One of the main reasons companies choose to franchise is the extremely low cost associated with aggressive growth. Since the franchisee typically supplies all the working capital and pays for the right to do so, a new franchisor need only invest in the appropriate legal documentation and an operations manual, and they’re ‘in the business’ of franchising.
Of course, successful franchisors know there’s much more to it than that – especially if they want to grow rapidly. These franchisors realise that getting into the business of franchising means getting into a completely new and separate business, and they must invest in that business accordingly.
It Starts with the Customer
The key to success in any franchise system is, and always will be, the success of the franchisees. With that in mind, one of the most important things for a new or established franchisor to do is to constantly strive to improve the value proposition at the consumer level.
It’s really pretty basic. The more you can do to improve the core value proposition to the consumer, the better each franchisee’s financial returns are likely to be. Successful franchisees need less in the way of support and pay the franchisor more in the way of royalties than their unsuccessful counterparts.
At the top of the list, from a consumer perspective, is brand advertising and marketing. The better the marketing, the better the franchisee’s profit from increased sales and, perhaps, margins. Additionally, the time you spend on marketing allows the franchisee to be free of these concerns, and more able to focus on the core issues of operations and customer service.
So, your first order of business may be to ensure that you have great consumer marketing materials. A qualified consumer advertising agency is often an important early ‘hire’ for a franchisor – especially if you have done much of the work in-house in the past. This agency will almost certainly be different from the agency that’s needed to help the franchisor sell franchises.
A good PR firm should also be on the fast-growing franchisor’s wish list. Most people don’t realise that 60% of the stories they read on a day-to-day basis are placed by PR firms – only about 40% are ‘hard news.’ And while PR is something that a newly hatched franchisor may initially try internally, an internal PR function will never be able to fully match a good PR firm in crafting the story angle and selling (and I do mean selling) the idea to writers and editors with whom they have a relationship.
Lastly, a franchisor should be careful to continue to invest in research and development. This could result in new products, new menu items, new services, new delivery methods, new advertising or new suppliers – but the fact is the world doesn’t stand still.
Help for the Franchisee
Beyond the consumer level, you can strengthen the franchise system and make the franchise offering more attractive by offering additional benefits to the franchisee.
One of the biggest benefits that can be offered to franchisees by the franchisor involves the use of the franchisor’s increased buying power. Even a small chain of stores can generally purchase more effectively than a single unit can, and larger chains can bring substantial volume discounts.
These discounts can be provided to the franchisee in a variety of means. Some franchisors choose to provide this benefit in the form of negotiated discounts, others in terms of rebates, but the value is unquestionable. In the case of one franchisor we know, the rebates from vendors have approached the average royalty paid by the franchisees. Now that’s a value proposition!
Other franchisors try to help their franchisees focus on either sales or daily operations by taking over the back room responsibilities that might otherwise occupy the franchisees’ time. For example, some franchisors will take responsibility for ad placement, Internet site management or accounts receivable collections.
Franchisors in the advertising or publication industries often assume responsibility for printing, editorial content and even ad design. These services free the franchisee from much of the day-to-day operational routines that their competitors labour under, allowing franchisees to spend more time in productive pursuits (eg sales).
Likewise, some franchisors provide services to the end consumer to improve sales. One example of this can be found in some direct sales franchisors which provide consumer financing to the customers of their franchisees – making the sale that much easier while creating a new profit centre.
And of course, anything you can do to set your franchise apart from the competition will help. Some of these differentiating factors might include strong internal communications programmes, franchisee intranets and the development of an active Franchise Advisory Council.
Improving Quality Control
Top franchisors know that brand maintenance means more than just marketing. It also means quality control.
The best franchisors typically have field support personnel whose responsibility is to visit franchisees in the field and determine if they’re living up to brand standards. And while you may be reluctant to exercise these rights aggressively, more mature franchisors know that often the biggest advocates of strict quality control are the best operators among their franchisees – who don’t want to see their brands undermined by a sub-par operator.
Beyond field support, the best franchisors are huge advocates of training. While training with early-stage franchisors can sometimes be informal, larger and faster-growing franchisors will take this a step or two further, by developing formal training programmes that lay out in exact detail the knowledge that must be learned by each franchisee and/or their personnel.
These training programmes are designed to provide knowledge in a consistent manner, specifying on an hour-by-hour basis exactly what will be taught and learned, then creating accountability for this learning through the use of various testing vehicles.
