Gaining new clients and increasing business is very challenging and difficult for many small CPA firms. There are a number of ways in which CPAs market. Many of these methods are not very effective for providing for any significant, real long-term growth.
Traditionally, referral marketing has been the number one way for small CPA firms to gain new business. However, referrals can only take you so far, and will only yield a limited amount of growth in your practice.
One non-traditional growth method that CPAs may consider is franchising. What is a franchise? Franchising is a system for expanding a business and distributing goods and services â and an opportunity to operate a business under a recognized brand name. For example, Wendy's doesn't franchise hamburgers, and Midas doesn't franchise car mufflers; they franchise business systems that deliver hamburgers and mufflers to customers with consistency of the products, the services, and the customer experience.
A franchise occurs when a business (the franchisor) licenses its trade name (the brand) and its operating methods (its system of doing business) to a person or group (the franchisee) who agrees to operate according to the terms of a contract (the franchise agreement). The franchisor provides the franchisee with support and, in some cases, exercises some control over the way the franchisee operates under the brand.
In exchange, the franchisee usually pays the franchisor an initial fee (called a franchise fee) and a continuing fee (known as a royalty) for the use of the trade name and operating methods.
What kind of business lends itself to franchising? Most any business lends itself to franchising. Most restaurant concepts can be franchised. Companies in a stable or growing industry, unburdened by significant regulation, are franchisable. Companies in fragmented industries (that's an industry where most of the businesses are independent operators) that would benefit from branded consolidation are franchising candidates. That sounds a lot like the CPA profession. There are tens of thousands of CPA firms in this country. The vast majority of these firms are small, one or two owner, mom-and-pops. The CPA profession is a great example of an industry that would benefit tremendously from franchising.
There are advantages and disadvantages of franchise ownership. Before you consider whether you're cut out to become a franchisee, you need to understand some of the advantages and disadvantages of franchise ownership.
First, let's look at some of the advantages of franchising. When you franchise, you gain overall competitive benefits. The public has become accustomed to a certain level of quality and consistency from branded locations. What we mean by a branded location is a business that has the same name and decor and that the public thinks of as a chain.
Branding makes it easier to compete with the well-established, independent operators and even against other franchised and non-franchised chains. The advantage of brand recognition also extends to national accounts. They look at a system that has a network of locations and trust that each will operate at the same level of consistency and commitment. That type of system can service their needs wherever the franchise has a location.
In addition to the overall competitive benefits, there are ongoing benefits. In exchange for paying an ongoing royalty and other payments, franchisees benefit from periodic training programs and home office and field assistance. Often, through the franchise system's buying cooperatives, franchisees pay less for goods than their independent competitors do.
Franchisees benefit from the purchasing power that comes from joining with others. They benefit from professionally designed point-of-sale marketing material, advertising, grand opening programs, and other marketing materials that independents could never afford. Franchise systems can also afford to modernize through ongoing research and development and by test marketing new products and services and operating systems.
Each franchisee's spending power is combined with the spending power of all the other franchisees in the local market and in the rest of the system. This combined spending power, on advertising for example, often enables franchises to not only dominate local markets and the established independents but also to compete effectively against large, established chains.
Now, let's look at some of the disadvantages of franchising. Franchising is not right for every person, and it is important that you understand some of the disadvantages in a franchise relationship.
For some people, one of the most serious disadvantages to becoming a franchisee is loss of independence. If you want to make all your own decisions, franchising may be the wrong choice. Franchise systems are structured in such a way that the franchisor sets many of the rules.
Franchising's loss of independence, if taken to extremes, leads to a further disadvantage: over-dependence on the franchise system. Franchising succeeds when financial and emotional risk motivates franchisees. When they rely totally on the system for their success, their over-dependence can cause problems. Franchisees have to balance system restrictions with their personal ability to manage their own business.
Other franchisees can be a disadvantage to franchising. You've heard the old saying âone rotten apple can spoil the whole bunchâ. Franchisees are not only judged by their performance, they are judged by the performance of other franchisees. Poorly performing fellow franchisees or company-owned locations damage a franchisee's business even where they do not share the same market. If the hotel room is dirty in one location, or even worse, if the press were to report that the hotel had rodents, the public assumes the problem exists throughout the system.
In closing, a lot of preliminary steps go into making the decision to enter franchising. Each step is important, and each step takes time to complete. But the combined results are worth your efforts. You're investing in yourself, your future, and your level of satisfaction with your life. Taking the time on the front end of the process means achieving the best possible result when the moment arrives to fish or cut bait.
You have a lot of work to do and decisions to make before you select a franchise:
1. Decide whether you should become a franchisee or remain an independent business.
2. Learn as much as you can about what franchises are available. There are a few companies in the U.S. offering accounting franchises. There is only one franchisor in the U.S. offering franchises exclusively to CPAs, that being CPAYY. More information on CPAYY can be found online at their website, BestTaxProfessional.com/cpa-franchise.
3. Select which franchise is right for you.
4. Make sure that the company has a history of growth and is a good prospect for future growth.
5. Don't make a decision on any franchisor before you visit its headquarters and meet the support team.
6. Don't make an emotional decision. Ask questions and do your research.
7. Get a copy of the company's disclosure document and franchise agreement. Read it and make sure that you understand what you're being asked to sign.
8. Before you make a final decision, make sure that you have proper help from professionals (consultants and attorneys). Be certain that your advisors are experienced in franchising.
About Calvin Brown
Calvin Brown, a former practicing CPA turned franchisor, is the Founder and CEO of TAXATION CORPORATION, a tax preparation and accounting franchisor. The Company offers two separate franchises, CPAYY, a CPA-exclusive small business tax and accounting franchise, and NSTANT MONEY TAX SERVICE, a retail tax preparation franchise.
Learn more about CPAYY at BestTaxProfessional.com/cpa-franchise, and NSTANT MONEY TAX SERVICE at NstantMoney.com/tax-franchise.