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Tuesday, June 21, 2016

How to manage your franchise business successfully

5 Experts share their tips and experience

You have probably heard and read numerous stories about the benefits of franchising. Usually, they are about how to successfully get under the umbrella of a bigger company, which allows you to reap the financial rewards of a well-known brand name.

But what about the hurdles involved in being a franchisor? What are the challenges and how can you overcome them?

We asked 5 successful franchisors to share their stories and picked the best tips.

Allen Fishman

Founder and Executive Chairman of The Alternative Board

When starting a franchise, the initial challenge is bringing on the first few franchisees. Business owners are typically skeptical of new franchises, and rightfully so. To overcome this obstacle, instead of franchising very quickly, I spent 5 years opening different offices in different cities, so we could refine TAB's system. We developed the tools for each office to succeed in its unique location. I'd recommend franchisors not start franchising until they have their system in place, with processes, protocols, and tools that are proven to succeed across the different places where they want to grow.

The key to running an efficient franchise is documentation, processes, protocols, and uniform offerings. At TAB, structure is everything. When we bring on new franchisees, their first 12 months are spent learning our coaching systems via tight protocol. More flexibility is allowed after the first 12 months, but only after they have a very clear picture of what they're supposed to be doing (and how they can succeed). Each new board is formed identically and is very process oriented.

Craig M. Morgan

Franchise attorney at Providence Law

The primary issue franchisors face when starting is developing the systems necessary to effectively monitor franchisees. Companies lacking adequate systems are unable to monitor the additional units. Issues such as consistency and correct royalty payment soon arise. Developing the infrastructure necessary to turn a small unit company into a multi-unit chain is a difficult task, separating the successful brands from the short-lived.

Franchisees should be monitored through a series of processes. Sales data should be reported in as near-time as possible, daily if not instantly. P&Ls should be reviewed quarterly. Field managers, working for corporate, should visit the individual units routinely, at least once a quarter (this, obviously assuming a brick and mortar establishment). In short, the more thorough the monitoring the more likely the success of the individual unit.

Alan Guinn

Managing Director of The Guinn Consultancy Group, Inc

My experience has been that the closer you can operate the franchisor and the franchisee financially, the better opportunity both have for success.  Operating with one set of identical or very similar reporting tools allows you to compare apples to apples as opposed to apples to oranges.  Parties are more open and conscientious when the books are open in a two way communications scenario, and it's easier to discuss opportunities and challenges faced than trying to position arguments or create issues from either side.

Troy Hazard

Shareholder and director of Poolwerx 

The typical challenges a franchisor faces in the early days is a lack of cash and resource. To attract franchisees you need to provide a service; marketing, field support, system manuals, buying power, induction training – the list goes on. When you are not generating any revenue from franchise fees that resource becomes expensive.

Poolwerx franchisees are all hooked into a central administration management software platform. This gives us real time view of how the business is tracking. Monitoring sales, stock control, and a range of other activity allows us to have a very clear picture on what we need to be addressing in the business on a day to day basis with all of our operators.

Brigida Aversa

Owner of Tiny Hoppers

It has always been important to us to maintain regular contact with our franchise owners and provide support wherever needed. We schedule weekly meetings with our franchisees, where we speak for 15 to 30 minutes about the status of the franchise and any problems they may be having. We also have managers for each district that visit each franchise once a month to check in on the site and provide feedback. This protects and maintains both the quality of the brand and the franchisee's investment.

In conclusion...

Going through all of the franchisors’ comments – and these are just the highlights, we’ve combed through many more for this post – certain patterns become obvious. Most franchisors stress the importance of having best practices in place and typical processes all franchisees follow. To make this happen specific franchise administration software is necessary to ensure reporting is adequate, communication is unhindered and information flows from one member of the partnership to the other as appropriate. And although all of the above seems like a complicated problem to solve, it certainly is addressable while at the same time hiding most of the complexity, leaving franchisors -and franchisees- able to focus on running their business more efficiently.

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