Ultimately, of course, it all reverts to your ability to structure a programme that delivers value. If franchisees succeed in delivering value to the customer and you succeed in delivering value to the franchisees, you’re much more likely to create the win-win-win relationship that’s the hallmark of successful franchising.
Sell Franchises Faster
Another way to make a franchise organisation stronger, of course, is to make it bigger and faster. Assuming that quality doesn’t suffer in the process of growing the company, faster growth can equate to increased economies of scale when it comes to advertising, public relations, purchasing and brand recognition.
The first thing you need to understand in this regard is that franchise growth is not something you ‘stumble into’ or something that happens by accident. Franchise growth, at least in the early stages, comes about almost exclusively by design. The four pillars of franchise growth are a strong concept, adequate marketing expenditures, professional marketing materials and competent sales people.
Start with the marketing materials. Ask good franchisors what business they’re in and most will tell you, ‘selling and servicing franchisees.’ Yet many of these same executives spend a small fortune on consumer marketing and give short shrift to the marketing of franchises.
A good brochure is an essential beginning, not only to sell the franchisee but also to help sell the franchisee’s banker, accountant, lawyer, spouse and his know-it-all Uncle Charlie. In fact, virtually all fast-growing franchisors produce a full-sized brochure (similar in size and quality to an annual report), perhaps a two- or three-fold flier (for in-store use, direct mailings and trade shows), and, of course, a state-of-the-art web page.
Get Your Franchise Running Smoothly – Even When You’re Not There
Does the thought of taking time off from your franchise outlet make you nervous? Then you have to learn to run your business instead of letting it run you.
“A sign of a successful business is one that can operate without your physical presence 24/7,” says Brad Sugars, start-up expert, author and founder of ActionCOACH. While your franchise systems and operations are designed to run smoothly and consistently, is your staff trained to be productive in your absence?
“Franchises are already by nature systematised operations, so it boils down to how you as a business owner hire and train people to get the necessary jobs done,” says Sugars.
If you know a sick day will cause havoc in your store, an assessment of how you’re running your business is needed. Are you really running a successful franchise if things fall about without your supervision? Take a step back and consider the following steps to manage your franchise without it controlling your life. Pretty soon you could book that vacation.
Determine your role in the franchise
Are you managing the franchise, taking orders, doing admin and handling every other aspect of the business? Then you’re not hiring the right people, because those roles should be filled by people who can be left to carry them out unsupervised.
“And if you don’t have the right people for the job then it might be time to start hiring, so you can free up your franchise’s most valuable resource – you,” says Pieter Scholtz, co-Master Licensee for ActionCOACH in Southern Africa.
“You need to get an idea of how you can hire people to take repetitive or administrative tasks away from you. Ask yourself: ‘Do I really need to be doing this?’” says Sugars. Your business cannot run optimally if you’re the single most-knowledgeable and capable person there.
Lead with clarity
You have long-term goals for your business, perhaps even acquiring more locations and running multiple units. While growth is good, you need to share the load and ensure everyone employed in your business is working towards the same goals, otherwise, it’ll be difficult to get there. Sugars suggests asking yourself the following:
- How will you make your vision a reality?
- What makes you different from other franchisees and business owners?
- What kind of team do you want to recruit and create?
- How does all of this deliver value to your customer?
Conveying your vision can help ensure employees know how to get to the end-goal faster and more efficiently.
Plan for long-term cash flow
Loyal customers ensure a constant flow of cash through the franchise and this requires exceptional service and the building of strong relationships. “Target your top-spending customers and establish a good relationship with them for long-term cash flow,” Sugars suggests.
Although the broader campaigns are covered by the marketing fee you’re paying to your franchisor, it’s wise to focus on your local’s tastes and suggestions when looking to deliver an experience worth returning for.
Are Your Employees On Board With Your Franchise’s Brand Promise?
You cannot run a successful franchise if your staff isn’t aligned to the brand’s values.
Are the people who work in your franchise outlet familiar with the franchise’s brand promise? As a franchisee, you’re required to deliver a uniform experience, so any customer who walks through your door feels like they’re at the same store the franchisor has across multiple locations. If your employees aren’t able to embody the franchise’s brand promise at every interaction, you have a challenge on hand.
“If your company’s brand promise is a warm and friendly atmosphere, you can’t deliver that if your employees aren’t warm and friendly,” says Robin William, Senior Practice Consultant at Gallup.
