying competitors with similar products or services publicly traded on Nasdaq or NYSE MKT is the first step in this process (formerly known as OTC Markets Group). Once you’ve identified analogous companies, you can compare their sales figures to determine whether yours are developing at the same rate or quicker. If they’re growing faster than you, this may indicate that there’s room for expansion in your own business; however, if they’re growing more slowly than you, investors may be able to demand better terms from them when negotiating funding rounds in the future, as they’ll know how much potential value lies within each share of stock sold today compared to tomorrow’s market price once news spreads about how well Q1 earnings season went!

Benefits Of An Asset-Based Strategy

The benefit of an asset-based approach to valuation is that it measures a company’s intrinsic value. This is because it emphasizes assets rather than liabilities. Subtract your liabilities from your assets, then divide the difference by one minus your tax rate to calculate this method (1 – T).

The disadvantage of this method is that it does not account for intangible assets such as goodwill or intellectual property rights; however, these can be factored into any potential sale price through negotiation with potential buyers or sellers during due diligence processes before finalizing the transaction.

The optimal method for valuing your venture depends on the specifics of the situation and its characteristics.

The market approach is the most straightforward and intuitive method for valuing a startup. It is based on the value of comparable companies in the same industry, so it can be used for early-stage companies that do not yet have a significant amount of revenue or earnings (if any). The disadvantage of this method is that it is challenging to locate comparable companies; you will need access to an extensive database of private company financials if you wish to employ this strategy.

Conclusion

The optimal method for valuing your venture depends on the specifics of the situation and its characteristics. If you have significant market potential and wish to transfer your company immediately, you should adopt a market-based strategy. The revenue multiple and EBITDA multiple are useful for valuing established firms. In contrast, the comparable companies method helps value smaller businesses with less complex operations. The cost approach can be used when estimating value based on assets or liabilities alone. In contrast, the asset-based approach is beneficial when evaluating a company’s goodwill value.

TIPS ON COMMUNICATING SUCCESSFULLY WITH YOUR EMPLOYEES

Posted on by Franchise Strategist

When you are in charge of anything, communication is a crucial aspect of the task, but its relevance increases if you are in a leadership role regarding employees. The method in which you interact with your employees may have a substantial impact on how they feel about their jobs and the quality of work they do. You want them to feel heard and appreciated.

Tips on Communicating Successfully With Your Employees

Introduction

When you are in charge of anything, communication is a crucial aspect of the task, but its relevance increases if you are in a leadership role regarding employees. The method in which you interact with your employees may have a substantial impact on how they feel about their jobs and the quality of work they do. You want them to feel heard and appreciated. You also want them to feel free to make mistakes without fear of censure or punishment. However, accountability for their actions should not be overshadowed by communicating in such a way that they are not aware of a mistake. It’s how you use the mistake to improve that count. This is why it is crucial to know how to communicate most effectively with them: you want them to feel heard and appreciated, but you also want them to feel comfortable speaking freely without fear of making a mistake.

Set The Tone

Set the tone by being a good example for people to follow. As your employees will mirror your behavior and emulate how you deal with them if you set a good example, it is crucial that you courteously communicate with them.

Preserve coherence to establish a tone. Ensure that every team member is aware of the expected behaviors while communicating with one another, whether through email or in-person meetings; then adhere to these standards in all of your communications. The use of proper words is critical to maintaining clear and professional communication, particularly in a workplace environment.

When dealing with employee disputes, you should set the tone by being kind and impartial (and even between managers). When there is a dispute between two individuals or teams at work, you shouldn’t let it develop into a full-scale conflict; instead, you should attempt to resolve the issue amicably before involving higher-ups if necessary. If you allow the situation to grow into a full-scale battle, you will only make matters worse.

Communicate In Person

Unquestionably, emailing your workers is an excellent way to stay in contact with them. Face-to-face engagement, on the other hand, cannot be compared to any other kind of communication in terms of delivering crucial information and managing workers’ emotions. When you are face-to-face with your employees, you can read their body language and assess how they respond to your words, and vice versa. You can also convey the tone of voice and facial expressions, which is far more complicated (or impossible), through email.

