Franchising Today - Winter 2017 - 27

SYSTEM GROWTH

receiving the right information. Conversely, the franchise might not be
competitive with other franchises. In
both cases, acquiring and communicating the right information can be a
way to answer these challenges.
This information can benefit franchisors in several ways by helping
them to:
	 		Know how they compare - good
and bad - to competitors, and
their strengths and weaknesses;
	 		Identify the changes that should
be made to those areas that are
non-competitive;
	 		Use statistics to communicate
their strengths on the website and
in franchisee marketing materials; and
	 		Be better prepared to respond to
questions or objections raised by
a prospective franchisee.
Franchisees will benefit, too, by receiving more information. It will allow them to:
	 		Have objective information and
credible facts;
	 		Make more informed decisions;
	 		Become better educated regard-

Franchisees benefit from the communication
of information that allows them to make
better-informed decisions.

	

ing selecting and evaluating a
franchise opportunity; and
		Provide important statistics
about franchises for the companies that are considering franchising their business.

The RighT infoRmaTion
The next step in the process is to acquire the right information. Here are
examples of the types of information
that should be gathered by franchisors
so that they know how their system is
performing and how it compares to
other franchise opportunities:
	 		How do initial franchise fees, royalties and estimated investment
compare to competitors?
	 		What was the system growth for
the past 24 months?
	 		What is the franchisee turnover
that is due to termination and
ceased operations?
	 		How much litigation is the franchisor involved with? For a large
system with more than 1,000 locations, the number of lawsuits
should be shown as a percent of
the total.
	 		What type of territory does a fran-

	

chisee receive? Protected or exclusive? Is territory defined?
		Is there an Item 19 disclosure? If
yes, does it include both revenue
and expense data? How does the
amount of financial disclosure
and detail compare to competitors' information?

There are other important items to
compare; however, these items are
the most significant when evaluating
franchise system performance.
After the data is gathered the next
step is to organize and compare the
results to the competitive franchise
systems. The relevant information
can be gathered from franchise disclosure documents or from an industry vendor.

fRanchisoR TRanspaRency
a pRioRiTy

is

At a recent industry conference designed for emerging franchise systems, one of the messages was that
added franchisor transparency was
becoming an important priority. The
increased use of FPRs in Item 19 of
the FDD is an example of how added
transparency benefits a franchisor.
Franchisors that fail to provide an
FPR are cited by competitors, which
places them at a disadvantage.
To attract and sell to prospective
franchisees in a highly competitive
environment, it's important that a
franchisor sets itself apart from other
franchise opportunities. By incorporating the right information in candidate messaging, a franchisor will gain
credibility and grow a successful franchise program.
Ed Teixeira has more than 35 years of
experience in the franchise industry. He is the
COO for FranchiseGrade.com. and the author
of Franchising from the Inside Out and The
Franchise Buyers Manual.
WINTER 2017

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27


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Table of Contents for the Digital Edition of Franchising Today - Winter 2017

Contents
Franchising Today - Winter 2017 - Cover1
Franchising Today - Winter 2017 - Cover2
Franchising Today - Winter 2017 - 1
Franchising Today - Winter 2017 - Contents
Franchising Today - Winter 2017 - 3
Franchising Today - Winter 2017 - 4
Franchising Today - Winter 2017 - 5
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Franchising Today - Winter 2017 - Cover3
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