Considering common site options

Here are some of the types of locations you typically will be looking at for your franchise.

Dual branding: Sharing your space

When two or more businesses share the same premises, it’s called dual branding: Two or more franchises with different concepts set up shop next to one another or within the same location, offering customers a one-stop shopping experience. Think of a food court.

Yum! Brands, the parent company of KFC, Pizza Hut, Taco Bell, and WingStreet, often places two or three of its brands in one location. So do gasoline companies that often combine their gasoline stations with a convenience store offering sandwiches, doughnuts, and other food, along with a quick oil change or car wash businesses (often with multiple brands all at once).

A dual-branded location may be able to use labor and real estate more efficiently because, if done well, it expands a location’s daypart. (In the restaurant industry, breakfast, lunch, and dinner are called dayparts.) For example, doughnut chains, as you might expect, are usually busiest during the breakfast daypart and slow down during the lunch and dinner dayparts. Some, like Dunkin’ (formerly Dunkin’ Donuts), have begun to expand their offerings to expand their traditional dayparts to include lunch. Other concepts are slow during the breakfast daypart but busier during the lunch or dinner daypart. By dual-branding a location, the operator hopes to capture traffic generated by the other product offering and use the location more fully.

If you choose one of these dual-branded sites, you still pay an initial franchise fee and royalties and remain accountable to the same standards. Make sure your franchisor offers equipment, signage, and design specifications to fit these new locations. Compare the costs — and sales/profit potential — with those of single-branded locations. These sites are usually tucked inside another location and take up less square footage. The smaller space may mean less staff and possibly lower overhead. Some operate seasonally. But just because they’re smaller doesn’t mean they’re cheaper. Some — such as limited-access highway travel centers — are on prime properties. The bidding can be fierce and the occupancy costs high.

Finding out what constitutes a good site

First, you need to understand from your franchisor the criteria that are important for your type of business. You may think the best place to open your doors is where the crowds are right now, such as in a shopping mall or adjacent to a busy highway. You may be right — for now. But with all the acquisitions, mergers, and market pullouts happening with major retailers and grocers, that major draw your business is dependent on may go away and take your customers with it. At one point being close to a Sears store was a terrific choice because of its customer draw — that has changed considerably.

No one can offer a stock definition of a “good” site, because different businesses require different kinds of locations. Some generalities do hold up, however. If you’re investing in a retail franchise, focus your search on a location that gets in your customers’ faces. If it’s in the path of people commuting to work, near an entertainment arena, or in an office complex, customers can see your business, recognize your brand, and more easily come in to buy your products and services.

For some businesses, though, getting the best corner in town, with high visibility and terrific customer access in a strong, anchored shopping center, for example, is not only unnecessary but also the path to rapid disaster. Carpet cleaners, janitorial services, building-repair services, direct-mail companies, lawn-care services, pest-control businesses, moving companies, tool-delivery services, and home-inspection services, among other service providers, don’t usually need high-visibility retail space (and can’t afford it, either). Their needs run more to good-looking trucks, delivery access, access to postal facilities, highway access, warehouse facilities, and good telephone service than to locations where their customers shop. After all, most of these service providers go to their customers — the customers don’t come to them.

If you don’t need to be at the corner of State and Main, you’ll likely have more options, lower rent, and a more accommodating landlord.

Also consider your potential neighbors and nearby competitors. If you’re operating a child care center, you don’t want to be next door to a liquor store. Being near a strong anchor store like a Target or a grocery store could help drive customers to your location, as long as the anchor store doesn’t monopolize available parking spaces or offer the same products or services as your store. If direct competitors are in the same retail center or shopping plaza, consider choosing a different location — unless your potential site out-positions them by being more visible or more convenient for the customers you’re competing for. But clustering with similar businesses may on occasion be advantageous, especially when the area is known for restaurants or the regulations for the sale of alcohol make those areas essential.

Some developers or landlords may not want or allow two business of the same type (for example, two pizza parlors) in the same complex, either for reasons of tenant mix or exclusivity rights granted in a lease. So, even if you don’t mind moving in a few doors down from a competitor, the landlord may not be willing or able to rent to you. Understand these restrictions up front so you don’t invest a lot of time and money on a site you can’t get into.

