I find interesting articles as I continue to explore various business models in search of new opportunities for the Montessori movement. One such article is “Should I Franchise My Business”, by Mark Siebert and originally published in Successful Franchising. It is reprinted here with the permission of the author.
I have taken the liberty of changing a few select words, which has not significantly altered the meaning of the article, but has translated that meaning to more directly address Montessori schools and guides. Examples of substitutions are found following the article.
“Should I Franchsise My School”
Have a better mousetrap and scared to death that the world actually is beating a path to your door? People walking through your classroom with notepads and cameras? Trouble sleeping at night wondering who will knock off your classroom first? Certain that yours is the next Ray Kroc story, if only you could get the capital? Tired of reading about schools and thinking, “I have a better franchise concept than that school.”?
Maybe you, too, should consider franchising.
In general, schools franchise for one of three reasons: time, people, or money.
The primary barrier to expansion faced by today’s school administrator is capital. And franchising allows schools to expand without the risk of debt or the cost of equity. Since the franchisee (interested parents or guide) provides the initial investment at the school level, franchising allows for expansion with minimal capital. Moreover, since it is the franchisee (interested parents or guide), and not the franchisor (established school or professional organization), who signs leases and commits to various service contracts, franchising also allows for expansion with virtually no contingent liability, thus greatly reducing the risk to the franchisor (established school or professional organization).
Another barrier to expansion facing many of today’s schools is finding and retaining good guides & administrators. All too often, a school board spends months looking for and training a new guide or administrator only to see them leave — or worse yet, hired away by a competitor.
Franchising allows the school board to overcome many of these problems by substituting a motivated franchisee (interested parents or guide) for the guide or administrator. Interestingly enough, since the franchisee (interested parents or guide) has both an investment in the unit and a stake in the finances, performance will often improve. And since a franchisor’s (established school or professional organization) income is supplemented on the franchisee’s (interested parents or guide) gross budget, and not enrollment, monitoring school expenses becomes significantly less cumbersome.
Finally, opening a school takes time. Hunt for sites. Negotiate leases. Arrange for design and build-out. Secure financing. Hire and train staff. Purchase equipment and inventory. The end result is that the number of schools you can open in any given period of time is limited.
For schools with too little time (or too little staff), franchising is often the fastest way to grow. That’s because it is the franchisee (interested parents or guide) that performs most of these tasks. The franchisor (established school or professional organization) provides the guidance, of course, and the franchisee (interested parents or guide) does the legwork. Thus, franchising not only allows the franchisor (established school or professional organization) financial leverage, but it allows him to leverage his resources as well.
BUT IS MY SCHOOL “FRANCHISABLE?”
Franchising is a relatively flexible format, and just about any type of school can be franchised, provided it meets some basic characteristics:
- It needs to be credible. Does it have experienced management? A track-record over time? Is the concept (Montessori method) proven? Has it achieved good local press or public acclaim?
- It needs to be unique. Is it adequately differentiated from competitors? Is it marketable as a school opportunity? Does it have a sustainable competitive advantage? (Montessori method)
- It needs to be teachable. Are the systems in place? Are operating procedures documented? Could someone learn to operate the school in three months or less?
- And it needs to provide an adequate return. Not just profitability. If a school cannot generate a 15% – 20% return on investment after deducting a royalty (typically between 4% and 8%), it is going to have difficulty keeping franchisees (interested parents or guide) happy.
If your school meets these criteria, then it may be a good candidate for franchising.
THE PROCESS OF FRANCHISING
When a school makes a decision to franchise, it must first develop a sound plan for expansion. The plan must take into consideration the numerous issues confronting a new franchisor (established school or professional organization): speed of growth, territorial development, support services, staffing, and fee structure, to name several of the most important issues. Larger schools need to address more complex issues such as resource allocation issues. And obviously, this entire plan needs to be subjected to rigorous financial analysis and scrutiny to fine-tune the strategy for growth.
Once this plan is in place, the franchisor (established school or professional organization) needs the proper legal documentation. At a minimum, the franchisor (established school or professional organization) will need a franchise contract, an offering circular (as required under FTC Rule 436), and, depending on where franchises are being sold, state registrations. There are literally hundreds of different school issues that must be addressed in a good franchise agreement, and the decisions made regarding these issues will ultimately dictate the franchisor’s (established school or professional organization) success.
Quality control for a new franchisor (established school or professional organization) involves the development of highly developed systems. Generally, this translates into the development of a school manual. This manual must contain not only the systems used by the school, but also the checklists, policies, procedures, and tactics that will allow these systems to be uniformly enforced. Moreover, school manuals must be careful to avoid the creation of an agency and must also address issues that could create claims of negligence if the franchisor (established school or professional organization) is to maintain an effective shield from consumer liability.
Finally, the new franchisor (established school or professional organization) must develop the ability to market and sell franchises. That requires knowledge of how to attract the prospective buyer and the necessary materials (brochures, mini-brochures, videotapes, DVDs, etc.) that will help make the sale. Moreover, since the franchise sales process is highly regulated, the franchisor (established school or professional organization) needs to be educated in proper sales, disclosure, and compliance techniques.
Every new franchisor (established school or professional organization) quickly learns that when they turned to franchising they entered a completely different business. Regardless of how the franchisee (interested parents or guide) makes money, the franchisor (established school or professional organization) has two roles: selling franchises and servicing franchisees (interested parents or guide). And of the two, ensuring the success of the franchisee (interested parents or guide) is the most important.
Properly structured, franchising can allow small schools to more effectively compete with much larger competitors. It can also allow large schools to gain the advantages of highly motivated management while reducing overhead. As such, franchising is an option that more and more schools should explore.
The key to success in franchising is successful franchisees (interested parents or guide). Without successful franchisees (interested parents or guide), no franchise system will last. But if you can put the interests of your franchisee (interested parents or guide) first, those same franchisees (interested parents or guide) might help you become the next McDonald’s.
company = school
business = school
operation = classroom
business person = school administrator
business owner = school administrator
unit manager = guide
manager = guide
Mark Siebert is the CEO of the iFranchise Group, a management consulting firm specializing in franchising. During his 20+-year career, he has consulted with some of the world’s most prominent franchisors. He can be reached at 708-957-2300, via fax at 708-957-2395, or via e-mail at email@example.com.