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The Most Difficult Aspect Of Franchising

What is the toughest part of franchising a business? Simple, it’s saying no to money.

Mark Siebert

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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.

Related: Franchising Mistakes You Need To Avoid

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.

Related: Reverse Engineering Franchise Success

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.’

broken-franchise

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!

Choose wisely

Don’t just follow the money. Your first few franchises will set the tone of future success for your franchise.

As a franchise consultant since 1985, Mark Siebert founded the iFranchise Group, a franchise consulting firm, in 1999. During his career, Mark has personally assisted more than 30 Fortune 1000 companies and over 200 startup franchisors. He regularly conducts workshops and seminars on franchising around the world. For more than a decade, Mark also has been actively involved in assisting U.S. franchisors in expanding abroad. In 2001, he co-founded Franchise Investors Inc., an investment firm specializing in franchise companies. He's on the board of directors of the American Association of Franchisees and Dealers and the board of advisors to Connections for Community Ownership, which encourages minority business and job development through franchising.

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Franchisors

How Strong Is Your Franchise’s Quality Control?

Your key objective as a franchisor is ensuring every one of your locations maintain the same quality standards. Why?

Diana Albertyn

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If you’re concerned about brand consistency as your footprint grows and you acquire more franchisees, listen up. While growth is good, keeping tabs on the quality franchisees are providing versus your company-owned locations’ efforts is difficult, but not impossible.

“McDonald’s is among the world’s most quality-oriented brands, but the value proposition and price point aren’t appropriate for steak and lobster,” says Mark Siebert CEO and Senior Franchise Consultant at iFranchise Group, an author of Franchise Your Business, The Guide to Employing the Greatest Growth Strategy Ever.

Related: 3 Ways Communication Helps You Run Your Franchise Better

“There are, however, high-end franchise brands known for detailed attention to quality. Quality is not about what’s on the menu; it’s about consistency of the operation.”

Inconsistency ruins things

Many franchise brands risk failure by not establishing and maintaining quality for each outlet under the network’s guidelines. Regardless of whether a store is run by your company or a franchisee, if there’s glaring inconsistency in service and product quality between different locations, it’s likely to harm your brand’s reputation.

To establish the strength of your quality control standard, ask yourself the following questions:

1. Is your operational training procedure customisable?

Acquiring new franchisees is a chance to cement your training and quality processes and establish if these can be standardised, or if customisation is necessary.

“Training is equally as important as franchisee selection when it comes to maintaining the brand. The best franchisors routinely provide the most – and the most comprehensive – training to their franchisees,” says Siebert. “If standards aren’t rigorously enforced from day one, chances are these standards will continue to slip, and in the process, they’ll become more and more difficult to maintain.”

Because different locations present varying climates and market preferences, remember to customise your training materials based on respective franchisees’ markets, keeping in mind to remain consistent with your brand’s core identity.

2. Have you provided the right tools in the franchisee manual?

Duplicating your franchise’s success relies heavily on mapping out the roadmap for your franchisees and their employees to follow. The right tools will most likely yield the same results you have achieved.

“Documenting systems of operation lend a big hand in a quality control,” says Siebert. “A robust manual has multi-fold benefits and not only serves as a blueprint for operation, but as an ongoing piece of reference for even the most established franchisee, becoming the default go-to in most every scenario.”

Related: 3 Core Strategies For Building Successful Franchise Organisations

3. Do you understand the role of supporting each franchisee?

Whether you choose to conduct on-site field visits, offer master classes like Nando’s, or check in via email or phone monthly, the ultimate goal should be aiming for higher-quality and more profitable franchisees through ongoing support and reinforcement of brand standards.

Quality control is all about commitment. For a good franchisee, that commitment comes naturally. For the franchisor, it comes at a price. But franchisors who are willing to pay that price will find their ability to build a quality brand greatly enhanced,” says Siebert.

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Franchisors

Could Semi-Absentee Franchise Ownership Be For You?

Ready to become your own boss…for only 15 hours a week? Yes, you can become a franchisee while still clocking into work. Here’s how.

Diana Albertyn

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If you want to keep your current job while owning your own franchise, you may want to look into semi-absentee franchising.

“A semi-absentee model allows you to work on the franchise for ten to 15 hours per week while continuing full-time employment. Then when the time is right, you can exit your day job to focus entirely on your business,” explains Jim Judy, a consultant at Franchoice.

When you have a capable manager to oversee the daily operations of the business, you have the flexibility to work your full-time job and ownership of a fully-fledged business. But first, the following considerations need to be made:

Related: 3 Things You Should Consider Before Buying Your First Franchise

How will the decision affect your finances?