Using the franchisor as your compass

Most franchisors can offer a big advantage: experience. The staff at a mature franchisor can help you identify the kinds of locations that usually work — and those that don’t. For example, staff members know whether a franchise can be effectively home-based initially or even long term, whether an office is attractive or whether a retail franchise fares better tucked inside a suburban mall or flaunted center stage on a main thoroughfare. So, your first step in selecting a location is to discuss viable options with your franchisor. The company may allow a variety of locations, or it may stick to only one type.

A good franchisor points you in the right direction and can share with you the demographics that profile your potential customers:

• Who are the system’s target customers and where do they live?
• How many customers do you need, say, of a particular age and income that can drive to your business in a certain amount of time?
• How far are customers willing to travel to buy your goods or services?
• How and when do customers typically interact with the chain — are you opening a coffee shop aimed at commuters, a fitness center catering to professionals on their lunch hour, a child care center that needs to be near residential areas, or a destination concept like a spa?
• How much are your target customers willing to pay for what you sell?

A good franchisor wants you to find a location that meets the needs of your target customers. Many franchisors use mapping software for locating areas best suited for your type of business. But you still need to double-check any information the franchisor supplies against your own research. Think of this as a check-and-balance. You check on the accuracy of the data, and your information provides a balance to what the franchisor offers. Frequently your knowledge of your market will be a better gauge than even the best mapping software — don’t rely exclusively on one source of information.

Many franchisors bombard new franchisees with site criteria — a list that spells out specifications for a particular franchise — inside and out, so that the site meets the franchise system’s standards. You may be required to have x number of square feet, x number of parking spaces, x number of seats, x number of grills, venting requirements, and so on. Retail and restaurant franchisors, especially, expect their franchisees to comply with their design standards — without variation. On the other hand, an office-based franchise may not care whether you have wood floors or carpeting, mahogany desks or oak. A consistent look at each of the locations may not be important to franchisors, as long as the locations meet their overall quality standards.

Will your franchisor ultimately help you find this crown jewel of a site? Typically, a franchisor will educate you about its site criteria, provide you with site criteria forms, and ask you to find the location and do the required research — before you present the site package to the franchisor for review. Then the franchisor will evaluate your information and possibly visit the location before approving or disapproving your choice.

Check your franchise agreement to see whether and how the franchisor must approve a franchisee-selected site and the time limit for the franchisor to render a decision. Standard contracts allow a franchisor to accept or reject your request to open at a particular location. This decision, like everything else in franchising, reflects the need for consistency.

In almost every franchise agreement, the franchisor is only approving or rejecting a site, not guaranteeing it. This is true even if the franchisor found the location for you — you didn’t have to accept it, did you? The franchisor’s approval indicates only that the site is acceptable to the franchisor but ultimately, the selection of the site is your responsibility.

The more hands-on support the franchisor provides in site selection, the better your chances of finding a successful site. Look at your franchise agreement to find out what your franchisor will do for you. Ask the other franchisees in the system how good the franchisor’s site-selection assistance actually was.

Typically, the franchisor will approve a general area for your location and expect you to search within those boundaries for a location, unless the franchisor already has a site in mind. After you find a site, the franchisor’s role is to accept or reject it. Other franchisors — especially start-up franchisors — may physically accompany you on your site hunting. The staff may jump in the car with you, plot demographics, and talk to landlords. Some franchisors may already have located the site, built the building, outfitted it with equipment and fixtures, and made it available for you to buy or lease.

Crunching data to evaluate a site on your own

Investigating a site for your franchise is like following the scientific method. Suppose you hypothesize that a given site may be a good location. You need facts to support your hypothesis before you can reach any conclusions. The factors that influence site success fall into four primary categories:

• Demographics and employment
• Activity generators
• Physical and traffic
• Competition

Most demographics studies today can present information based on census tracts, block groups, zip codes, a radius measured in miles from a center point, drive-time polygons, and many other configurations. For retail and restaurant franchises, the drive times are usually best (except for walk-up locations) because most people will drive to your business — either coming from someplace or going to someplace else. Given a specified amount of time (3 minutes, 20 minutes, and so on), some computer programs that franchisors use can draw an irregular polygon based on vehicle speeds on the various roads and highways and then provide demographic and employment information for the contained area. These polygons usually vary dramatically from the comparable circles of 1, 5, 10, or 20 miles. The size of an area you should measure is most important. If your customers are quick-lunch types who typically drive no more than a couple of minutes each way to get lunch, measuring the employment population 10 minutes out won’t help you. The franchisor can usually give you assistance in determining the size of your trading area (the area where you draw the majority of your customers).

