Franchising is an appealing business model with plentiful advantages for prospective franchisees looking to get involved. Opening a new business, whether it be a franchise or independent business, can seem daunting. Franchising offers many advantages that simplify this process, making it easier for the business owner to achieve the career they desire. Franchising provides the advantage of a trademark, thorough business plan, initial training program, and national level marketing.
The advantage of working with trademarks
A key advantage of franchising is the benefit of operating a business with an established and publicly recognized trademark. One of the hardest aspects of opening an independent business is the establishment of a regular customer base. Customers are often reluctant to try goods or services that they do not easily recognize. That’s where many small business owners find great benefit in franchising, as they are able to rely on an existing trademark and brand name, encouraging a baseline stream of customers.
Understanding the basics behind trademark law and the steps needed to create a trademark can help new franchisees or small business owners develop and grow their business.
A key advantage of franchising is the benefit of operating with a RECOGNIZED trademark
What is a trademark?
A trademark is a symbol, word, slogan, or object that indicates the goods or services of a specific business or party. Trademarks serve an interesting purpose. In essence, trademarks allow customers to separate goods or services that they enjoy and recognize from those that they do not. These logos or symbols allow consumers to choose brands or services that they trust and respect.
There are different forms of symbols/slogans that can serve as a trademark. Many franchises have trade names. A trade name is a word or symbol that distinguishes a business from others. It is the legal name by which the business is known and recognized in contracts but also common, every-day interaction.
Another aspect is the trade dress, a less commonly known form of trademark. The trade dress is the collective elements that make up the look or feel of a service or business. The trade dress may refer to specific aspects of the business decor but it can also refer to the overall image.
Why do you need a trademark?
The trademark is a key marketing and advertising tool for any business, franchise or not. In the customer’s mind, trademarks create an almost immediate link between an image (the trademark) and the goods or service it provides. The Nike swoosh or check mark immediately conjures images of sneakers or sports equipment. Similarly, the gold “M” shaped arches almost instantly triggers the savory taste of McDonald’s french fries. Creating these triggers or links in a customer’s mind is an extremely advantageous tool. For this reason, franchisees see a quick customer base after opening their location; people are already familiar with the services or products.
All franchisees receive a license or rights to use the trademark of their new franchise. These rights are outlined in the franchise disclosure document. Most often, the franchisor has the power to administer the trademark license or even owns the trademark themselves. Whenever the franchisee utilizes the trademark in their business transactions or to market their goods/services, it is legally required that they obtain this license in order to avoid any conflict.
How do you claim a trademark?
In the US, trademark rights are gained as the trademark is used. Business owners gain trademark rights by simply using the trademark and these rights grow or build the more frequently the mark is used. There is no required legal paperwork so long as you are the first service or business to use that trademark. These are also called “common law rights.”
Although it is not mandatory that a business legally register their trademark to protect the trademark rights, federal registration on the Principal Register of the US Patent and Trademark Office (PTO) can be advantageous. Federal registration of a trademark guarantees exclusive validity and ownership. Not to mention, registration gives the franchisor ownership of the mark across the country even though it may only be used in a specific state at the time of registration.
Creating a business plan
Both franchisors and franchisees need to create thorough business plans in order to succeed with their business. It’s easy for a franchisee to be overwhelmed with all of the steps and procedures behind the process of opening a new franchise location. Along with all of the support systems and training manuals that the franchisor provides, a clear and step-by-step business plan further simplifies the process. Often, the franchisor will provide some sort of outline and plan that assists the franchisee after opening.
The thorough business plan is an advantage for the franchisee
There are many elements that a franchisee must consider while creating their business plan. The task may seem daunting but there are several primary elements that the franchise business plan must include in order to fully benefit the franchisee.
Company Run Down
This portion of the business plan includes a summary or overview of the company. This part of the business plan is similar to Item 1 of the FDD. It provides an overview of the business, including all of the services and goods it provides. This provides the franchisee with a clear idea of where they’re starting from.
Local Market Analysis
It is helpful that a franchisee analyze the area or territory where they plan to open their new location. What is the general demographic of the people living in the area? This analysis is extremely helpful for several reasons.
First, an analysis of the local market can help your location specify or tailor its marketing efforts. Certain types of people respond to certain types of marketing or advertising strategies. For instance, if you are opening a gym franchise and decide to temporarily offer free daycare to the new members. Yet, the demographic consists of mostly post-graduates, this marketing tactic may not be the most advantageous for the area.
