Beyond the First Step of Franchising

Extras you can offer to make your franchise system stronger and more attractive.


Beyond the First Step of Franchising

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.

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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.

Mark Siebert
About the Author
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.

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