As you look for a site, keep your eyes peeled for red flags. A location that keeps turning over or that has been on the market for a long time should raise eyebrows. You may want to consider a different location if pedestrians would have to cross a busy street or drivers would need to make a U-turn to get around a median to get to the site. If anything — seriously, anything — smells fishy, investigate before you sign a lease. Do not let your desire to find a site and open your store trap you into selecting a substandard location.

Implementing a franchisor’s designs

Every retail and restaurant franchisor has a floor plan (called a footprint) that may be excruciating in its exactness. Even if you think that a counter should be 2 inches longer on the left side, you have to follow the franchisor’s plans — or get the franchisor’s permission for a change. Even if you know for a fact that menu signs are more readable if they’re placed 12 inches closer to the floor than the required 90 inches, too bad — you have to follow the plans. Review these specifications and standards with your architect and contractor.

Franchisors usually provide prototype plans for every location. Your architect must develop plans for your site that meet local ordinances and codes as well as the franchisor’s standards. Don’t assume that you can add improvements to the design, such as a bigger back of house (the kitchen and storage area).

Check with your franchisor before making expensive changes that you may have to reverse.

All these specifications from the franchisor are intended to ensure consistency, which is great, but what if your particular community has some type of restriction that runs counter to your franchisor’s building plans? Make sure that you notify your franchisor so that you can discuss the required changes. If the changes are important, the franchisor often personally contacts the builder or city planner to discuss the changes.

Generally the franchisor will provide you with a list of sources for the equipment, décor, and other items you’ll need to purchase. Before you open your business, you will generally need the franchisor’s approval that your development of your location meets its standards.

Getting approvals, permits, and licenses

Whether you’re renovating an existing leased site or building a new site from scratch, you’ll have to prepare preliminary plans and specifications for construction and site improvement for approval and permits from your local zoning board and building department. You’ll also have to — big surprise! — submit them to your franchisor for approval. Your banker or lender will also want to see these plans.

If building a site is going to be your choice, make sure you touch base again with the local zoning board and building department before you even close on the property and certainly before you move that first shovel of dirt. You want to be in compliance with everything — down to local ordinances that set the hours you can hammer and saw to your heart’s content. You also want to determine whether the town needs to approve any variances (which give you permission to do something on the land that’s different from what the zoning rules allow) for the property and whether the site will support your needs for utilities, parking, and the like.

Early discussion with the municipality is important. Even in cases where your use is permitted, the planning board may have some unusual requirements that could make the site unworkable for you. Sometimes green-space setbacks or water-retention basins, although nice for the ducks, can push your building out of sight of approaching traffic. If your business relies on impulse purchases, you would be in a tough spot.

Although your contractor or architect usually does the pre-construction legwork, seeing that it all gets done is your responsibility — not the franchisor’s. Your contractor needs to obtain the following:

• Permits: For construction, utilities, signs, curb cuts (those indentations in the sidewalk that let the cars in), and environmental matters
• Variances: If you need the town to approve some specific violation of the zoning requirements for your site
• Certificates of occupancy: To allow you to occupy the location

Beginning construction

After your franchisor approves your site plan, it will be your responsibility to build out the location to the franchisor’s standards and to meet local building codes. Critical to the build-out process is selecting a reputable commercial contractor who has experience with meeting deadlines, securing necessary permits and approvals, and complying with the quality requirements imposed by your franchisor. Your franchisor (and other franchisees) can tell you how long the construction process typically takes.

