Who is Raintree and What is a Franchise Development Organization?
You might be wondering, “Who is Raintree, and why does it matter to me? Raintree is an outsourced Franchise Development Organization (FDO) — otherwise known as a Franchise Sales Organization (FSO). The role of an FDO is to recruit Franchise Owners for franchisors.
By outsourcing the marketing and sales of franchises to an FDO, franchisors are able to focus all of their energy on existing franchise owners, to better ensure they are operating more efficiently, and ultimately are more profitable.
For this reason alone, you’ll often find some of the strongest franchise models right now happen to be affiliated with an FDO. But they’re also strong because they understand the necessity of only awarding franchises to candidates who fit the mold.
Good FDOs truly act as stewards of the franchise brands they represent. They work with the franchisor to develop the profile of an ideal franchise owner, and work diligently each day to filter through candidates, allowing only those who meet the requirements to progress through the franchise discovery process. Ultimately, they only present candidates to their franchisor partners who have first gone through weeks — and even months — of qualification and education.
Ultimately, Raintree is responsible for making sure that we uncover the necessary evidence that proves you possess all the skills, background and personality traits to match the franchise brand in our portfolio that you’re investigating.
And if you do, our subsequent responsibility is to ensure you are given all the information and education necessary to make an informed investment decision on your end.
In our early days as a franchise development organization, we were so excited about almost every franchise brand who inquired about partnering with us. They all looked so shiny. We partnered with and invested in brands that had amazing branding, strong marketing and where the Franchise Owners seemed to be happy. And sure, a few of these brands got really great traction and started growing around the country.
But many of our early franchise partnerships failed. Our strategy was uniform across all brands, but the results varied greatly. In the first few years, we slowly learned the hard lessons on what separates high-quality from low-quality franchise brands. We sustained losses totaling somewhere north of $1 million.
With lighter wallets, we sat wondering why. Soon enough, we’d come to learn an important lesson: It wasn’t the strategy that was broken. It was the quality of some brands.
In carefully going back and analyzing why some brands won big, and why some brands lost, we developed both a qualitative and quantitative assessment to help us better predict the future performance of the overall franchise model. These indicators now allow us to more precisely predict whether the franchise model is likely to become the next big brand in franchising.
Last year, I reviewed 219 applications from franchise brands looking to partner with Raintree — either for FDO representation, or investment into their brand.
Guess how many we approved?
One. That’s one (1) out of 219. The rest either didn’t like my terms, my Australian accent — or in the great majority of cases — they didn’t meet our very strict criteria that we use to determine if a brand is truly elite or not.
1. Strong Financials
Carefully review the Franchise Disclosure Document (FDD) and any franchise performance representations, and/or ensure you speak with Franchise Owners to understand their financials. Ultimately you’ll want to try to uncover the following economics:
- Consistent 2-3 year Return on Investment (ROI) achievement
- 20%+ EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization)
2. True Brand Differentiation / Competitive Advantage
Spend some time doing market research and pay close attention to shifting industries:
- Brand is in high demand
- Brand industry is not oversaturated
- Brand industry output is trending upwards, not downwards
- Major markets should allow for successful adoption of the model and brand
3. Franchise Owner Satisfaction (Validation)
Interview as many Franchise Owners as are willing to speak to you. You’ll want to understand three basic premises: Is the Franchise Owner profitable? Are they happy? And would they do it all over again given that choice?
- At least 30% of the Franchise Owners confirm their financial expectations have been surpassed and are thrilled with the economics of their business.
- At least 70% of the Franchise Owners interviewed confirmed they are happy with their financial performance and over experiences as franchise owners within that brand.
- No more than 20% of Franchise Owners interviewed confirm they regret the experience and would not do it again.
4. Strong Franchise Support Infrastructure
Brands that produce exceptional returns for their franchise owners always need exceptional leadership and support programs in place. Accordingly, keep an eye out for:
- Strong brand founders with leadership experience and preferably franchise leadership experience. In lieu of this we seek brands who show a willingness to hire seasoned talent from within the franchise industry.
- Brands must show robust processes and thoughtful planning in all major areas of the franchise owner support program — including site selection, local marketing, profit coaching, operational support and more.
5. Well Capitalized with a Sound Growth Strategy
You’ll want to ensure the brand is committed to long-term franchise growth, and financially capable of it.
- Healthy existing balance sheet
- Business line of credit established — ready if needed
- A franchise recruitment strategy that allows brands to reinvest franchise fee revenue back into the franchise support infrastructure
Our brand criteria is longer than what’s provided above. But the overall scoring mechanism is heavily weighted to the five listed criteria. I believe that if you can uncover a franchise opportunity that meets the criteria listed above, there’s a strong chance you’ve stumbled across a winner.
Indeed, this scoring mechanism has allowed us to represent and/or invest in some of the most sought-after franchise brands in the world.
(Here’s a taste of what it’s like to be a franchise owner in a Raintree brand):
Most unknowing Franchise Owners invest in brands that don’t encompass these traits. Indeed, brands of this quality are hard to find. But in going through the process with Raintree, you can be rest assured that all franchise options presented to you have already successfully gone through our vetting process.
Over the coming days and weeks, I’ll send you a number of articles designed to arm you with the knowledge you need to be able to better understand if the franchise(s) you’re investigating (whether they are Raintree-related or not) are of the type of quality that have allowed us to find significant success in franchise investments with over the past several years.
You’re about to embark on one of the most important journeys of your career, and your life. Be studious. Be smart. But most of all, enjoy it!
- Raintree is a franchise development organization (FDO)
- Raintree represents a collection of franchisors, franchise owners, and franchise development professionals
- Raintree connects top-tier emerging brands with top-tier franchise owners
- Raintree acts as the steward of each franchise they work with - filtering through thousands of candidates each year to award to the select few
- The Raintree team analyzes and evaluates roughly 200 emerging brands per year
- Evidence of strong unit level economics
- True brand differentiation
- Industries / segments trending upwards
- Enough available territory for you to grow into
- Strong franchise support infrastructure
- Well capitalized franchisors
- Happy and profitable franchise owners
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1040 S Gaylord St.
Denver CO 80209
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