“Selecting the right employees is essential to providing the right brand service. Hiring people who can’t behave the way the brand wants them to will doom a service initiative.”
When employees know what’s expected of them, they’re able to keep the promise the franchise makes to customers – leading to higher customer and employee engagement, trust, and revenue.
More than a mission statement
Even if you’ve ensured every one of your staff members know the brand’s mission statement, how can you be sure they’re able to exemplify it in their behaviour every day? William suggests that you do the following:
- Create structures and mechanisms to consistently instil brand values in the franchise’s culture.
- Discuss brand behaviours daily.
- Demonstrate brand behaviours yourself every day.
- Praise the efforts of individuals who demonstrate brand behaviours.
- Hold employees accountable for not exhibiting brand behaviours.
Once you’ve clearly defined the right brand behaviours, it’ll be easier to have staff on board who deliver your franchisor’s brand promise.
Internalise the culture
Here’s a conundrum. Do your staff know what to do in a situation where a customer’s request might not be aligned with the brand promise, but the brand promise is always to deliver on customers’ requests? It’s a tricky situation, but if you’ve clearly articulated the promise, your staff will know how to “Behave the brand”, says William.
“Do whatever it takes to deliver on its brand promise. Whether it’s focusing quality, fast service, customer care, or low prices,” he says.
“Employees must execute brand and service behaviours consistently, and frequent reminders can help employees understand and internalise these behaviours.”
Empower your staff
Investing in your staff is the best way to encourage them to act in line with your brand’s promise. Once they understand why it’s important to act along the lines of your brand, they will feel empowered and motivated to do so.
Starbucks trains employees to memorise customers’ names and preferences in line with their promise of making everyone who visits their stores feel at home. Apple’s strategy of hiring nice, smart people who are passionate about service and the product aligns with the company’s belief that knowledge can be improved, but personality cannot.
How To Write An Operations Manual For Your Franchise
After establishing that your business is franchise material, ensure you’ve created a clear roadmap to success for your franchisees.
Documenting the replicability of your business is key to launching a viable franchise operation. Without manuals and instructions on how exactly you carried out your concept to its current level of success, your franchisees won’t accomplish the results you anticipate.
“Unless you can capture your business on paper, you cannot claim to have a business system to sell. Even detailed documentation may not be enough,” says Franchise Direct’s Lorraine Courtney.
“You may need to provide structured education programmes for new franchisees and their staff to teach them your business system.”
With the help of an experienced franchise consultant, you can devise the critical document that contains all the aspects of what make your brand successful.
Why you need a franchise operations manual
If you’re second-guessing the importance of crafting an operations manual, then you shouldn’t go into franchising. “Your operations manual is your go-to document for deciding who is responsible for what in any franchisor-franchisee relationship,” says Dani Peleva, Managing Director at online marketing agency, Local Fame.
According to Peleva, your manual should generally include each franchisee’s contractual obligations to you as well as the complete details on how you expect them to fulfil these obligations.
“On a basic level, it tells your franchisees what you expect of them. It gives them all the information that you’ve accumulated while operating your franchise,” says Peleva. After familiarising themselves with this manual, franchisees should know how the information can be used to build their own business up to be as successful as the original store.
What an operations manual will do for your business
When all your franchisees know what’s expected from them as they run their respective locations, the entire brand is then able to provide a cohesive, coherent customer experience, which is crucial to your success as a franchisor.
A good manual will also help you build better relationships with your franchisees as they won’t need to constantly contact you to clarify aspects of the business they’re not sure of. If they’re applying the information in the manual, they should know everything you know about how to run this type of business, meaning they’ll make good profits – for you and themselves.
“One of the steps most potential franchisees make before signing an agreement will be to contact your other franchisees. A strong manual will help your current franchisees return positive feedback,” adds Peleva.
How to decide which elements to include
Obligations detailed in your franchisee agreement will have to correspond with steps on how to achieve them in your franchise manual. As a new franchisor, you cannot be expected to have a manual as thick and wordy as your established counterparts.
Peleva suggests covering aspects such as:
- How to set up a franchisee location and start trading
- How daily operations will be conducted
- How development or expansion will be controlled.
“Your operations manual should always include as much detail as possible regarding operational practices that are to be followed,” says Peleva. “A simple list item that states ‘this obligation must be fulfilled’ is not helpful. Looks always to the ‘how’ of the issue and you’ll cover everything you need to.”
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