Getting help with the opening

Many franchisors provide in-person assistance immediately before and during a location’s grand opening. The amount and nature of such opening assistance varies greatly by system. Some franchisors send a single field consultant to observe and be available to answer questions during a franchisee’s grand opening, whereas other franchisors send a team of field consultants who arrive up to a week before the grand opening and stay until they’re comfortable that the franchisee is ready to run solo. Such pre-opening and opening assistance can include the following:

• Providing guidance on the type of marketing and advertising a franchisee should conduct for the location’s market introduction and grand opening.
• Placing initial orders of opening inventory and supplies.
• Conducting additional on-site training of the franchisee and its management team. As discussed later in this chapter, many franchisors historically have provided some training to a franchisee’s staff at the franchisee’s location in connection with the opening; however, due to fears of being declared a joint employer of a franchisee’s staff, franchisors are increasingly providing train-the-trainer programs to franchisees and then expecting franchisees to train their own staff.
• Ensuring initial compliance with brand standards.

Check your franchise agreement and Item 11 of the franchise disclosure documents (FDD) regarding the opening assistance you can expect to receive from your franchisor.

The franchisor as the sole supplier

For some goods or services, your franchisor may be your sole or exclusive source. When that occurs, the requirement usually extends only to items that are proprietary (secret recipes), contain certain key ingredients, or are branded with the franchisor’s trademark. These products may be ordered directly from the company, or, in many franchise systems, the franchisor provides the products to the distributors or licenses another company to produce and oversee distribution to the system. Because these items are proprietary, don’t expect any franchisor to provide you (or any supplier you recommend) with the specifications for the franchisor’s proprietary ingredients or products.

Suppliers approved by the franchisor

Rather than serve as the exclusive or sole source for all required purchases, some franchisors simply give franchisees a list of approved suppliers from whom they can or must buy their items directly — and the franchisor (or one of its affiliates) may be included on that list. The franchisor and the suppliers will have agreed on what specific products can be supplied to the system as well as alternatives should any of the specified products be out of stock. The choice of alternative products is not for you as the franchisee to make. Trusting the supplier to meet system standards is an important part of why the franchisor selected the supplier in the first place. As long as the approved suppliers sell franchisees only the items approved by the franchisor — without unauthorized substitutions — a franchisor can have significant confidence that it is maintaining the control it believes is necessary over the quality of the products sold under its brand.

Compliance with quality standards is a core principle of their business, and franchisors will reject and replace any supplier that does not produce and make available products that satisfy those standards. As a check on quality and service standards, franchisees need to report to the franchisor any issues or problems they are having with an approved supplier.

Most franchisors allow franchisees to request the franchisor to approve new or alternative suppliers (or approve new products or approve new or modified product specifications). If you discover that a supplier in your market meets your franchisor’s criteria and is less expensive than the franchisor’s authorized suppliers, make sure to pass the information on to the franchisor. If you feel strongly that you should be able to purchase items from this supplier, make a formal request for approval of the supplier. If acceptable, the franchisor may add the supplier to the list of approved suppliers once it has vetted the supplier, often by ordering and inspecting products produced by the supplier or visiting the supplier’s facilities.

The costs for vetting requested new suppliers are often passed back to the requesting franchisee, so be discerning in your requests.

The franchisor will often reserve the right not to approve a proposed supplier for any reason, even if the supplier appears qualified to you. Keep in mind that there is more to being an acceptable supplier than the price of a single item. Smart franchisors evaluate many factors in considering whether to approve a proposed supplier. For example, does the supplier have the capacity to supply the entire franchise system with quality products on a timely basis, a proven track record, competitive prices and do they have financial stability? And if the current supplier is providing volume-based rebates or other incentives to the franchisor and the proposed supplier won’t do that, the franchisor may choose not to approve the proposed alternative supplier. Also it’s reasonable for any franchisor to limit how many suppliers it works with.

Rebates and upcharges

It’s not unusual for franchisors to receive money based on franchisees’ purchases of required goods and services. This happens either because the franchisor is selling products directly to franchisees at a markup (called an upcharge) or is receiving payments or benefits from the designated suppliers and distributors (a rebate). Franchisors frequently apply upcharges to proprietary products manufactured and supplied directly by the franchisor to cover the franchisor’s product development, manufacturing, sourcing, distribution expenses, and to earn revenue.

