Quora Asks About Franchises, Ed Answers

So you have franchise questions.

Chances are high Ed has answers or at least an opinion. 

With more than 20 years in the franchise field buying and selling well-known multi-location brands and smaller, craft businesses across the country, Ed Alberts has a unique vantage point to give advice.

The current WIRED National owner, a full-service IT and multimedia installer and supporter, was asked to tackle three Quora questions about the industry and he stepped up to the challenge.

Quora Question: What are the hardest things about being a franchiser?

Ed Alberts: I assume this Quora user is referring to the term “franchisor” and not “franchiser”. A franchisor oversees all franchise locations.

From that perspective, there are two difficult tasks ahead of you. The first is setting up adequate systems so franchisees can maintain success. These systems include a trusted architect group to ensure that every build-out has the same look and feel, employee hiring plan and a similar startup plan for each new location to follow. From procedures for outfitting the store to a marketing plan and schedule, consistency is crucial for brand strength.

The second biggest on-going challenge a franchisor will face is monitoring this standardization among all franchisees to see when a location is going rogue and ultimately diluting your brand’s experience and message.

It’s easier to say than do.

Quora Question: Do corporations make money from franchise stores?

Ed Alberts: Yes, a franchisor charges a fee, or royalty percentage, to each franchisee. This dollar amount is usually based on 5-8 percent of individual sales.

Franchisors also collect a marketing fee in addition to the royalty percentage. This fund is for the benefit of all locations to promote the brand through magazine and TV advertisements as well as run other promotions. It is usually 1-3 percent of sales with more flexibility than the royalty fee.

Quora Question: Which franchise is the biggest cash cow?

Ed Alberts: That’s a tough question to answer, Quora. I think if you’re looking at a franchise, the best way to determine the profit is to look at its franchise disclosure document (FDD). In the document, you can find the average sale per store and startup costs on average. From that information, you can deduct what your return on investment should be while also factoring in key components like location and marketing.

I can tell you the more you spend during the startup period, the better rate of return you should expect.

Do you have more franchise-related questions for Ed? Send them through to info@wiredtelcom.com and you may just see them in our next blog post!