The biggest mistake many new franchisors make when structuring a business, is failing to model the business from the franchisee’s perspective.
The basic reality is that if the model doesn’t work from a franchisee’s perspective, the franchisor will fail. They will fail to attract interest from prospective franchisees, and certainly any franchisees that they do attract, will struggle to make a success of the business and not develop into the brand ambassadors that the franchisor needs to achieve continued growth and interest in the business.
So the first lesson is to build the franchise business from the ground up by beginning with the WIIFM factor (what’s in it for me) from the franchisee’s perspective. Building the business to ensure that healthy profits are available for the franchisee will ensure the business grows, and will encourage franchisees to make further investment in the business as well as encouraging new prospective franchisees to join the system and expand the group.
The second lesson is to provide clear direction and leadership for franchisees. This doesn’t mean that every decision a franchisor makes will be popular or correct, but franchisees expect the franchisor to be the captain, steer the ship and take them on a journey. One of the primary reasons most franchisees join a franchise is for the guidance and proven business systems the franchise offers. If they didn’t value these things they would have started their own business without the support of a franchise system. Franchisors need to clearly communicate the business strategy to their franchisees if they expect them to willingly follow their direction. The franchisor’s management team needs to be visible and accessible to the franchisees, and not just at the annual franchise conference! The management team should spend time in the field talking with franchisees in their own environment and working hand in hand with the field team to get a real perspective on what is happening at the frontline of the business. The franchisees’ willingness to work collaboratively with the franchisor’s management team will be greatly enhanced if they perceive management to be fully informed and willing to get out of their ivory tower and appreciate the real world.
This leads me to the third important lesson, which is listening to your franchisees. Franchisees are the frontline troops of the business, and every decision made by the franchisor will impact on the franchisee and their customers in some way. The most successful initiatives undertaken by a franchisor are those that involve and fully engage the franchisees in the decision making process. The use of an FAC or Franchise Advisory Council is one excellent way to get buy in to the decision making process.
A good example of where things can go wrong is the recent unrest among some QSR franchisees with the franchisor’s decision to launch a marketing price initiative. Whilst it is difficult sometimes to get unanimous support for initiatives from franchisees, a franchisor should question the value of any decisions that cause major disruption among the group. So the lesson here is involve the franchisees in the decision making process, consult with franchisees as much as possible, but in the end make a decision and go with it. Franchisees will be far more forgiving of a poor decision than dealing with a franchisor that is indecisive.
The fourth lesson is to be fair, consistent and equitable in your dealings with all franchisees.
Franchisees need to understand where they stand with the franchisor, and in the event that things go wrong during the relationship, they need to feel confident that the franchisor will act fairly and work with them to resolve the issue in a manner which is equitable for both parties.
Whilst a binding contract governs the conduct and obligations of both parties during the term of the franchise agreement, how each party conducts itself within these parameters will determine the reputation of the franchisor in the broader business sector. Inevitably, all franchisors will have some disagreements with franchisees during the term of their relationship, but it is how these issues are amicably resolved that will govern the franchisees long term feelings towards the franchisor, and determine whether the franchisee remains an ambassador for the brand.
Finally, the fifth lesson is that you have to have FUN!
Irrespective of the nature of the business, the franchisees must enjoy being involved in the business and of equal importance, the franchisor and their team must enjoy what they are doing! Most franchise agreements are for terms of five years or more which is a significant investment of time, so the business needs to fulfil more than just the financial goals of the franchisee and franchisor. A successful franchise should challenge both the franchisee and the franchisor to be the best they can be, which means that it provides an opportunity to mentor and grow the employees of the business, as well as providing the opportunity to develop and grow a brand and positive reputation for the business. A successful franchise should also be a positive role model for the franchise sector, giving confidence in franchising as a business format.
The bottom line of course, is that you must not only be good at what you do, but you must also enjoy doing it, otherwise you’re in the wrong role.