Due to recent improvements in videoconferencing technology, it is now possible for individuals on opposite sides of the globe who have yet to meet to want or need something from each other (such as comments on performance appraisals) to connect.

Ask Questions, Not Statements.

Ask open-ended inquiries. This can help you better comprehend the employee’s perspective and encourage them to respond more thoughtfully.
People sometimes do not like it when you answer a question with a question, but do it anyway. It conveys an interest in what the other person is attempting to communicate and your desire to truly understand them.

Whenever feasible, you should avoid asking yes/no questions and making “if/then” statements since these queries tend to be too binary for most situations. Instead, you should ask yourself: what else could this person possibly be thinking? What would be different from their vantage point? And what reaction would I get if I told them this?

People Should Be Allowed To Speak Openly

While communicating with your workers, you must allow them to express themselves freely. As a leader, it is crucial that you listen to what people have to say without interrupting or casting judgment on what they say. It is preferable to ask questions when something does not make sense rather than make assumptions or speculations.

It would be best to allow them space to express themselves without feeling compelled by your emotions interfering with the dialogue. For example, when a team member makes a mistake, you may feel angry or frustrated. Nevertheless, it would be best to refrain from responding emotionally since doing so will only exacerbate the problem and distract your teammates from what matters most: how effectively they execute their job.

Practice being an attentive listener (and observer)

The single most important thing you can do as a leader is to listen to the input supplied by your workers. You may decide not to execute on the suggestion, but at least it should be heard and considered

Listen to what they have to say and observe their behavior, not just in the workplace but also in other contexts. This entails studying closely how folks interact in person and through technological means such as email and text messages. You may find that some of your best ideas come from observing patterns of behavior that have not been explicitly brought up but are nonetheless significant (for instance, an employee may always respond to questions about a project with “I’m on it!”; this could indicate that she needs additional direction). Conversely, you may also discover that some of your finest ideas result from recognizing patterns of conduct that have not been expressly mentioned but are nevertheless significant.

Don’t Allow Job Titles To Distract You.

Keep job titles and responsibilities from distracting you throughout the recruitment process. Instead, please focus on the person, their achievements, and degree of competence. Focus on what they can do for your company and how they can help you achieve your goals.

It is easy to fall into the trap of focusing on resumes instead of people when filling a job quickly; this is particularly crucial for recruiting managers with limited resources and time restrictions. This is particularly critical when recruiting managers have limited money and time. Yet suppose everyone concentrates on credentials instead of personalities and character qualities. In that case, it becomes hard for candidates with tremendous potential but insufficient experience to distinguish themselves from others with more relevant expertise but less overall potential. This is because qualifications are objective, but personality characteristics and character traits are subjective (for example: if one person has worked as an assistant manager while another has worked as an entry-level employee).

Clear Communication Is King

One of the essential components of being a great leader is the ability to communicate with others, yet this can be challenging. Please remember that communication is a two-way street; if you want to get the most out of it with your employees, you must be open and honest.

Listening to what they are saying is crucial, so try asking questions such as “What do you think?” or “Can you give me some examples?” Listening more than speaking makes individuals feel more comfortable opening up about sensitive topics. Again, it is essential that you pay close attention to what they are saying. Consider asking, “What do you think?” or “Can you provide some examples?”

Not only does having clear expectations facilitate communication, but it also guarantees that everyone is on the same page regarding how they feel about any given issue or event. For instance, if you tell another individual which tasks must be completed by then, there will be a clear understanding when those dates come up again!

Conclusion

It is important to remember that communication is a two-way process. You cannot just lecture your employees; you must listen to what they say, observe their actions, and ask them questions. Doing this well helps employees feel acknowledged and allows them to provide feedback on what they think needs to be addressed at their workplace.

What To Consider When Purchasing A Franchise

Posted on by Franchise Strategist

Photo by Estée Janssens on Unsplash

Summary: To select the ideal franchise company to join, you should first find a company with a proven track record of success. A good franchisor will have been in business for at least two or three years and be able to demonstrate the growth potential of its products and services. The best way to do this is by looking at how many franchises they currently have in operation and are they profitable. A robust and growing network often indicates a successful brand.

