chapter 4

• Ongoing costs franchisees must pay

  • Rent
  • Utilities
  • Marketing expenses
• Franchise fees


  Fees paid to the franchisor
• Royalties


  Ongoing payments made to the franchisor, usually a percentage of revenue
• Franchise fees and royalties affect the franchise profits
• Franchisees must perform due diligence and contact other franchisees
• It is important to analyze the financial performance of the franchise business
• Financial statements


  • Income statement
  • Balance sheet
  • Cash flow statement
• Assessing market potential


  Evaluating factors like market size, growth, competition, and target customer demographics
• It is important to evaluate the training and support provided by the franchisor
• Thoroughly examining the supplier setup and supplier business relationships is crucial
• Franchise business model


  • Advantages and disadvantages compared to other business models
• It is important to thoroughly examine the franchise business plan and other brochures because it have different components of the business plan
• Legal considerations when buying a franchise

  • Trademark
  • Contracts
  • Employment law
• It is important to research the franchise business before making a decision
• Comparing different franchise opportunities is important different factors to be considered
• Franchise businesses to consider less

  • New or unproven franchise systems
  • Fads or trends
  • Overly competitive markets
  • High investment costs
  • Poor franchise support
• Franchise businesses that provide the most benefit

  • Established and proven business model
  • Low overhead and operating costs
  • High demand and growth potential
  • Strong franchise support and training
  • High potential for recurring revenue
• The first step in elevating an original business idea into a franchise is to explain what franchising is and its benefits
• Conducting a feasibility study is important to determine if a business is suitable for franchising
• Pilot testing, analyzing operational efficiency, and assessing location and brand strength are important steps in evaluating a franchise concept
• Developing a comprehensive franchise plan, determining the franchise model, and creating a franchise disclosure document (FDD) are crucial steps
• Finding potential franchisees is a crucial step, and can be done through advertising, franchise brokers, referrals, trade shows, social media, direct mail, and franchise portals
• Effective management of franchisees includes providing training and support, regular communication, performance monitoring, field support, and compliance monitoring
• Signs that a business is not ready to franchise

  • Lack of established systems and processes
  • Inconsistent performance
  • Limited brand recognition
  • Insufficient support infrastructure
• Human Resource Management (HRM)

  The activities an organization carries out to utilize its human resources effectively
• Franchisor's HR responsibilities


  • Recruitment and selection process
  • Training and development programs
  • Performance management
• Franchisee's HR responsibilities


  • Hiring and onboarding employees
  • HR policies and procedures
  • Employee engagement and motivation
• Benefits of franchise HR

  • Standardization of HR practices
  • Centralized HR support
  • Economies of scale
  • Talent development and retention
• Team-building activities


  • Organizing team-building initiatives, such as social events, team outings, or employee engagement programs, to foster a positive and cohesive work environment
• Performance management


  • Setting performance goals, conducting regular performance evaluations, and providing constructive feedback to drive employee growth and improvement
• Employee motivation


  Motivating employees
• Standardization of HR Practices

  • Consistency
  • Brand alignment
  • Compliance
• Access to HR Expertise

  • HR guidance
  • Best practices
  • Continuous support
• Cost-sharing and Economies of Scale


  • Shared resources
  • Bulk purchasing power
  • Training efficiencies
• Balancing Centralized and Decentralized HR Functions

  • Centralization
  • Decentralization
• Ensuring Consistent Implementation of HR Policies

  • Communication and enforcement
  • Monitoring and oversight
  • Cultural and legal differences
• Maintaining Brand Image through HR Practices


  • Consistent customer experience
  • Employee turnover
  • Handling HR-related crises
• HR Manuals and Guidelines

  • Standardized policies and procedures
  • Job descriptions and specifications
  • Compliance guidelines
• HR Helpline or Support Center

  • Professional advice
  • Issue resolution
  • Policy interpretation
• Regular Communication and Training Sessions


  • Updates and notifications
  • Training programs
  • Best practice sharing