WHAT IS A FRANCHISE?

 

The FTC (Federal Trade Commission) and the franchise regulating state entities have not yet agreed on a single, uniform definition of ‘franchise’, and therefore the scope of coverage of each state’s applicable statue must be carefully analyzed.

 

The Federal Trade Commission, in an promulgation known as the “FTC Rule”, defines a franchise as a “continuing commercial relationship” which contains all of the following elements. If any of these are missing, the business relationship is not considered a franchise.

 

1. Trademark:  The franchisee is allowed to operate a business, or offer, sell or distribute goods, commodities or services, which are identified by a trademark, service mark, trade name, advertising or other commercial symbol;
2. Significant control or assistance:  The franchisor exerts, or has authority to exert, significant control over, or provides significant assistance to, the franchisee’s method of operation; and,
3. Fee or Payment:  The franchisee is required to make a “required payment” to the franchisor or its affiliates of $500 or more (other than for bona fide wholesale prices for inventory) at any time before or within six months after commencing operation of the business.

 

WHY DO BRANDS FRANCHISE?

 

1. Money: Often it is the lack of capital that restrains the expansion of a business. Possibly the biggest advantage for the franchiser is the use of OPM (Other People’s Money) to grow the Brand and its market penetration.

 

2. People: Another major restraint for an expanding business is the recruitment and training of quality unit Managers. Once trained, retention becomes an issue. By franchising, the franchiser expands the Brand by using OPP (Other People’s People), often the key person at the new location is the franchiser themselves.

 

3. Time: Finally, opening another location is very time consuming. The hunt for a suitable site, negotiating leases, design and layout of a new facility, securing financing, hiring and training staff, purchasing equipment and inventory all take valuable time. Franchising removes this limiting factor to the Brand’s growth.

 

HOW DOES ALPHA OMEGA RESTAURANT SOLUTIONS GROW YOUR BRAND?

Good question, it all starts with a free consultation of your concept. There are four basic questions we must ask and answer in the affirmative in order to franchise a brand.

 

Is It credible?

Is it desirable?

Is it teachable?

Is it providing adequate return?

 

Many clients believe they can say “yes” to all four questions. Many well-meaning people have the proverbial tunnel vision about their concept. We have a fresh set of eyes. Our experience will render a candid assessment of the current state of branding and operations.

 

Franchising is a relatively flexible format, and just about any type of business can be franchised, provided it meets some basic characteristics. Here are a few questions for restaurant owners to think about. Does your company have experienced management? Is the concept proven? Have you achieved good local press or public acclaim in the market place? Is your business adequately differentiated from its competitors? Is it marketable as a business opportunity? Does it have a sustainable competitive advantage? Are the systems in place? Are operating procedures documented? Could someone learn to operate your business in three months or less? If the end goal is a robust franchise program then bottom line must be consistent and healthy. If a business can't generate a good return on investment after deducting a royalty (typically between 5 and 7 percent), it's going to have difficulty keeping franchisees happy.  If your business meets these criteria, then it may be a good candidate for franchising.

 

AO Restaurant Solutions can assist you in branding and rebranding dull and faded appearances. We can implement operational system to be a consistent and superior service provider.

Once the basics are in place we can move on to the development of a registered franchise program.  We have the experience to develop, administer and grow the brand through franchising.