10 Key Points To Consider When Purchasing A Franchise
Originally published in Forbes.
By Gary Occhiogrosso, Managing Partner Franchise Growth Solutions

If your goal is to purchase a franchise, choosing the right franchise brand to invest in is one of the most important decisions you’ll make as a business owner. It’s not just about finding a company with a proven track record but also finding one that fits your personality and lifestyle. Your first step, is knowing what to look for when you’re evaluating potential franchises. Here are some key areas to consider:

Franchise Fees
Franchise fees are one-time payments made when purchasing a franchise. These fees can range from $10,000 to $100,000 and are used to pay for the rights to use the name, the procedures and any systems developed by the franchisor. It is also used to cover costs for training and opening support by the franchisor to assist the franchisee with the opening of their franchise. Franchisors usually charge their franchisees up-front fee when the franchise is granted. In addition, post Covid initial “turnkey” investments may be higher than in the past due to supply chain issues, inflation, and increased cost of equipment and leasehold improvements between brands.

Royalty Fees
Royalty fees are the amount of ongoing money (usually a percentage of gross sales) you pay to the franchisor for using their brand name and ongoing support such as marketing and developing new products or services for the franchisee. As a franchisee, you are required to pay royalties based on a portion of your sales. This percentage may be fixed or fluctuate on a sliding scale based on sales.

Term Length
Franchise term length can be a good indicator of how much the Franchisor invests in their franchisees.
On average, depending on the type of franchise, home based vs a retail location, franchise brands have terms that last ten years or less. This means there’s plenty of time for the franchisee and franchisor to work together and develop a solid relationship. Still, it also means that the franchisee may not be allowed to retain the business if something doesn’t work out. If a franchisee is underperforming, the franchisor may not renew the franchise agreement once it expires, or may seek to terminate the franchise prior to the full term. In such a case, the franchisee must exit the business. In many instances, there will be a contractual obligation that the franchisee cannot open a similar business for a period of time within a certain distance from their original location. This is called a non-compete clause.

Consider Your Lifestyle.
* Consider the lifestyle you will have while running the business.
* Look at the hours of operation. You don’t want to buy an 80 work week.
* Review flexibility of franchisor with respect to new products, relocation and other variables.
* See if the location makes sense for you. You will need to manage the location or develop a team to manage the day-to-day operation for you.
* Check out the type of work needed to run the franchisee. Make sure it fits your skill set and interests, including whether it’s something you’d enjoy doing as a full-time job.
Seeking the advice of a professional franchise consultant can be an extremely useful method when evaluating if a franchise is the right business model for you. Scott Milas, a Certified Franchise Executive (CFC) and Certified Franchise Consultant (CFC) with The International Franchise Professionals Group recommends you consider these questions: “What is your “Know” and “Why?” Understanding “why” you are interested in owning your own business, and “knowing” who you are, are critical steps in choosing the right opportunity. A self evaluation and clear picture of your skill sets and eventual end game- exit strategy, will help ensure that you invest in the right opportunity. Better to “know” now then after you made the wrong decision. “Why” now?
An experienced franchise consultant can assist you in answering those questions and choosing a brand that’s a good lifestyle fit as well as one that offers opportunities to meet your business goals

Look For An Experienced Franchisor
To select the ideal franchise company to join, you should first find a company with a proven track record of success. A good franchisor will have been in business for at least two or three years and be able to demonstrate the growth potential of its products and services. The best way to do this is by looking at how many franchises they currently have in operation and are they profitable. A robust and growing network often indicates a successful brand. In addition, it demonstrates that customers value its products or services enough to pay for them again through multiple businesses.
The second thing you should look for when choosing a franchise is reputation—how well does your chosen brand stand up against its competitors? While there may be other similar businesses out there with similar business models, does you selected band have points of difference to separate itself from the competition. It’s essential that you choose one that utilizes high-quality materials, produces consistent results, and provides excellent customer service while maintaining competitive prices at all times.”

