Countless books and articles have been written about the franchise industry and that trend continues. Topics run the gamut from starting up a new franchise, to buying a franchise, and everything in between. If you search the Internet, you’ll find lots of articles describing what makes for a successful franchisee, but few if any describing what makes for a successful franchisor. When it comes to what sets the top franchise companies apart from the rest of the pack, the determining factor is usually the number of units. However, as we’ve recently seen in the case of certain franchise programs, size doesn’t always relate to a good franchise program.
What is needed is a set of building blocks that can serve as the foundation for a successful franchise. Following these building blocks will result in a franchise company providing its franchisees the best opportunity for financial success.
Ten Building Blocks for a Successful Franchise System
1. Equitable franchisee ROI must be a priority
The structure of the franchise program both operationally and financially must provide franchisees an opportunity for success that does not require extraordinary performance. If the franchisees follow the program and do not earn an ROI commensurate with their original investment, then the franchise is flawed. There must be balance between the earnings of the franchisor and its franchisees.
2. If the franchise program is flawed, then it must be fixed
Franchisors should adjust a franchise program that isn’t “working.” There is no reason why a royalty or advertising fund contribution can’t be changed. If certain products or services aren’t successful then find alternatives. Franchisors can’t let ego get in the way of what’s best for the system.
3. The franchisor must control the franchise sales process and adhere to its franchisee profile
One of the most frequent reasons for franchisee failures is undercapitalization followed by a lack of skills needed to operate the franchise successfully. Establish a franchisee profile and if franchise candidates don’t fit this profile just say no! If the franchisor utilizes brokers than the franchisor must be in full control of the franchise sales process.
4. Total transparency with prospective franchisees
Provide prospective franchisees complete details’ regarding what is needed to be successful. Don’t sugarcoat the franchise opportunity. The franchisor sales staff should act as more consultant and less salesperson.
5. Franchisor leadership must be fully engaged in the franchise operation
Franchisor executive leadership must be totally involved in the franchise so that there is total awareness of successes and failures. There is no room for “surprises” when it comes to franchise operations. Whatever the forum, franchisee feedback must flow to franchisor leadership.
6. Franchisees must be included and their input solicited for important operational and marketing strategies
The franchisor must include its franchisees in important decisions. Any significant changes or alterations in the area of franchise operations, marketing or finance should involve the franchisees. This can be done using the FAC, advertising committee or other representative body.
7. New products and services must be tested, evaluated and measured by franchisees before introducing to the program
Test new products, services or equipment in select franchisee locations before introducing them. This process leads to an objective and credible result for the rest of the franchise network to decide upon.
8. Obtain financial results from franchisees on a regular basis
Despite certain requirements set forth in franchise agreements it’s been my experience that many franchisors fail to obtain financial results or reports from their franchisees on a regular basis. This lack of critical information prevents a franchisor from knowing which franchisees are profitable and which may be in trouble.
9. Uphold and Protect the integrity and standards of the franchise program
It’s critical that the franchisor uphold the standards of the franchise. The franchisees that follow the program deserve it and the customers that use the product or services provided by the franchisees are entitled to consistency. Franchisors that don’t protect the brand are not respected by their franchisees.
10. Invest in franchisee training and support
Top notch franchisors have viable and effective training programs. Training and support does not end with start-up franchisee training but rather is an ongoing activity. When franchise operations identify weaknesses in the execution of best franchise practices the training component should implement programs to address these problems.
In order to build a successful franchise organization franchisors’ must adhere to certain operational principles.
From “McDonald’s: Behind the Arches” by John Love:
“Kroc travelled light years ahead of other franchisors of his day, but not by disciplining franchisees. Instead, he used franchising to unleash the power of operators who have an ownership stake in their businesses. Though he demanded adherence to strict operating standards, he also freed franchisees to market their services as they saw fit, and he motivated them by giving them the opportunity – unheard of in franchising – to become rich before he became rich.”
© 2010 FranchiseKnowHow, LLC. Reprinted with permission.