Is Franchising The Right Model For The Growth of Your Business?

3rd July 2019 | Leigh Head | Corporate and Commercial, Franchising, Business

Franchising has been lauded as a tried and tested way of growing a business by using the entrepreneurial skills and capital (without incurring debt or interest charges) of others.  It has also sometimes misguidedly been promoted as a solution for... Read more

Franchising has been lauded as a tried and tested way of growing a business by using the entrepreneurial skills and capital (without incurring debt or interest charges) of others.  It has also sometimes misguidedly been promoted as a solution for ailing businesses. Leigh Head, gives his Top 10 Tips for any aspiring Franchisor and what they should look out for to grow a business.

1. Competition – Find out who is likely to be competing with you for franchisees. This means researching to see who is franchising not only a business which is similar to yours, but also what other franchises are available for sale at the sort of price you are proposing to charge for your franchise.  Not all prospective franchises are wedded to the idea of only selling goods or services of the type being provided by your franchise.  Many are concerned with starting their own business and approach franchising with an open mind, but with a good idea of what they can afford.  They will therefore be looking at franchises within their price range.

2. Franchisee selection – Establish and stick to your criteria for those whom you consider to be suited to operate your franchise – do not lower your standards in a moment of weakness. The temptation is very great to lower standards when recruiting the first few franchisees or when the growth in your network is not keeping pace with your expectations.  If you are forced to do so for sound commercial reasons, do so in the full knowledge that it is highly likely that these franchisees will become troublesome in the future.

3. The future – Ask yourself what are you doing now that will make your franchisees want to renew their franchise agreements when they expire.  Franchising is a long-term proposition and franchisors who do not look to the future will find that their franchise network will diminish in the longer term.

4. Two Businesses – As a franchisor you have two businesses.  The first consists of supplying goods or services to your customers via your company-owned units.  The second is that of franchising.  Do not forget that your franchisees are your customers and that your obligations as franchisor to your franchisees are different and a good deal more onerous than those to your customers.  Remember also that the customers of your franchisees are your customers too, albeit indirectly.

5. Management skills – Improve your management skills and those of your staff.  The management of a franchise network is an art – not a science.  The big challenge your staff (who will be employed) will face is managing franchisees who are not your employees, but independent business people in their own right.  Managing them as managers of a branch business will not bring the best out of your franchisees and will lead to confrontation.

6. Support – One of the key obligations of a franchisor is to support its franchisees to the extent that it is necessary to sustain them in their business.  To avoid disappointment and accusations that you fail to keep your promises, always under-promise and over-deliver.  In this way you will gain a reputation for doing what you promise and more often than not, more than what you promise.  Whatever you do, do not fail to deliver what you promise.

7. Exclusive Territories – If you are granting exclusive territories, ensure that you have the necessary protocols and mechanisms in place for dealing with turf wars which can break out amongst franchisees.

8. Performance Targets – If you impose minimum performance targets you must be able to justify their imposition and the basis upon which they are calculated.  Make sure that they are reasonably achievable and be prepared to impose such sanctions as you may have reserved in the event that they are not reached, otherwise you will lose credibility and have problems in enforcing targets when others fail to reach them.

9. Standards – Do not tolerate sub-standard franchisees – they affect the whole network and certainly their neighbouring franchisees.  Failure by a franchisee to comply with your “system” is a mortal sin.  Uniformity is the key.  The key to your success and that of your franchisees is uniformity of business practices, uniformity of marketing image and uniformity of the quality and manner in which products and services are delivered to customers.

10. Bad may be good – Remember that it does not necessarily follow that the most demanding franchisees are the worst franchisees. Often, it is the most demanding franchisees who are also the best in your network.  That may be a coincidence or it may be that it is precisely because they are demanding of themselves and good at what they do, that they are demanding.  Better to have a very demanding franchisee who is firing on all cylinders and growing his or her business like topsy, than to have a quiet, compliant franchisee who merely chugs along with a tendency to use you as a crutch.

Contact Leigh Head for more information.