Outside Consultant: Where to focus in a franchise business

Q: What are some things I should focus on when operating my franchise business?

A: Training. Franchises are developed by an experienced businessperson with a proven track record, so start by tapping into this success model. Take advantage of the franchiser's experience — and the experience of franchisees already in the system — by carefully reading the manuals and attending training sessions. A franchiser rep should also visit you for market-specific training and to help train your staff.

Hiring staff. Franchise success is all about hiring the right people. Start with your key management staff, who should be selected with the help of the franchiser. You and the management team can then work together to hire the rest of your staff. Today's hiring process needs to be aggressive and creative, with the expectation to pay employees at or above market. Build in reward programs to help retain employees, so that you don't have the extra burden of constantly hiring and training new people.

Marketing. There is no substitute for effective marketing. In addition to paying a monthly royalty (a percentage of sales set by your franchise agreement) to the franchiser, you will also have a required marketing fee, which is a percentage of sales, usually 1 to 3%. These fees are earmarked for marketing the concept overall, not just your unit. There is normally an additional requirement to spend a set amount on local marketing. Therefore, it's wise to find a local marketing agency versed in your industry to advise on where to spend your funds.

Financial control. There is nothing more important to the success of a franchise business than financial controls and reporting. You need to establish monthly and yearly budgets (pro forma analysis), all based on franchise system performance and projections. Variance from your pro forma needs to be dealt with immediately. If you don't have a finance background, hire someone to help with this crucial financial piece. Don't get frustrated.

Franchise concepts may give you a head start in developing your business, but things are not always going to be smooth starting out. With all businesses, there is a learning curve as you settle into your niche and ensure customers know about your concept and frequent it. Don't get frustrated; give it the time it needs. And remember: Keep that cash cushion.

Dennis Monroe is a senior distinguished fellow at the University of St. Thomas School of Law, and co-founder and chairman of Monroe Moxness Berg PA.