There are many factors that can cripple a great franchise system but with most problems there is a solution.
Does your business need to fix any of these so that you can attract better quality franchisees?
1. Lack of head office engagement
For customers and franchise buyers, an email or phone call may be the first interaction with head office. So if the silence is deafening, and queries go unanswered, the lack of response could. be damaging. Instigate a process to ensure the recruitment and support teams responsible for engaging with potential and existing franchisees are time-sensitive and responsive.
2. Significant level of disputes between franchisees and the franchisor
It pays to keep disputes to a minimum. Not only because dealing with issues before they become sources of dispute is good business practice and maintains a good relationship with franchisees but because franchise buyers doing their due diligence will be wary of investing in a franchise system with a history of disputes.
3. Poor level of franchisee retention
If a large number of franchisees want to leave the business rather than renew their agreements (or cut their terms short) then it’s time to look at why. Is there a common issue that is pushing franchisees to exit the business? Consider what the franchisor can do to correct this. A high turnover of franchise units will be a red flag to incoming investors.
4. Poor franchise support
Every franchise claims to offer good support for franchisees. But you may need to take off the rose-coloured glasses if your franchisees are not getting the service they believe they are paying for with their franchise and marketing levies.
Could your franchise model do with a refresh? Revisit your model to see if there are changes that could give franchisees a sustainable level of support at a good price.
5. Ongoing capital investment is unreasonably high
The question of ongoing capital investment has been included in the Franchising Code of Conduct and franchisees shouldn’t be getting any unpleasant financial surprises. So it’s worth considering what can be done to minimise the impact of capital expenditure and adjust costs in the supply chain.
6. Excessive rents
A return on investment that is near impossible in the face of competition helps no-one and as we saw with the collapse two years ago of the now-revived Pie Face, overpriced rentals can seriously damage franchisees and corporate business. An adjustment to the model to embrace rental trends might be in order.
When customer demand is on the increase it can be tempting to saturate the area with other franchised or company owned outlets. But are they all making money? If this is an ongoing policy, it might prove to be a short-term gain that needs re-considering.
Conducting a regular business health check can be one way to stay on top of an ever-changing marketplace, and if a common theme of complaints or concerns does crop up, review the issue swiftly.