Know Your Competition
One of the steps to building a successful franchise business is to know your competition. What brands already exist in the market, and how do they compare? What is their customer base, and what can you learn from them? How do your offerings differ from theirs, and how do these differences help or hinder you as a company?
Tom Scarda a former franchisee and now a franchise coach and consultant offering advice to franchise buyers regarding evaluating the competition and what it may mean to their success as a franchisee “It’s smart to think about a product or service that is needed in your area and consider bringing that sort of business to the town. However, just because there are no batting cages in your town and you think it would do great because there are kids everywhere, you may be right. However, will it make money? Is there some reason why there is no batting cages in the area? When starting a business, you must, must do a comprehensive business plan before anything else. Learn about competition in the area. Understand the local county laws and regulations around the business you’re considering. Be real about the cost to start and run the operation. These are just a few items to consider in a business plan.”

Once you’ve got a handle on who’s out there, it will be easier for you to see where there are gaps in the market—and then fill those gaps with your unique brand identity.

Carefully Review The Franchise Disclosure Document.
Read the current franchise disclosure document (check the issuance date) and have it reviewed by a competent franchise attorney. Harold Kestenbaum, a noted franchise attorney with Spadea Law advises: “When considering the purchase of a franchise, I highly recommend retaining the services of an experienced franchisee attorney. Never contemplate purchasing a franchise without seeking the advice of an attorney who has reviewed FDD;s before. I also recommend that you do your due diligence. By that I mean that you should review Item 20 of the FDD and call all of the existing franchisees who are in your general area.”

There are additional factors to consider when reviewing the franchisor’s FDD. According to Richard Bayer, a Partner in the law firm Einbinder & Dunn LLP: “Purchasing a franchise for many first-time business owners will often be one of the top three expensive transactions the franchisee will ever go through in his/her lifetime. Given the severity of the investment, a franchisee must commit to doing due diligence. It starts with speaking with existing franchisees as well as those who left the system. Their contact information can be found in the FDD. The goals from these calls include gaining a better understanding of the economics of the franchise – is it profitable, when is break even reached, do costs (labor or otherwise) or revenues fluctuate significantly making it difficult to predict performance. Equally important is getting a sense of the franchisor’s temperament – is the franchisor supportive, does the franchisor go above and beyond legal obligations (imposed in the franchise agreement) to deliver for its franchisees, is the franchisor forward thinking and/or technology driven. The FDD is a great source of information about a system, but it is has gaps that can be filled in quite nicely by franchisees in the system and by those who left. Purchasing a franchise without speaking to as many franchisees as possible is a lost opportunity.”


Investigate The Franchisor’s Tenure And Track Record of Success
In addition to analyzing the franchisors’ financials, it’s also vital to examine their overall track record. While a strong balance sheet is an essential indicator of a business’s health and stability, it doesn’t tell you much about how they’ve fared over time. So, for example, if you’re looking at two franchises with similar books and financials, but one of them has been around for four years while the other has been operating since say, 1899, it would make sense to choose the latter in this case—even if everything else on paper looks the same.
This information can be gleaned from third-party sources such as Dun & Bradstreet or franchise trade magazines or by visiting the website of the International Franchise Association. Always go directly through your Franchisor before getting this data yourself so that they can confirm that everything is correct and up-to-date. In addition, it is vital that you speak with or meet as many existing franchisees as possible before you make your final decision.

What Are The Brand’s Training Programs And Support?
When you buy a franchise, you’re not just buying the rights to use its brand name. You also get access to training programs, mentoring, and support from the Franchisor. These must be proven and effective; otherwise, it can be challenging for your business to grow or stay profitable.
You want to ensure that your franchisor is committed to your success as a franchisee. That means offering in-person training (the better option) and or using phone or video calls if necessary. It also means regular advice on running your business and what strategies might help you reach more customers or increase revenue.

Review The Franchisor’s Marketing Plans.
A good franchisor will have a written marketing plan in place. The marketing plan should include a social media strategy and details about how the franchisor plans to use the funds provided through your advertising fees. If you ask for this document, they should be willing to share it with you.

