How can you best avoid franchisee fails in your network?

How can you keep troubled franchisees on track and stop them from sliding into business failure?

Starting in the recruitment process, following a system that involves other departments in the network boosts the chances of getting a well-aligned franchisee.

Some franchisors insist that the operations and training teams are involved in some of the interviews to ensure that franchisees brought into the system are trainable, will assimilate, can learn to operate a small business and will fit into the brand culture.

It’s easy for misunderstandings to arise in a situation where franchisees keen to sign up to a brand they love only hear what they want to in a conversation.

Of course it’s important that incoming franchisees really understand what they are getting into, what the franchisor expects, where responsibilities lie for both the franchisor and the franchisee, and how the franchisee might be able to get help in times of difficulty.

It is crucial franchisees can afford their monthly financial commitments: fees, leases, loans. Prohibitive rents set franchisees up to fail. And franchisees need an appropriate amount of working capital.

It is easy for a busy franchisee to get caught up in the day-to-day operations and not have time to step back and review the progression of the business so a business plan is an essential – and it needs to be referred to and updated as the business grows.

One trend among franchisors is for the business development, field or area managers to be focused on enhancing franchisee business skills and growth strategies rather than checking for brand compliance, which might be handled by external providers.

Observing compliance of course maintains standards for the brand and its service or products; it can also keep the business on track, and failing standards can be a warning sign that all is not well in a franchisee’s business.

Financial transparency across franchise networks is increasing, and access to franchisee financials can alert the support team that help is required to avoid a franchise failure.

Good franchisors will benchmark their franchisees’ performance and share the results of best practice. It pays to communicate with other franchisees in the network who can offer solutions to problems or suggest alternative ways to achieve results.

The benefits of a franchise network is access to an amazing resource – the knowledge and experience of other franchisees. Why not tap into this? Informal or formal mentoring, performance groups, regular regional meetings, workshops, a national conference all offer ways to share best practice and introduce well-researched ideas and techniques.

Franchisors can have a plan of action for how to deal with franchisees who have hit a bad patch in their business – whether this has come about for financial, personal or health reasons, or a downturn in the economy.

  • Is there a structured plan for franchisees to ask for help?
  • Do franchisees in the network understand what help is available?
  • Can franchisees seek assistance without feeling loss of dignity?

Franchising is often described as a partnership – franchisors need to ensure they have the tools to enact the partnering element in bad times as well as good.