Prospective franchisors regularly ask me about the most difficult aspect of franchising. Is it franchise sales? Ensuring franchisee success? Quality control?
And my answer always surprises them: “No, it’s turning down a cheque for R800 000.” This is because the single biggest mistake made by novice franchisors is to sell franchises to candidates who are not truly qualified.
The temptation is understandable. When a new franchisor begins to market franchises, it is likely to experience lower closing rates and longer sales cycles than it’s ever encountered before.
It feels like that first franchise sale will never take place. Doubt creeps in.
“Will I ever sell a franchise?” And then a prospect the franchisor secretly knows is marginal indicates they want to sign the franchise agreement and pay the initial fee.
So what do you do?
Before you take that money, remember you are in this for the long haul. And nothing is more important to your success than the success of your franchisees.
Don’t forget, marginal franchisees require much more support than their stronger counterparts. This means you’ll need to devote more resources to, and incur more costs for, supporting these franchisees, and they’ll generate lower-than-average revenues and pay less in royalties – if they pay them at all. Failed franchisees, of course, pay nothing.
Furthermore, they’re much more likely to bring litigation against their franchisor. And that’s just the start.
For franchisors that use a financial performance representation in their disclosure documents, a bad franchisee’s performance will drag down reported averages, making the disclosure less impressive. And, as every franchise salesperson will tell you, a system characterised by poor franchisee validation and failed locations will be harder, if not impossible, to sell.
Now, if a marginal candidate is your 25th franchisee, you can probably weather the storm, though I’m not advocating that you relax your standards as your franchise grows. But if this franchisee is among your first ten, you have a problem. And if they’re your first, you may be so distracted by their demands that you never get your franchise programme in line again. Moreover, your first franchisee will often set the tone for your entire franchise programme.
Suppose you accept a franchisee who’s unqualified, under-capitalised and lazy. Do you really think they will tell a prospective new franchisee:
“The franchisor was a great teacher, and the system is flawless. The only reason I failed is because I’m stupid, under-capitalised and lazy.”
Instead, your prospect is more likely apt to hear: “This was the worst decision I ever made. The business is failing. The franchisor was absolutely no help. This business is much harder than I ever thought it would be, and much more expensive. It looks like I’m going to lose everything. My wife has left me and taken the kids. I’m about to lose my home, and by this time next week, I’ll be living in a cardboard box.”
If your prospect talks to this franchisee, I can pretty much guarantee you’ll never hear from that person again, regardless of the quality of your marketing materials or how well your development staff prepares them for ‘the one or two franchisees who may not be doing so well.’
Consider, on the other hand, what will happen if they hear a chorus of: “This was the best decision I ever made. I didn’t have any experience and was worried at first, but the franchisor was great. They helped me every step of the way and were always there for me. My earnings are far better than what you’re looking for, and frankly, after only five years, I’m planning on buying a fifth franchise with the profits.”
Related: Alternatives To Franchising
Any worries your franchise sales person may have had about overcoming objections have just disappeared. Start preparing the paperwork!
Don’t just follow the money. Your first few franchises will set the tone of future success for your franchise.
Make Your Business A Good Neighbour
Take your business from invisible and struggling to a thriving neighbourhood landmark.
Is your business invisible to your customers? You may have fewer customers than you would like because your business does not seem relevant to those in your neighbourhood. This is an even bigger mistake than not being able to reach beyond your direct trading area.
To appeal to people – customers – you should also present your business as a group of people who help other people. This can be helping supply them with goods they need to buy, helping provide them with loans or simply being a reassuring and consistent presence in your neighbourhood.
As our Local Area Marketing Manager, Juan Botha, tells Cash Converters’ franchisees, this is about blending and fitting in like a neighbour. It is about give and take. And all of that adds up to community engagement.
Here are six of his top tips:
- Introduce the family: Cultivate a friendly, welcoming atmosphere in your shop or office. Introduce new staff to regular customers. Make sure that new customers can get to know staff through your in-store welcome boards and name badges.
- Find your partners: Identify the gatekeepers in your community and create partnerships with them. Think about approaching sports clubs, schools, church groups, sewing circles and book clubs.
- Snatch some selfies: If you have local celebrities as customers, take a selfie and post it on your social media: “Guess who came to say hello today . . .” Build relationships with local heroes and you will be able to call on them to host your in-house fun day or charity drive.
- Give back to business: Be involved in local business chambers and groupings as more than a participant. Show you are a good business neighbour by facilitating speed networking, hosting a speaker or sponsoring a sound system or catering for the next meeting.
- Adopt a cause: Identify a local charity and rally support for it.
- Help the community: Launch or participate in a community project – anything from an area clean-up or helping repaint school classrooms to planting trees or a community vegetable garden.
Building relationships helps you build your business’s reputation. That is because you can make people start to feel a certain way about your business and influence them positively towards you. Then, when they need something that you supply, you will be top of mind.
That neighbourhood warmth creates a sense of ownership. These prospective customers will already know how you can benefit their lives and so are more likely to become your regular customers.
They will be acting on the fact that people remember you for the experience you give them. As top American writer Maya Angelou said, their memories will be shaped by how you make them feel – not how or what you make them think. Relationships may be intangible but they can bring real value to your business.
