While the vast majority of young franchisors would be happy if they were to open 100 franchises, for others, nothing short of world domination will suffice.
If you’re someone with grander designs, you might well ask, “What does it take to become the next McDonald’s?”
Making it to the top of the world starts with the concept. The franchisor hoping to rule the world must start by breaking new ground and not following in the steps of others.That doesn’t mean your concept must be the first to the market – although that can certainly help.
Uniqueness may be as simple as a new recipe, a fresh marketing campaign, a proprietary product or a new twist on an old service. And ideally, your unique selling proposition involves staking out a competitive position against which your competitors cannot or will not respond.
2. Start With a Plan
Once you decide to franchise aggressively, you need to realise that success in franchising does not happen by accident. Success is designed from day one and happens because companies execute according to a plan.
Good planning starts with an understanding of the competitive landscape and bench-marking your closest competitors. Every franchisor has competitors and it is your job to know how your prospective franchisees view you in relation to them.
You need to properly position the offering, structure the business relationship and determine whom to hire and when. You should then subject these decisions to financial analysis to ensure you have the resources necessary to implement your well-laid plans.
3. Build in Value
In order to be the next McDonald’s, you need staying power. That means building a strong value proposition into the offering. Larger, better established franchisors will have substantial value in their brand and the years of advertising that went into creating it.
For newer franchisors, however, the brand itself, at least short-term, is likely to be a lesser part of the value proposition. You need to concentrate on other elements of the value proposition: research and development, purchasing, back room services and other pieces of ‘value’ that cannot be obtained by an independent business person.
4. Add Sizzle
Of course, if you want to be the next McDonald’s, you are going to have to start by selling a lot of franchises. And to do so, you are going to need to motivate people to investigate – and ultimately buy – your franchise.
Call it what you will – sizzle, sex appeal or pizzazz – you’ll need it to generate interest in your franchise if you are going to really hit it big as a franchisor. While sizzle is, at least in part, a function of the concept it surrounds, the best thing you can do is put together a first-rate franchise marketing plan.
5. Capital Makes the World Go Round
Of course, the best laid plans of mice and men often go awry, especially if you don’t have the capital to implement them. While franchising is a low-cost way of growing a business, it is certainly not a ‘no cost’ means of expansion.
You need to secure adequate capital to fund your initial legal and development costs. Beyond the basic start-up costs, you need to fund a budget for franchise marketing.
There is no worse mistake than taking a one metre leap across a two metre ditch. That means you must start by understanding your capital needs and then ensure this capital is available to you.
6. Select the Right Franchisees
Great franchise systems have great franchisees. Even the best franchise concept will fail if its franchisees are not capable of running a profitable business and delivering a positive experience to their customers. Selecting quality franchisees is most critical as you’re seeking to gain traction in the market. Financial capability is clearly a critical component to success, but other characteristics are equally important.
Franchisees must possess a passion for the brand they are representing, have the ability to lead their operations team and be willing to filter their own personal interests through those of the entire franchise system. An excellent franchisee will realise that profits can only be maximised if their interests are aligned with those of both the franchisor and other franchisees.
7. Make Controlling Quality ‘Job One’
Once you have found your franchisees, one of the most challenging aspects of hyper-growth is controlling quality. But to maintain your value proposition at the consumer level, protecting brand standards must be at the top of your priority list.
If you’re opening a handful of franchises over the course of a year, you can often maintain quality without a heroic effort. But the faster you choose to grow, the more important it is for you to develop the systems and tools necessary to ensure the consumer receives a consistent experience. Moreover, that means a commitment on the part of management to inculcate these standards within the organisation.
8. Make it Work
Of course, no matter how unique the idea, it still has to work. And ultimately, that means return on investment. Nothing sells franchises as fast, especially in today’s viral environment, as the reputation that a particular opportunity is a moneymaker. And nothing can derail a growth opportunity as fast as failing franchisees.
With that in mind, you need to work diligently to maximise the franchisee’s returns. Your first order of business should be to determine if there are ways in which the initial investment can be reduced. Not only does a lower investment improve returns from a percentage basis, but by lowering the bar, it also increases the number of franchisees in the investment pool.
At the same time, you must strive to aggressively manage the franchisee’s income statement. And while top line performance will have the most direct impact on your revenue stream, the expense side management will result in more successful franchisees.
9. Bring in the ‘A Team’
One of the most important aspects of any business is the development of the team responsible for growing it. Chances are, if you have built a successful concept and are about to franchise it aggressively, you’ll need an entirely new set of skills to make the transition from operator to franchisor.
Regardless of the business you plan to franchise, as a franchisor you will now be in the business of selling and supporting franchisees. And if it is your goal to expand aggressively, you will almost certainly be stepping outside of your comfort zone.
The easiest way to overcome this challenge is to bring in an experienced team. Often, the best route is to use a management recruiter who specialises in finding proven franchise talent.
10. Erect Barriers to Entry, and Plan for Change
Lastly, you must anticipate and adapt to changes in the competitive landscape over time. When McDonald’s first started franchising, it had a much more limited menu. It did not have Ronald McDonald. It did not have drive-thru windows. But it continued to adapt and thrive.
The more successful your company is, the more certain you can be that knockoffs will follow you into both the consumer and franchise marketplace. You must anticipate these newcomers and do everything you can early in the process to erect barriers to entry, to adapt to the new marketplace and to stay one step ahead of the competition.
Establishing barriers to entry can be as simple as being first to market and establishing a dominant brand position. Or it can be as complex as obtaining a business process patent. It can be a recipe, a product or an attitude. But if you have an undifferentiated product or service with low barriers to entry, your business will quickly become commoditised.
Of course, there are a thousand hurdles to overcome on the road to success, but with the right planning and enough time, your company could be the business that everyone emulates years from now.
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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