Some franchisors may receive upfront or annual payments from suppliers and distributors in exchange for access to the system’s franchisees, exclusivity to a particular product or service, or the franchisor’s commitment to a long-term purchasing arrangement. Franchisors may also receive marketing fees or require equipment packages or special delivery arrangements from suppliers that benefit the system. This is common when the franchisor has agreed to feature a particular supplier’s brand or products in the system’s retail stores — think of Coca-Cola or Pepsi coolers or dispensers in fast food restaurants.

Many franchisors will also negotiate volume rebates from suppliers. These rebates are payments from vendors to the franchisor based on the number of franchisees buying from the vendor or the system’s overall volume of purchases of the vendor’s products.

Aggregate or total amounts of rebates and other benefits that a franchisor receives from vendors and the percentage of purchases from approved suppliers in relation to your overall investment should be disclosed in the FDD. Franchisors are not required to disclose specific rebate amounts for specific suppliers.

Review rebate information in the FDD carefully so you can get a sense of whether the franchisor is deriving significant revenue through the purchases you will make as a franchisee. Finding out in advance is important because some systems with a lower royalty rate may actually cost you more money than a system with a higher royalty rate, because the difference may be more than offset by the income the franchisor earns from your purchases. (The royalty is your payment to the franchisor that allows you to continue in the franchise system — it is usually based on your total sales.)

The supply chain revenue received by the franchisor is generally factored in as part of the franchisor’s own revenue model. Where supply chain revenue is not available, the franchisor would still require that revenue to manage the system and earn its own return on investment, which may result in higher royalties or à la carte fees being charged.

In addition to the information in the FDD, you should check with the franchisor about the way rebates and upcharges are handled in your system. The procedure is far from uniform among franchisors or among suppliers. Some franchisors will keep the rebates as revenue — often it offsets the costs of negotiating and monitoring the approved suppliers, but it may be used to offset franchisor expenses generally. Other franchisors will forward the rebates directly to the franchisees. Some franchisors will place some or all the rebates into a marketing fund for the benefit of the whole system. Still others will use a mix of all of the above.

It is generally acceptable for a franchisor to earn money when you purchase goods from a supplier. After all, setting up and maintaining these supplier relationships cost the franchisor, unless the system has an independent cooperative or buying group. And franchisees need to have a financially strong franchisor that can provide the services they need and want.

In a perfect world, you want to find a franchise system in which the total costs of being a franchisee (royalty and other costs) are the lowest, and the services provided by the franchisor are the highest.

Many of the legal disputes over the past two decades have resulted from franchisees’ perception that they are getting gouged — that is, the products they must purchase from the franchisor or its approved suppliers are excessively marked up, making the franchisee less competitive. It is essential that prospective franchisees and the franchisor talk about supply chain policies and requirements including margins and rebates. However, where the franchisor has properly disclosed how it conducts the supply chain before franchisees invest, franchisees have little to complain about after the fact. Understanding the supply chain relationship is important before you sign any franchise agreement.

Finding your own suppliers and requesting approval

Franchisors frequently allow and even encourage franchisees to find and choose their own vendors — as long as the franchisee complies with the product standards and specifications set by the franchisor. This practice is common in small franchise systems, but even big franchisors often allow franchisees to buy certain items locally, especially where those items are commodities, the brands for off-the-shelf items are reliable, or the franchisor is focused on local sourcing of certain items like fruits and vegetables from local farmers. If your franchisor doesn’t provide you with a list of authorized suppliers, you may have to choose your own vendors. Often this can be time consuming and add some cost to your investment. Knowing which items you can choose suppliers for and the specifications that must be met is important.

Work with your field consultant and your franchisor’s purchasing department to see whether they can help you identify suppliers in your market. Your local chamber of commerce may also have a list of suitable suppliers. If your franchisor offers a supplier-evaluation questionnaire, get it and use it. If not, make your own. And talk to other independent business owners in your market, including franchisees from other franchise systems. Make certain you do some basic online research on suppliers. The Internet can be a vital source of understanding how well suppliers work with their customers and what their reputation is.

When you review bids and quotations from vendors, make sure you understand the total charges. Some vendors quote a low price on a product but add on handling and delivery charges. Some reserve the right to modify or change prices unilaterally. Look for these hidden charges or reserved rights when you compare pricing.

