There are a number of common mistakes franchisors and franchisees make in franchising. After many years of working with both parties, monitoring research findings and reviewing best practice franchising, we would like to share four key insights gained to help both franchisors and franchisees improve their performance.
1. Communication (or lack of) is the source of all franchise problems
No doubt you have heard it before, and will hear it again – communication is the source of all franchise problems. The majority of franchise conflict stems from communication breakdown in one form or another.
Both franchisors and franchisees need to be upfront and honest about expectations and outcomes from the very first interaction, through to business exit and beyond.
Transparency and timeliness are also important when it comes to communication, and will save headaches down the track as research shows unrealistic expectations is the quickest way to conflict in the franchise relationship.
Fortunately there are several technology platforms available to assist with the timely and effective communication between franchisors and franchisees.
2. Franchisors as well as franchisees need to invest in due diligence – and invest early
A dollar spent early can potentially save tens of thousands of dollars down the track, whether in regard to a business owner looking to franchise their business, or a franchisee looking to buy a franchise unit.
While franchisees often cop flack for poor due diligence, it is also documented that some franchisors need to invest more in due diligence when investigating how to franchise their business.
A number of franchisors set off as successful business owners, before a friend or family member suggests they grow their business through franchising.
The prospective franchisor then invests to get legal documentation set-up and the operations manual in place, before meandering along their franchising journey trying to figure the rest out as they go along.
By investing a little more in the start-up phase, and accessing the help that is readily available to assist new and emerging franchisors to accelerate their growth the right way, franchisors can set their franchise networks on a trajectory for success.
Ask any emerging franchisor how easy it is to amend the franchise agreement or adopt a new technology once you have a dozen franchisees on board – it’s a challenge and much simpler to invest in the right advice early.
And the same principle goes for franchisees. There are a number of resources available to help educate prospective franchisees about what to expect when entering franchise and how to properly assess franchise opportunities to minimise surprises down the track.
3. Benchmarking franchisee data is a powerful tool that needs to be embraced
Franchisee benchmarking and data collection tends to be underutilised by many franchisors, yet it has been employed by leading franchisors for many years.
Franchisees often resist the adoption of this new technology, feeling threatened and imagine it’s a ‘big brother’ scenario so the franchisor can extract more money or check for ‘skimming’. However the truth is, benchmarking franchisee business data is an incredibly powerful tool, for several reasons. These include:
- With data available franchise support professionals can interpret the data to help franchisees identify the areas where improvements can be made.
- By comparing franchisee performance to the performance of other franchisees in the group it’s easier to identify areas for improvement.
- Franchisee benchmarking enables franchise operations teams to see what little tweaks need to be made to unlock more profit, which benefits the franchisee.
- Franchisees use this data to do their own analysis, especially franchisees with a business background they see the value and leverage it for success.
It makes sense to benchmark successful franchisees in a group and mirror them. However, if there is no business intelligence available then how can others mirror their successful to achieve the same results?
One of the strengths of a franchise is the collective power, which includes collective business intelligence, yet this does not always get harnessed. Business owners need to remember why they joined a franchise, e.g. for the training, information and systems a franchisor provides, so why fight those elements?
And franchisors it’s easy to implement a franchisee benchmarking program and then leverage that investment to achieve better business results for your franchisees. It just takes the initial investment to get it set-up right.
4. Always keep focused on the end goal
Finally, whether you’re a franchisor or franchisee you should always have the end game in mind and be closely monitoring the business performance towards achieving these goals.
Do you want to sell the business in 5 years or expand into multiple units? Having a clear goal in the beginning will help you set targets, implement drivers and determine where to invest your time and resources to ensure you achieve the desired outcome.
If you need assistance making improvements to achieve your goals, we have a range of educational workshops and masterclasses available. The Franchisee Financial Essentials Workshop
is one that can help guide franchisees and franchise management professionals on how to interpret business P&Ls and balance sheets to improve profitability.
What are your key insights about franchising?
By sharing your insights we can help advance franchise best practice, so everyone in the sector benefits. Join the conversation now on Linked In