While being a semi-absentee franchise owner may require less from you in terms of time, the financial commitment is the same as investing in a franchise as an owner-operator. The decision to become a semi-absentee franchisee should not be made before examining your needs, goals and expectations of the business. Asking yourself the following:

  • Do I want to become a franchise empire builder?
  • Would I like to build numerous concepts?
  • How much capital do I have to invest?

Keep in mind that semi-absentee models may take longer to turn a stable profit if you’re not giving it your full attention due to spending less time working on the business.

“Semi-absentee business models are also expensive,” says Heather Rosen, president of FranNet of Virginia, a franchise advisory firm. “Because the owner must not only rent the space but hire a competent manager.”

Do you have the necessary skillset?

The key to managing a franchise while at you have a full-time corporate job is having impeccable people management skills. This is because having a manager run your business while you oversee them requires you to be comfortable with delegating and trusting that they will handle the day-to-day operations of your business.

Related: The Secret Sauce To Great Franchise Leadership

In addition to people skills, you may think certain talents are required before calling yourself a business owner, but each franchise is different.

“Some franchisees find that the available training and the business concept allows them to use their particular talents and skills to enter semi-absentee franchising without management or business ownership experience,” say experts at Franchise Direct.

Can you balance your schedule adequately?

Even if your plan is to one day leave your job and become an owner-operator of your franchise, while you’re still on your employer’s payroll, you will need to work out ways to handle your nine-to-five tasks with your business’ success. This is an important aspect of choosing the kind of franchise to purchase. While most semi-franchisee suitable options are in retail or the service industry, ensure you’re able to keep track of the business remotely and can periodically check in on how things are going.

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Franchisors

Insights On Recruitment That Could Affect Franchise Performance

A critical aspect of operating any successful franchise chain is getting the right franchisees on board.

Diana Albertyn

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You’re facing a lot of competition as the franchising industry continues to grow. International brands, local giants, and new innovative entrants to the market require you to step up your game. Not only are you geared for growth, but you need your new locations to compete with the best.

“One of the success factors for franchise systems is market penetration which is often achieved through expansion, by opening new stores with quality standards that match the brand – through franchisees,” says Ethel Nyembe, Head: Sales Optimisation and Planning at Standard Bank Group. “The wrong fit, however, can seriously set a franchise’s growth back many years or cause irreparable damage to its reputation.”

Related: 3 Things You Should Consider Before Buying Your First Franchise

Besides the challenge of trying to make your brand more appealing to franchisees in a competitive market, acquiring the right candidates to join your franchise requires the following:

1. Draw up (and adhere to) a checklist

Not all franchisees are created equal, and even a candidate with previous franchising experience may not be the right fit for your particular brand. Alternatively, you can decide to train a potential franchisee if you see potential.

When narrowing down your list of franchisee candidates, consider the importance of this:

  • How important is prior experience in terms of the franchisee’s ability to become profitable in their first year?
  • Does he or she have the necessary resources to train and support the franchise?

“You need to be clear about what you want; don’t compromise on your required skills, priority traits and qualifying requirements,” advises Nyembe. “There’s too much at stake financially and reputation-wise to settle for second best.”

2. Network in the right circles

Sometimes, if the talent doesn’t come to you, it’s beneficial to seek it out physically. Industry events are a great place to come into contact with people aiming to own and run their own franchise. If not, your presence at these functions will expose your brand to more potential people to do business with.

“During key annual industry conferences and trade shows (such as The International Franchise Expo), make a point to send attendees, to sponsor or to exhibit in order to increase brand visibility,” advises Nyembe. “Also consider participating in panel discussions.”

Related: (Infographic) 7 Digital Marketing Strategies For Franchises

3. Get to know your new brand representatives

While personality tests and numerous meetings can give you an idea of whether you’re choosing the right candidate, it’s important to consider taking a more advanced approach to franchisee recruitment.

“Selecting the right candidates to represent your brand is critical to your operation’s ongoing success,” says Sue McConnachie, Vice President, Quality Credit Services Limited. “These franchisees will be the face of your company and you need to trust that they will maintain your brand image.”

The selection of franchisees is crucial because, as it carries both long- and short-term implications, including:

  • Reducing franchisee failure and turnover, while increasing success and profitability
  • Protecting and developing your brand’s reputation
  • Focusing your resources on business planning and management instead of problem-solving
  • Decreasing exposure to legal implications when a franchisee’s conduct is negative or their franchise is unsuccessful
  • Minimising legal and collection claims against delinquent franchisees.

Selecting your next set of franchisees requires establishing a checklist before viewing any CVs, dedicating time to seek out potential franchisees, and ensure you’re choosing people who will take as much pride in your brand as you do.

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