Price is certainly one of the prime considerations, but basing your decision solely on price can be a mistake. A good price on items that are constantly out of stock or a good price from a vendor who is trying to dump outdated merchandise won’t help you build your business. Consider product quality, order accuracy, and timely delivery in selecting a vendor. Having a vendor that will help you in a crisis may be more important than saving two cents a case for an item.

Considering key drop delivery

Having suppliers make their delivery through your front door during your busiest hours is going to be disruptive. Make certain you select suppliers that work with you on their hours of delivery, frequency of delivery, and how they deliver to your business.

Many reputable companies offer what’s called key drop delivery. The vendor has a key and makes a delivery during off hours, such as at night or early in the morning. Often the business will have a refrigeration unit accessible from the outside back of the location where deliveries are made. When the delivery is made, and in situations where refrigerated or frozen products are delivered, they are placed in the middle of the cooler or freezer with the dry goods placed in middle of the stockroom floor.

In the morning, the merchandise is checked in, and if there is a disagreement a call is made and, where appropriate, a credit is issued. This type of delivery is frequently offered at a lower cost for delivery because it allows the driver to travel when there is limited traffic, allowing the driver to make his deliveries faster. In some cities there may be restrictions on the size of truck that can be making deliveries in the retail and business districts during the normal business hours.

Receiving deliveries at any kind of franchise

Suppose you have just purchased a convenience-store franchise. The new site has been built, and you’re standing inside your brand-new building. The only problem is that the shelves are empty. Soon you will need to begin scheduling and receiving deliveries. Follow these general tips for receiving merchandise at any type of franchise:

• Make sure suppliers schedule their deliveries in advance. Accept deliveries only during specified hours. When the location is open and operating, you want the merchandise to come during off-peak hours so that you can concentrate on accepting the delivery.
• Don’t let vendors park in front. Require vendors to park in an out-of-the-way spot. The front of your business is for customers.
• Have the delivery driver bring all products into the building before you check the items. Some systems want their own employees to bring merchandise into the store.
• Confirm that the merchandise you receive is for your business.
• Check all vendors in and out. Be sure you physically see every item — don’t take the driver’s word. Check all cartons and boxes when the vendor is leaving to make sure they are empty and no merchandise is being carried out of the store. Unless absolutely necessary, vendor check-in should be done away from that vendor’s display and away from merchandise on hand. Don’t allow a vendor to both stock shelves and remove boxes unless you check both before the vendor leaves.

• Watch helpers. Some vendors have “helpers” whose main job is to distract you during the check-in process.

• Immediately put away all perishable products.
• Check use and expiration dates. Sometime vendors have relationships with other customers where merchandise that isn’t past the expiration date is removed before that date. If you receive that merchandise, the time available to you will be shorter than you need or want.

Checking the goods after they are in your location

A truck pulls up at the back door of your franchise, and a flurry of activity follows. Suddenly, you’re surrounded by boxes. The driver is completing the paperwork for your signature. This situation does not have to be scary if you know what to do. Check the quality and condition of the merchandise before accepting it. Here are some additional tips:

• Examine every box for signs of damage. Look for things like tears, broken or crushed cardboard, signs of tampering, rattles, damp or wet cardboard, bad odors, dented cans, and substitutions of standard items.
• Before signing for the boxes, open any cartons that have been opened and resealed or that you suspect have internal damage. Note any damages on the receiving record.
• Always check the date code on the product when it is delivered. Make sure the product is within the code and that you can reasonably expect to sell it before the code expires.

Verifying invoices

Attending to paperwork may be the least entertaining part of business ownership, but in the case of delivery receipts, it can prove rewarding. Avoid financial losses by ensuring you get what you pay for. Check out these tips:

• Before accepting delivery, check each item on the delivery receipt against the product that has been delivered and compare against the product ordered. Check quantities received against quantities ordered. Count the number of cartons delivered and compare this number to the number on the driver’s record or freight bill. Never sign for more cartons than you receive. Note any discrepancies on the freight bill or receiving record, or correct the errors before the vendor leaves the store.
• Never give the delivery receipt back to the vendor. Obtain the delivery receipt when the vendor walks in and under no circumstances return it to the vendor. Manipulating the delivery receipt is one of the most common ways that some vendors steal from franchise locations.
• If the vendor made a substitution, call your franchisor’s field consultant to verify that the substitution is valid and acceptable. Inform the driver and note on the invoice that substitutions not approved by your franchisor are subject to return for full credit.
• If you don’t receive an item appearing on the delivery receipt, have the driver clearly mark the item “Short” along with the quantity not received. The driver should sign the delivery receipt before you sign it.