Choosing The Right Franchise Brand Can Significantly Impact Your Success.
We’ve talked about screening potential franchise brands above. Still, there are some other factors that you should also consider when choosing where to invest your time and resources.
Tom Scarda goes on to say “We always hear the phrase, “If you love what you do you never work a day in your life.” That is true if you’re working a job. But a franchise is not a job. It’s a business that allows you to build a lifestyle. In the end, the service or product the business provides doesn’t matter. Of course, it must make sense for the community where you will operate and the concept must be something that you understand. However, you can be a vegetarian and own a burger joint. As the owner you are acting as the CEO and CFO, you’re not flippin’ burgers…well you shouldn’t be. If you are doing the tasks that the business requires then you bought yourself a job and your business will plateau and not be scalable. Scarda adds “Don’t buy a business because it has to do with your hobby. If you do, you will no longer have a hobby and you will probably resent the hobby if you’re trying to pay your mortgage with it. Instead, invest in a business that will give you the time and money to enjoy your hobby until your heart’s content.

Conclusion
It is important to consider all these factors when looking for a franchise brand. Some of them, like the fees and term length, are more straightforward than others. But, if you want to be successful in your franchise opportunity, it’s worth taking the time to research what makes each Franchisor unique thoroughly. A good franchisor will have invested in training programs and support systems that will help you understand how their business works.

When Not To Franchise Your Business

Posted on by Franchise Strategist

Franchising is not for everyone, but if you are willing to put in the time and effort required to make it work, it can be an excellent way to grow your business. However,let’s suppose you are considering franchising as a way of expanding your current business.

When Not To Franchise Your Business
By: Gary Occhiogrosso – Managing Partner FranGrow & Adjunct Associate Professor at New York University

Franchising is a great way to expand your business and grow your customer base, but it’s not for everyone. So before you get started on your path to becoming a franchisor, here are some things that you should think about:
You don’t have a proven business model.

If you don’t have a proven business model, franchising can be a hard way to go. You’ll have to invest a lot of money upfront and spend time managing franchisees, who may not see the potential in your product or service as clearly as you do. In addition, if your idea isn’t unique or doesn’t appeal to people outside of your local area, it won’t take off as you might expect.

There are plenty of success stories about companies that started franchising their businesses and became household names—but there are also plenty of horror stories about companies that began franchising only to have things collapse within a few years. For example, suppose your goal is to ensure that your company stays afloat and continues growing after its initial launch phase (and believe me: it should be). In that case, franchising may not be suitable for you at this stage in its growth process—or ever!

You’re still refining your product/service offering.
If you still need to test your product or service offering, then franchising isn’t for you. Franchising takes time and money, so it’s essential that you know your business model works before you start expanding it. The last thing a franchisee wants is to spend their hard-earned money on a product or service that doesn’t work.

These are some things you should consider before embarking on the journey of franchising:
* Are you offering the right price?
* Do the features meet customer expectations?
* Is the product reliable?
* Is it easy to use?
If you can’t answer these questions confidently, franchise expansion may not be for your business yet.

You can’t afford it.
Suppose you cannot invest in the necessary costs associated with franchising. In that case, it’s probably not a good idea. The price of franchising can be pretty high. You’ll have to pay for all the administrative and legal work required during the process, along with continuing support and other services. You’ll also need cash on hand for marketing purposes and regular payments into an escrow account (if applicable) that will help fund your franchisee’s initial start-up costs.
This is especially true if you don’t already have an established brand or product line; it takes time for those things to develop organically and build momentum among customers. As such, it may take longer than anticipated before any revenues start rolling in from new franchises—and those initial expenses will continue relentlessly until then!

You don’t have a strong brand presence in your local market.
Branding is essential, but it’s not a short-term strategy. On the contrary, branding is a long-term effort that requires a lot of work, money, and time. So if you’re looking for something quick and easy to get immediate results, don’t bother with branding. Branded businesses are built on solid foundations that take years to develop.
Brands are more than just logos; they express who you are and what makes your business unique. A brand can be as simple or complex as necessary (or both). Still, suppose it doesn’t convey the essence of your company in some way. In that case, it falls short of its potential value in building customer relationships over the long term.”

Your business is not scalable.
There are two basic requirements for a business to be scalable:
* The company has been successful in the past.
* The company can be run with minimal costs.
If you do not meet these criteria, your business will not be able to scale without additional investment. You need market research before deciding whether or not franchising is right for you!

