Sean McGarry is the founder and CEO of Franchise Direct, an international website that connects franchisors to potential franchisee businesses.
What do you see as the biggest challenge in converting to a franchise?
One of the biggest challenges that a company in the automotive sector looking to convert to a franchise will face is obtaining the rights to its name nationally and internationally. There have been instances where businesses attempting to franchise find that another company is already using its name at a local level. This is one of the first things that a person must clarify before franchising.
Another significant challenge is the need to create a detailed documentation of all systems and procedures throughout your company; this is necessary in order for the business to be replicated by future franchisees. A comprehensive plan can be in the form of a hard copy or online manual. Yet no matter what form it takes, this is a huge undertaking. As a result, many companies use consultants that specialize in preparing such manuals.
What do you think is behind the franchising growth seen in the automotive industry?
There has been pent up demand as people deferred repairs and new purchases during the worst of the recession. Now, there is a greater sense of consumer confidence as the economy begins to recover and people see better job security and job opportunities.
What are some of the key items businesses should consider when deciding whether or not to franchise?
Since overhead costs associated with franchising a business are so high, one needs a significant number of franchisees to pay royalties in order to cover the overhead structure. In relation to the internal structure of the company, it is likely that the management team will have to be strengthened with a senior person designated to handle all franchising.
A company should also assess its ability to source outside capital. Venture capitalists are interested in investing in franchise companies because of the possibility of significant growth and return on investment. The investment can be used to strengthen your management team and also buy outside expertise. Examples include franchise consultants to help with detailed documentation, branding, legal expertise, registration of trademarks and protection of intellectual property.
You must also factor in the cost of establishing a "pilot". Although you have already started a successful business, this does not mean it can be franchised. A pilot is a second unit in a different location. If the pilot is profitable after a certain amount of time running, it is then used as the reference point from which the franchise is grown.
Please explain the Franchise Direct process when working with clients.
Franchise Direct’s mission is to help franchisors recruit franchisees. We do this by promoting our clients on the web worldwide. Research undertaken by the IFA shows that the web is now the most important form of franchisee recruitment. We start by writing a profile of the business in conjunction with the client. The client may also add video streaming to this profile to give the visitor a better understanding of the business. Franchise Direct then places the franchise in the appropriate category on the site. Most people search by industry category combined with funding required. The visitor on the website can browse the different franchises and complete the inquiry form that is sent to Franchise Direct. We then pass on the qualifying inquiries to the franchisor who then contacts the person involved.