Back of the house

The back of the house includes the stockroom. It is literally in the back area of your business, and it is where you keep all the items not currently in use. Back of the house is also where you store perishables and frozen items, which means it also can be the location of a refrigerator or freezer. You will be expected to know what you have in the back, too.

Your franchisor should provide detailed back-of-the-house storage procedures that may include a plan-o-gram so you can readily know what you have in stock. Follow them; a plan-o-gram enables a franchisor’s field consultant to quickly see how the franchisee is managing inventory because each franchisee will use the same methods for storage, and a bad stocking plan can allow for goods to be buried behind others, which can increase waste. If your franchisor doesn’t provide information on back-of-the-house arrangements and procedures, the following sections provide some procedures to consider.

Front of the house

The front of the house is everything that’s not the back of the house. This is the area that customers see when they enter your store. Obviously, how the front of the house looks is more important for locations that are frequented by customers and less important for locations that customers never see. If you’re a retail location, you’ll handle your merchandise differently than you would if you were a restaurant. Still, at all times, the front of the house is your showcase — it is what customers see every time they visit your store.

Retailers need to place merchandise on shelves so that it’s attractive to customers and induces them to buy. Restaurants and other businesses that sell food also need to keep their locations attractive. If you have reach-in refrigeration accessible to your customers, or if you have items on display, how you display them is just as important to you as it is to a retailer. Your franchisor should provide you with a plan-o-gram for that purpose.

To keep the front of your store in tip-top shape, make it a priority to do the following:

• Follow your franchisor’s plan-o-gram, which gives instructions on where to display products. In some systems a plan-o-gram tells the merchant how many facings (number of rows) they should have of each product and the amount of products on each shelf, hanger, or merchandiser. The franchisor will often specify branded merchandise at eye level with generic merchandise down by the consumer’s knees.
• Keep your shelves and merchandisers (displays for your merchandise) stocked, clean, and dust free.
• Use proper product rotation by placing the oldest products in front of the newly received merchandise (first-in, first-out).
• Price identical items the same. One benefit of point of sale (POS) technology is that you don’t have to reprice each item when prices change — just change the price in the POS and on the shelf’s price tag.
• Allow adequate space between displays, as required by your local code.
• Use only signage that is acceptable in your system. If your franchisor requires you to use professionally prepared signage, don’t use hand-written signs. Equally important, make sure you keep your signage current. (Remove the Christmas posters after Santa has returned to the North Pole — before New Year’s Day.)
• Clear the floor of empty boxes, unless they’re part of the design concept.

The Americans with Disabilities Act requires that you keep your store arranged in a manner that makes it usable for individuals with disabilities. As a general rule, provide enough space for easy passage of a wheelchair throughout the store, make sure that the lines to your registers are accessible, and don’t display merchandise in a way that makes it difficult for people with disabilities to shop. If you have no choice about how you merchandise the store, make sure that your staff is actively available to any customers who may need assistance. As the business owner, complying with all federal and local laws is your responsibility.

Undergoing good initial training

A new franchisee should expect to cover a lot of ground during the initial training. Your initial training will be focused at teaching you and your managers how to produce and deliver the system’s product or service consistently to brand standards, but franchisors will include other important subjects as well, including the following:

• Site selection, design, and development (covered earlier in this chapter)
• Supply chain, vendor relations, purchasing, receiving, stocking, and inventory management (covered earlier in this chapter)
• Food safety and storage (if the franchise is a restaurant or a store selling food products)
• Labor management, including recruitment, supervision, and motivation
• Leadership and business management
• Brand standards and operating procedures
• An understanding of the customer experience
• Technical operations on products and services
• Problem-solving
• Brand positioning (how the franchisor wants the public to think and feel when hearing the brand name)
• Merchandising
• Pricing strategies and methods
• Marketing and advertising
• Cleaning and maintenance
• Safety and security
• Financial management and business plan development
• IT, including point of sale (POS), accounting, payroll, inventory, and communications hardware and software systems
• “Train the trainer,” to enable the franchisee to train his or her own management and staff on an ongoing basis

Good training instills in the franchisee the franchisor’s brand philosophy and history, teaches franchisees things they need to know (from opening the business in the morning to closing at night), and gives them the sources for additional or emergency support.