Why Your Franchise Should Adopt A Shared Value Business Model
Stay ahead of the curve in an evolving business environment and unlock business growth by addressing social issues.
Have you heard the term ‘profit with purpose’ in your business ownership circles, but not sure how exactly it could be applied to your franchise? As a franchisor, entrenching this model into your core business strategy could see your current growth potential multiply – along with the communities that play a role in your business’ success.
“By leveraging resources, market access, scale and their capacity for innovation, businesses can advance and accelerate development while generating commercial returns.”– Serial entrepreneur Cindy Langeveld.
Considered the key to profit and progress, the shared value business model enables your franchise to go beyond just ticking the CSR box. Here’s why and how your franchise can start establishing partnerships for business growth:
Indicates your business has a conscience
Not only is a profit-first business approach is no longer viable for long-term business growth, the role of the consumer is becoming more prominent – and they are leaning towards buying from corporations that demonstrate conscientious business practices. Donating blankets to a charity is good, but how are you impacting those involved in the value chain that sustains your business?
Chicken franchise chain Nando’s, for example, creates shared value for the key players in the success of their brand – the small farmers in Southern Africa who farm their unique African Bird’s Eye Chillies used in the PERi-PERi flavour.
This farming initiative was started ten years ago in Mozambique with just six small farms. Today it includes 1400 farmers and produces in excess of 360 tonnes of chilli across Southern Africa.
Ensures your profit creates progress
While implementing shared value business models helps consumers see your business in a better light, it’s important for the initiatives that stem from it have a visible, positive and measurable impact on the communities concerned.
“I’ll never forget my first impact assessment. I sat with one of our farmers and a translator who told me about the impact growing chilli crops for Nando’s was having on his life and his community” recalls Sam Hirst, Nando’s PERi-PERi Farming Initiative Manager.
Nando’s has grown and sustained its network of farmers through learning and improving on the process, despite the challenges involved. Empowering the small farmer has required unprecedented effort and working very closely with farmers every day and every step of the way to overcome challenges such as generating working capital to set up the infrastructure the farmers needed, managing unpredictable weather conditions, and high transactional costs.
Creates sustainable partnerships
The purpose of implementing a shared value business model is so make a sustainable difference in both your business’ growth and that of the communities involved in your supply chain. For Nando’s the motivation was the potential impact the chilli farming could have in its communities.
The franchise has consequently invested in providing these farmers with the tools and skills for sustainable farming. Investing in technologies and various new processes has enabled Nando’s to secure prices and contracts directly with the farmers, avoiding potential negative economic impact on the farmers’ financial security.
3 Employment Best Practices To Apply In Your Franchise
Brand new to franchising? As a first-time franchisee, you may need some guidance on managing your recruitment processes within your business.
You’ve just hired your first few employees. Congratulations. As an owner-operator who is also new to business ownership, navigating the human resources aspect of your franchise may be daunting, especially when growth is imminent. Your franchisor offers support, but may not want to play a huge role in recruiting and managing your staff.
“Employee management and HR compliance is a tricky topic, especially with the relationship between franchisors and franchisees. Depending on what HR support the franchisor can and cannot provide, the franchisee may be on their own in this all-important area.” – Dean Haller, President and founder of HRSentry
This, however, doesn’t mean you’ll have to blindly search your way through human resources practices, hoping you’ll eventually get it right. Invest a little time into learning the basics, and you’ll make the best decisions until you can afford to hire an HR specialist – and pick up some expertise along the way.
1. Equip newcomers with the tools for success
Consider the type of information, tools and training your new recruits may need to function productively in their new work environment – and ensure they get it. “Studies indicate that most new employees decide whether to stay or leave a company within the first six months, so be sure to be welcoming early on to help them feel part of your team,” advises Haller.
“If you’re thoughtful of your employees’ new experience, they will become more productive and engaged, and thus, more likely to stay.”
Remember the first time you went through the manuals while familiarising yourself with the franchise concept? A new employees’ experience is similar as they have to take in a lot of new information while acquainting themselves with their new workspace, colleagues and systems. Make the on-boarding easier, by reasonably introducing each aspect during orientation and training.
2. Remain stern on performance standards
Once both parties are satisfied with the training and support offered, new staff should be made aware of expectations and receive continuous and constructive feedback on their performance based on these.
Should employees fail to meet their KPIs, it’s important you’re able to identify if your best efforts have failed and whether termination is an option. “Don’t procrastinate. Make sure all performance-related reasons are documented clearly,” says Haller. “Treat the person with dignity and respect –not only because it’s the right thing to do, but because it’s good business practice and can help you avoid any potential legal action against your business in the future.”
You can avoid this situation early on by hiring employees whose CVs not only meet your business’ operational needs, your company culture too.
3. Acknowledge and reward hard work
During key periods of business growth, it’s easy to overlook good performance. And even when you acknowledge your best employees, sometimes money in the bank isn’t as meaningful as creative tokens of appreciation.
“Get creative,” says Haller. “Provide flexible work schedules, interesting assignments, or a gift certificate to a great restaurant or spa. Be mindful that it’s costly to replace a good employee, so reward your employees with some kind of benefits if you can,” he adds.
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