Franchising is not for everyone; will it work for you?
Franchising is not for everyone, but if you are willing to put in the time and effort required to make it work, it can be an excellent way to grow your business. However,let’s suppose you are considering franchising as a way of expanding your current business. In that case, it’s crucial that you consider whether or not this type of growth is appropriate for what you’re trying to achieve with your company. As a franchisee, there will be times when you disagree with management decisions or feel like we’re not listening to feedback from our restaurants. To ensure that these situations don’t become roadblocks in our relationship, we strongly encourage all stakeholders (franchisees and management) to communicate openly about the issues before they become conflicts.

Conclusion
Franchising can be a great way to grow your business, but it is not for everyone. If you are still unsure if franchising is right for you, we recommend considering other options, such as starting from scratch or hiring an employee. Many factors need to be considered before making any significant investment. We hope this article helps guide you through those decisions!

Does Your Franchise Program Contain the Elements of a Top Franchise?

Posted on by Franchise Strategist

Here are 10 elements that you will find in the top performing franchise programs. If you are a franchisor and want to enhance your franchise performance, make sure these are a part of your franchise operation.

Does Your Franchise Program Contain the Elements of a Top- Franchise?

By Ed TeixeiraFranchise Expert, Author, Franchise Executive and Former Franchisee with 40 years of Franchise Industry Experience.

Ever wonder what sets the top franchise brands apart from the rest? There is a big difference between the indicators of a good franchise program and how the franchisor got to that stage. Whether a franchise system has 10, 100 or 1,000 units there are certain practices that separate the top franchise brands from the rest.
Here are 10 elements that you will find in the top performing franchise programs. If you are a franchisor and want to enhance your franchise performance, make sure these are a part of your franchise operation.
 
1. Stick to your franchisee profile
Have a franchisee profile and when franchise candidates do not fit the profile, say no! If using brokers, then remain in control of the franchise sales process.

2. Be candid with prospective franchisees
Provide prospective franchisees the tools they need to be a successful franchisee.

3. Have an effective training program, evaluate it, and continue training
Top performing franchisors have an effective training program that continues as an on-going activity.

4. If the franchise program needs adjusting, then do it
If certain marketing programs, products or services are not delivering the results then make changes.

5. Franchisee profitability must be a priority
The structure of the franchise program both operationally and financially must provide franchisees an opportunity for success that does not require extraordinary performance. If the franchisees follow the program and do not earn an ROI commensurate with their original investment, then the franchise is flawed. There must be balance between the earnings of the franchisor and its franchisees.
 
6. Franchisor leadership must be fully engaged in the franchise operation
Franchisor executive leadership must be totally involved in the franchise so that there is total awareness of successes and failures. There is no room for “surprises” when it comes to franchise operations. Whatever the forum, franchisee feedback must flow to franchisor leadership.

7. Solicit Franchisee input for important operational and marketing decisions
Whether through a Franchise Advisory Council, advertising committee or other representative body use them as a sounding board before making major operational decisions.

8. New products and services should be evaluated and measured by select franchisees before introducing
Obtain objective results from these franchisees, which will enable you to obtain a franchisee system buy-in when implemented.

9. Measure franchisee results on a regular basis
Use key performance indicators (K.P.I.s) to measure franchisee performance on a scheduled basis, whether monthly or quarterly. This enables a franchisor to know how its franchisees are performing.

10. Protect the integrity and standards of the franchise program
It is critical that the franchisor uphold the standards of the franchise. The franchisees that follow the program deserve it and the customers that use the product or services provided by the franchisees are entitled to consistency. Franchisors that do not protect their brand are not respected by their franchisees.
When franchisors have these elements in their franchise program, they can feel confident their franchise brand will be a top performer.

