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If I created a franchise system, it would be the Oz of the franchise world, and I would call it “Ozor”. Pursuing the yellow brick road to success, Ozor’s characteristics would reflect what is necessary to grow a concept, attract key franchisees, and provide franchisee support.
The Ozor concept would incorporate the following:
- Low capital investment;
- Strong unit economics;
- 30% or more return on invested capital;
- A concept appealing to the aging baby boomers;
and
- A “destination in and of itself” that
could go into diverse properties, such as life -
style centers and strip centers rather than a concept
solely dependent upon high - traffic locations.
Once the concept is created, Ozor would franchise its kingdom as follows:
1. Wait to franchise until Ozor had 20 to 25 proven locations in several market areas.
2. Develop a prototype building or leasehold that looked smart but was easy on cost.
3. Carefully assess the type of franchisee most suited for its concept. Ozor would not jump at the first financially capable franchisee, but would look for franchisees with compatible business skills.
4. Not offer large territories to franchisees in an area development agreement. Instead, Ozor would offer small territories and limited exclusivity. Ozor would be careful to reward motivated, successful franchisees without initially binding itself contractually to large development areas.
5. Slowly franchise the system by bringing in several key franchisees to test the system. Ozor would develop in contiguous areas that could be reasonably serviced.
6. Create a franchise document that is user-friendly to attract investment and financing for the franchise system. The UFOC would include the following:
a. Allow the franchise agreement to be used as collateral;
b. Allow for basic remarketing approaches by the franchisor in the case of a troubled situation;
c. Have exceptions to personal guaranties;
d. Recognize different types of investment groups and allow for creative structures; and
e. Allow entity franchising rather than only individual franchising.
7. Insist upon substantial equity investment and not allow franchisees to be overleveraged. The franchisees would be required to have a minimum of four months of working capital in the business.
8. Meet with financing groups to encourage investment in Ozor’s system.
9. Have reasonable earnings claims based on corporate store development.
10. Provide for graduated royalties to allow franchisees developing new areas to have royalty relief.
11. Provide for reasonable franchisee development schedules. Ozor would not overburden the franchisees with tough development schedules with triggers that result in the loss of development rights.
12. In addition to operations people, hire key marketing and product development people, as well as a director of franchise finance.
13. Review all of the franchisee’s corporate documents to ensure the documents contain a clear dispute resolution process among the owners of the franchisee. Additionally, Ozor would require that the franchisee’s corporate documents contain appropriate buy/sells, ways to provide continuity of ownership, and continued operation for franchisee companies.
14. Hold monthly franchisee conference calls to discuss development issues, trends, and franchisee incentives.
15. Be a great “band leader” through consistent promotion of the system and by helping to create a feeling that the franchisees are a part of the team.
16. If a franchisee is not following the system, the franchisees (not the franchisor) through a franchisee association, would put pressure on the non-complying franchisee. Legal remedies would be the last resort.
This is my Ozor franchise: a true system of cooperation and business flexibility in a company built to last. I hope some of these “Oz-ian” ideas will help you with your franchise company and lead you over the rainbow to a vibrant franchise of your own.
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