Furthermore, an analysis of the local area can give the franchisee an idea of other businesses in the area. Some of these may be competitors, while others may be potential partners in marketing campaigns. Continuing with the example above, imagine a fitness franchise opens near a smoothie franchise. The two can coordinate marketing events or campaigns to mutually benefit.
This portion of the business plan works closely with the local market analysis; the two elements depend on one another. A thorough marketing plan depends on a developed local market analysis. Once that analysis is complete, the marketing plan can be tailored to attract the demographic of the area. It is crucial to consider the types of promotions or advertisements that the demographic would find appealing.
The franchisee’s selected management team plays a large role in the success of their franchise location. A crucial part of the business plan includes building a carefully picked team to help manage and run your location. While many franchisees choose to work hands-on at their location for a period of time after opening their franchise location, eventually the day-to-day operations will be handed over to this team.
Not surprisingly, this is where franchisees experience the most stress. Financing a franchise can be difficult if a step-by-step plan is not created. Much of the FDD provides the franchisee with a realistic idea of the different expenses associated with opening a new franchise location.
Getting help from the initial training program
The initial training program is a key benefit that the franchisee is given once they decide to open a franchise location. Franchisors provide extremely thorough training programs in order to introduce franchisees to all of the different aspects behind franchising. In fact, many franchisors even have their own “schools” of sorts. For instance, Kona Ice sends new franchisees to “Kona Kollege,” which is a multi-day training program. More often than not, these training programs take several days or weeks to fully immerse the franchisee in their new business.
An operational or training manual is the key behind a successful training program. Not only does the manual serve as the franchisee’s primary source of information, but the table of contents is typically included in the franchise’s Uniform Franchise Offering Circular. For these reasons, the manual should be prepared with time and as thoroughly as possible. However, the franchisor should make the manual as simple to understand as possible, considering future franchisees may not have much experience in the industry.
Every process of the development of a new franchise location must be outlined in the manual, whether it’s finding a location or obtaining a federal tax ID number. Legal issues such as wage and labor laws and sexual harassment should also be discussed within the manual in order to avoid future legal problems.
In addition, the daily operations of the business must be fully described. Most companies have day-to-day procedures involving hiring, performance standards, or scheduling. Even factors that may seem overly simple, such as job description, should be explicitly stated in the manual.
Local marketing and advertising rules are factors that should also be included in the operational manual.
The hands-on training portion of the initial training process gives the franchisee a good idea of the day-to-day feel of running a franchise. Typically various department heads give new franchisees a run-down of their department’s responsibilities.
The franchisee should consider the duration and location of the training program when considering investing in a franchise. Many franchisees have other obligations, whether they be familial or professional, that may conflict with a long and time-consuming training process. As the franchisee, think about whether you can commit a long time to the training process.
In addition to training for the franchisee, the employees of each location must also be provided with a training program. While the franchisor does not need hand-on inclusion in the staff training, they still must implement the training programs or systems for everyday staff members. Typically this form of training is implemented using an electronic system.
The trademark is the strongest asset in any franchisor or franchisees marketing tool belt. The use of a trademark can help build a strong brand, allowing for business recognition across different geographical locations. However, this means that the franchise must send consistent messages across the entire franchise, advertising consistent products and services. Therefore, any franchise marketing plan must be carefully outlined with precise rules for the use of the company trademark and any advertising ventures.
Creating a strong identity for products or services is a driving force behind the success of any franchise. A strong identity reassures customers that they will receive the same quality of product or service regardless of which franchise location they visit. Therefore, all franchisees must use the marks according to strict guidelines.
At the national level, marketing can include TV or radio commercials, internet advertising, social media, and other public relations ventures. National level marketing can be costly but a wide reach encourages brand recognition, resulting in brand equity.
Franchisors should provide franchisees with direct marketing guidelines or tasks.
Before any national level marketing campaign is released, the franchisor can benefit from researching their competition and defining the company’s target demographic. Identifying the competition and researching their marketing strategies can help to develop any franchisor’s advertising efforts. Consider the following questions while researching the competition:
- What services do my competitors offer and what is their pricing?
- Do their marketing strategies have any shortcomings?
- What methods do they use do advertise their company?
- What types of customers are they looking to attract?
- What needs do these customers have?
Any successful national marketing campaign will consider the needs and interests of their demographic. Considering the competition’s strategies, how can your franchise better appeal to these customers?
Hiring public relations employees or social media coordinators is never a good idea for a franchise interested in launching a national marketing campaign. Developed PR reps, that have previously worked in similar industries, typically come with a list of contacts or sources that can be used to grow your business. Similarly, social media coordinators fully understand the strategies behind social media marketing and can help a franchise reach a high following in a short period of time.