About the Author:
Ed Teixeira Franchise Expert, Author, Franchise Executive and Former Franchisee with 40 years of Franchise Industry Experience.Ed is a recognized franchise expert with over 35 years experience in the franchise industry. He has served as a corporate executive for franchise firms in the retail, manufacturing, healthcare and technology industries and was a franchisee of a multi-million dollar home healthcare franchise. Ed is the author of Franchising From the Inside Out and The Franchise Buyers Manual. He has participated in the CEO Magazine Roundtable Meetings with business leaders from around the country and spoke at a number of venues including the International Franchise Expo and the Chinese Franchise Association in Shanghai, China. Over the course of his career, Ed has been involved with over 1,000 franchise locations and launched franchise concepts from existing business models. Ed can be contacted at 631-246-5782 or [email protected].

KEY TIPS FOR LAUNCHING A SUCCESSFUL RESTAURANT

Posted on by Franchise Strategist

Owning a restaurant can be personally rewarding and profitable. Many people have built great restaurant companies following these simple guidelines. Desire and passion will only get you so far. Create your business plan as a road map. Your plan will help you stay on track when dealing with the many moving parts of launching and successfully operating a new restaurant.

Key Tips For Launching A Successful Restaurant.
BY Gary Occhiogrosso Contributor

For many people, opening a restaurant is a dream. One of the many things I find so interesting about the restaurant business is the blend of creative artistry and the detailed and challenging business aspects necessary to be successful. As an Adjunct Instructor at NYU’s School of Professional Studies, I teach restaurant concept development and business planning. On several occasions, I have been asked by my students to summarize the top issues that one must consider when planning to open a restaurant. Generally, regardless of the type of restaurant, the planning and considerations are the same. I’ll cover a few of the top line elements here.

At the beginning of the process, you should write a simple business plan. It would help if you thought about the many pieces of the puzzle connected to a successful outcome. Many novice restaurateurs, very often chefs, only consider the food component, but there is so much more. A well thought out business plan will include creating a unique concept, a competitive analysis, site selection, financial projections, equipment needs, staffing, and of course, the menu.

Let’s start with a concept

It’s essential that your restaurant offers a unique experience. It could be a Wine Bar with small plates, or a BBQ theme or a Create Your Plate concept. Whatever you decide, it is critical that the environment and “vibe” within the restaurant places the guest firmly inside the experience you’re attempting to create. Don’t confuse the guest with a concept that’s disconnected. As I often remind my clients, “everything touches everything else.” For instance, you wouldn’t use elegant tableware in a fried chicken restaurant or disposable plates in an upscale steakhouse. As obvious as this may seem on the broader elements, it’s essential to take that idea to every detail of the restaurant concept, no matter how small. Everything from the paint color to the music to the tabletops to the wall hanging must work together. The decor elements, the menu, and the service level need to provide the guests with a seamless experience that, when done well, goes almost unnoticed because it’s natural and authentic.

If You Build It, Will They Come?

Building a clientele is never as easy as hanging a sign over the door. It takes smart planning, execution of marketing, and living up to the promise in your mission and brand position statement. You should never assume, “if you build it, they will come.” Questions to ask yourself are; how will my restaurant connect with people? Why does my restaurant exist? What type of people am I looking to attract? What do they read or watch? How do they spend their spare time? What is the best way to reach them? Your concept should appeal to a particular, selected audience. There is no such thing as “everyone is my customer.” Knowing why and for whom your restaurant exists is crucial to success. Your marketing plan should offer compelling reasons why that guest base should frequent your establishment regularly. Is the concept created for health-conscious people? Is it aimed at Millennials or Baby Boomers? It is a full menu or dessert brand or a convenient, fast food, value-based concept. Your social media, print ads, and community outreach should focus on one single audience with one single message. Once you’ve built a loyal base of customers and repeat business, then you should consider expanding your base by marketing to others in the area with a proposition that appeals to them.

Your People Plan is Key

A great team will help you win everyday. Hiring great people is the first step in delivering service excellence and a consistent product to your guests. Your mission statement “the why” along with a corporate culture that emphasizes respect for employees, commitment to your guests, service to the community, and concern for the environment will guide you when selecting your staff. It’s not enough to hire people with restaurant experience; they should also understand and be excited about the mission of the restaurant. If not, they will go through the motions with an inauthentic approach and often fail at exceeding guest expectations. Examine your corporate core values and hire people that match it. Next, supply your staff with comprehensive, ongoing training and the proper tools so can they carry out the day to day tasks flawlessly. Hire for qualities, train for skills.

