Many people don’t realize that franchise success starts before you ever get your business off the ground. Just like building a home starts with a carefully laid foundation, a successful franchise depends on smart preparation. The exact steps vary from business to business, but here are some key things you should do if you want to lay the groundwork for a successful executive franchise.
Keep Your Day Job
The first thing you should do is actually something you shouldn’t do. Don’t quit your day job–at least, not yet. Executive franchising usually involves multi-unit ownership, which often comes with a larger up-front investment and longer time to profitability. This means you’ll have to wait a bit before you can rely on your franchise business as a source of personal income.
For this reason, I generally recommend staying at your day job until your executive franchise is well on the road to profitability. Managing a franchise side hustle is very doable for an experienced executive, and the paycheck will help cover your bills until you can draw a salary from your franchise. There are only three situations where I think quitting your day job might make sense:
- You’re at retirement age and have a full nest egg to draw from.
- You’re not at retirement age but have at least several years’ worth of income in cash savings to pay your bills, or you have large assets (such as real estate) that you’re willing to sell to create liquidity.
- Your spouse makes enough income to support your family’s lifestyle.
Learn the Business System
Every franchise comes with a business system. In my mind, it’s one of the biggest reasons franchising is preferable to traditional entrepreneurship. As part of your contract with the franchisor, you agree to follow the business system, which usually provides guidelines for sales and marketing practices, pricing, training employees, and more.
If you want to build a successful executive franchise, you should familiarize yourself with your franchisor’s business system well before you open your first franchise location. In fact, reading through the business system and discussing it with the franchisor and other franchisees should be part of your due diligence process. When you go into business already knowing those guidelines, your launch process will run more smoothly, and you’ll be better able to solve problems quickly. You’ll also avoid unnecessary conflict with your franchisor.
Hire an Accountant
Your business will live or die by your profit-and-loss statement (often called a P&L). At the end of the day, business is about simple math. Take in more money than you spend, and your business will grow and become profitable. Spend more than you take in, and eventually your business will fail.
You need a good accountant to help you maintain your P&L and ensure that you’re managing your money well. They’ll also help you pay your taxes properly, follow relevant financial regulations, and abide by the financial requirements of your franchise agreement, so you don’t end up spending your hard-earned money on fines and penalties (or worse). Even if you have experience as a finance manager or executive, I still recommend hiring an accountant so that you don’t spend your valuable time doing ledger entries.
Set Your KPIs
I’ve mentioned before that I love data. One of my guiding principles is “What gets measured, gets managed.” I believe strongly in setting measurable goals and in having specific KPIs (key performance indicators) for any business. For instance, don’t say, “I want to bring in lots of revenue.” Say, “I want to achieve revenue of $100,000 per month by the end of my business’s first year.”
When you set specific KPIs like this, you can tell when you reach them–and whether you’re making enough progress to accomplish them. You can also break down a larger goal into smaller goals, so you have actionable steps to follow. This will increase the likelihood that you’ll reach your goal. For instance, you can break down the goal above by saying, “To achieve $100,000 in revenue per month by the end of the first year, I need to reach $25,000 per month by the end of the first quarter and $50,000 per month by the end of the second quarter.”
One important tip: research your KPIs before you set them. The due diligence phase is a good time to do this. Use the Franchise Disclosure Document and your conversations with other franchisees to help you determine what goals are easy to achieve, reasonable, and a stretch. Set a mix of those goal types. Easy goals will give you early successes to keep you motivated. Reasonable goals will help you establish a solid business. And stretch goals will put you in the top tier of owners and make you feel like a superstar.
Build Your Team
As an executive franchise owner, you also need to build your team as your prepare to launch your business. Remember, you won’t be working full-time in the franchise. You’ll need to hire people to take care of day-to-day responsibilities for you. I’ve already mentioned that you should hire an accountant right away. In most cases, the launch team for an executive franchise should also include a good franchise manager, 1-2 line employees, and marketing and/or sales support.
As your franchise business grows–especially as you add more locations–you’ll need to grow your team. In addition to hiring a manager and line employees for each location, you may want to create a centralized administrative team. This kind of team usually consists of a general manager, a marketer, your accountant, and perhaps an administrative assistant. Your marketer and accountant might be freelancers working on retainer, or if your business is especially large or successful, you might want to fill those roles with full-time employees.
Ready to lay a solid foundation for your executive franchise? Book some time on my calendar for a free consultation! I’ll provide support and guidance, customized to you, so you can find the right franchise to fulfill your goals.
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