Today, because of franchisors’ concerns over claims of joint employment, mainly fueled by the National Labor Relations Board (NLRB) and the Department of Labor (DOL) actions in support of the Service Employees International Union (SEIU) and other unions’ organizing efforts, most franchisors are moving away from directly training their franchisees’ staff. Instead, franchisors are increasingly including train-the-trainer programs as part of initial training to give their franchisees the capability to train their own management and staff.

How much training a franchisee can expect to receive from its franchisor will depend on the industry, the complexity of the business, and especially on the franchisor. Your franchise agreement will provide you with information on what you should expect to receive. For details on the franchisor’s initial training curriculum, look at Item 11 in the franchisor’s FDD. The methods franchisors use in training their franchisees vary widely.

Although most of a franchisee’s initial training will take place at a franchisor’s headquarters or possibly at another training facility, more and more franchisors are including online training for franchisees. There are many benefits of online training for franchisors and franchisees. Through online training, franchisors can enhance the amount and detail of the training provided without requiring the franchisees and their management team to spend an extended period of time away from home. In addition to reducing a franchisee’s travel and other costs, online training ensures that each franchisee receives consistent training and enables franchisees and their staff to go through the training at a pace best suited for themselves.

Emerging franchisors may be limited in how they deliver training to their franchisees — frequently a copy of the operations manual and a new franchisee training class are the only training assistance a new franchisee will receive. Even so, given that frequently the founders of the franchise system are still very much involved and there are few franchisees in the system that require support, franchisees can still expect to receive a significant dose of training from new franchisors.

You need to understand how much training you’re going to receive from your franchisor. In some systems — even some of the largest franchise systems — a franchisee can expect to receive only a few days of training, which may be limited to working in an operating location. The amount of classroom time and the training you might expect to receive in managing your business can be very limited in those systems.

In other franchise systems, franchisees may spend months in training. That training will include both classroom and on-the-job training and will extend into additional training at the franchisees’ locations before and during the opening of their business.

Don’t expect every franchisor to provide the same depth and length of training. In conducting your due diligence on a franchisor, it’s up to you to make certain that the training the franchisor provides is sufficient for you to operate your business. Talk to existing and experienced franchisees in the system before you sign the franchise agreement to determine whether the franchisor’s training program and training staff are able to deliver what you will need. Also ask them what other training they recommend you take that may be available from sources other than the franchisor.

Receiving effective ongoing training

In established franchise systems, in addition to support that comes from the franchisor’s headquarters, field support is often provided from a franchisor’s regional offices. Smaller and emerging franchise systems may only have their headquarters staff available to provide franchisees with local training support and ongoing management assistance.

With the rapid changes in products, services, competition, technology, and regulations, operating a franchise today requires constant evolution and improvement. Most franchisees can’t do that alone. You should not expect the franchise you invest in today to be the same exact business you will be operating next year, let alone in five years.

To help you as your business evolves, franchisees should expect their franchisor to provide more than initial training. Expect your franchisor to require you, your management team, and your training personnel to attend continuing training programs. Even when the training is only recommended and is not mandatory, smart franchisees will elect to consume every training program a franchisor has to offer. That is only being a smart businessperson — assuming your franchisor has a history of great training programs.

In some franchise systems, the franchisor’s field staff is the main delivery vehicle for new training. In addition to showing up at your business armed with operational, marketing, and organizational support, they also train the franchisee and their management team on the rollout of innovations, such as the preparation of new products or the operation of new equipment.

It’s the hallmark of a great franchisor to continually offer new products, updated research, state-of-the-art technology, better methods of customer service, and other improvements to continually enhance the brand in the marketplace. These changes keep a company more than one step ahead of the competition. In modern franchise systems, much of this continuing training on improvements to the brand will be provided not only by the franchisor’s field staff, but also through the franchisor’s intranet system online.