The Market and Competition

Understanding the market area where you’d like to open your restaurant is a crucial element to the plan. Carefully research the demographics to ensure there are enough people in the area that match whom you believe will embrace your concept. When looking for your location, work with an experienced commercial broker that can supply you with data to help you choose the area and the site correctly.

A full competitive analysis is also essential. For example, check the pricing of your competition. Be sure you’re not over or underpriced for the market. Check other services they offer, such as delivery and online ordering. Spend time in the market area, dine several times at as many competitors as possible, and position your restaurant to address the missing needs in the market. Having a unique value and selling proposition will keep you ahead of the game. Remember, everyone is vying for the same consumer dollars, so you need to create points of differentiation that will help your establishment stand out from the competition.

Consistently Great Food

Your menu must not only be relevant to the concept and the market but should be prepared and served perfectly every time. Restaurant guests expect dishes they grown to love to have the same flavor and high quality each time they visit. Inconsistent products can lead to disappointed guests, bad reviews, and slumping business. Your menu should be not only delicious but also simple to execute. The more straightforward the menu, the less chance of mistakes in preparation. Consistency increases guest satisfaction. Some chefs and “foodies” create menu items that are too complicated and require a highly skilled professional in the kitchen. This approach is fine if you intend to open a high-end restaurant staffed with high price personnel, but not in a fast-casual or family restaurant setting. A winning menu is simple, fresh, relevant, and great tasting. A competent chef can assist in developing dishes that are unique and great tasting that are also simple to produce with less skilled labor. If you have aspirations of owning more than one location, then simple execution, and consistent products are a must to achieve the goal of operating multiple restaurants.

Cash Is King

There are many reasons why restaurants fold. It could be the wrong concept, poor choice of location, not correctly researching the competition, poor service, an uninspiring menu, or bad food, to name a few. That said, the negative impact of undercapitalization may be the most frequent cause of restaurant failures. Knowing how much money you need to launch the restaurant is only the tip of the iceberg. You must assess ongoing cash needs while the restaurant is newly opened and gaining momentum. It may take many months for a restaurant to break even and then eventually become profitable. Being able to support the financial needs during this phase is often the “make or break” challenge that many new restaurateurs cannot overcome. A well thought out projection model that you create with the help of a professional financial advisor can save you from the frustration, negative financial impact and heartbreak of a failed restaurant. Considering capital needs for the first twelve to fifteen months is not only prudent but essential to the success of any new restaurant. You must be prepared to cover the operational costs and expenses as the restaurant “ramps up.” Carefully consider your cash needs and how much working capital you must have on hand, ready to deploy.

Have A Plan And Follow Your Dream

Owning a restaurant can be personally rewarding and profitable. Many people have built great restaurant companies following these simple guidelines. Desire and passion will only get you so far. Create your business plan as a road map. Your plan will help you stay on track when dealing with the many moving parts of launching and successfully operating a new restaurant.
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About the author:
Gary Occhiogrosso is the Founder of Franchise Growth Solutions, which is a co-operative based franchise development and sales firm. Their “Coach, Mentor & Grow Program” focuses on helping Franchisors with their franchise development, strategic planning, advertising, selling franchises and guiding franchisors in raising growth capital. Gary started his career in franchising as a franchisee of Dunkin Donuts before launching the Ranch *1 Franchise program with its founders. He is the former President of TRUFOODS, LLC a multi brand franchisor and former COO of Desert Moon Fresh Mexican Grille. He advises several emerging and growth brands in the franchise industry. Gary was selected as “Top 25 Fast Casual Restaurant Executive in the USA” by Fast Casual Magazine and named “Top 50 CXO’s” by SmartCEO Magazine. In addition Gary is an adjunct instructor at New York University on the topics of Restaurant Concept & Business Development as well Entrepreneurship. He has published numerous articles on the topics of Franchising, Entrepreneurship, Sales and Marketing. He was also the host of the “Small Business & Franchise Show” broadcast in New York City and the founder of FranchiseMoneyMaker.com 

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