The first-ever franchise of a brand was established in 1891. Today, there are over 770K franchise establishments in the US. This sector has a workforce of 8 million people, contributing $760 billion in revenues.
It’s hard for behemoths like McDonald’s or Burger King to survive without their franchise operations. This shows how important they become when you have to scale your business.
So, how can you build a great franchise business?
In this article, we’ll understand why franchising is important for your business’ growth and some tips for managing a franchise network.
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What is a franchise?
In franchise systems, a business allows its products and trademarks to be used by another business in exchange for a fee and royalties. The former is known as the franchisor and the latter is known as the franchisee.
There are two main kinds of franchise relationships — business format franchising and traditional franchising.
In business format franchises, there are training and guidelines for every aspect of the operations. Franchisees are expected to use the franchisor’s logos, products, packaging material, and designs in their setup. This is the reason why a Wendy’s burger tastes more or less the same across the US.
Traditional franchising arrangements are less stringent when it comes to business operations. The best example is gas stations like Shell or Chevron. They aren’t concerned about how you run the gas station as long as you sell their brand of gasoline. Traditional franchises are also seen in soft drinks, automobiles, and spare parts industries.
Why do you need franchises?
Many businesses face roadblocks even after establishing a few successful stores. It may be due to lack of investment, higher capital requirements, or regulatory hurdles. The easiest way for them to spread their wings is by franchising their business.
Here’s why franchising can be a great business strategy:
- It’s a low-risk option since you don’t have to pay rents, salaries, equipment costs, or marketing expenses
- There’s a regular stream of income in the form of royalties
- It’s the quickest way to establish yourself in newer markets
- You can start competing with the big players in your domain with lesser resources
- Since franchisees own their setup, you can expect a higher level of commitment from them
There are many more advantages of franchising your business. You can make the most of this system if you follow the best franchise business practices.
10 tips for effective franchise management
It all comes down to having good relationships and taking care of your franchisees. We have listed ten tips to become a great franchise business.
1. Communicate effectively
If you want your franchisees to emulate your success, there needs to be effective communication with them.
Have regular conversations with them. Break down your conversation into parts and dedicate time to each aspect of the business (marketing, human resources and legal). And finally, document everything you discuss. If you work with many franchisees across a vast area, have similar meetings with your regional managers.
Such discussions will establish trust between you and your franchisees. They’ll know that you have their back and share all their concerns with you.
2. Provide training
You have a vision for the business. But, do your franchisees share the same vision?
Training is the best way to bring the entire business network under an umbrella of shared values and goals. Whether it’s customer service, marketing, or operations, you could impart knowledge and make teams more efficient.
Thanks to the internet, training activities need not be long drawn. You can send across videos or hold virtual sessions to teach the franchisee teams. If you’re conducting on-site training, spend at least a week or so to help the team grasp important concepts. The best training programs are ongoing ones wherein franchisors train store employees for a few days every year.
Small business owners who take up a franchise can definitely benefit from such training activities.
3. Lend support
Starting a business might not be easy for all prospective franchisees.
They might need help with acquiring real estate, submitting franchise disclosure documents (FDD), or making business plans. Moreover, there are a number of state and federal laws that could overwhelm new business owners.
If you have franchisees across different time zones, set up a 24×7 helpdesk so that they can get support in real-time. Appoint relationship managers and ensure that their contact details are published across the network.
Additionally, create a system to deal with situations such as natural calamities or financial troubles. In such cases, you can release emergency funds to keep them afloat.
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Such measures are key for building a reliable and successful franchise network.
4. Conduct trials
The biggest advantage of having a widespread franchise network is you are free to experiment with new products in different markets.
Before going for a full-scale launch of new products, you can conduct beta tests in a few stores. This will tell you if your products need changes or if you need different variants. You can do the same for new brand policies, software and standard operating procedures.
5. Audit franchises
Your franchise strategy might be an excellent one, but it’s only effective when implemented properly. Audits will help you understand if this is being done.
Franchisees often see audits as a threat, so it becomes important to explain why they can help their business. Design an audit plan and share them with your franchise owners. You can decide which stores to visit based on objective parameters such as revenue, growth, or footfall.
You don’t have to visit every single franchise to conduct an audit. Instead, you can ask for balance sheets, survey the franchise’s employees, and check if the operations are seamless. If you find any irregularities, you can create a management plan to resolve the issues.
This is a vital part of your brand’s reputation management. If there’s any problem with a franchise, it ultimately becomes your company’s problem.
6. Have clear goals
You need to bring all the franchise owners on the same page by explicitly mentioning the goals of every step you take.
If a new product hits the shelves of your franchises, the franchise should know all about it. When you’re launching a new marketing campaign, explain the rationale behind it. If there is a change in the pricing structure, tell them what’s the expected impact on sales.
Synergy is key in this business model. As long as the entire network is kept in the loop about the latest happenings, no one can stop you from becoming a top player in your industry.
7. Recognize and reward
What’s the trick for keeping your franchise owners motivated? It’s simple — give them perks for good performance.
Keep a tab on the bottom line figures of all franchisees and reward the owners that perform well. The compensation need not be monetary. You can give the franchise team a free vacation, a club membership, or some gift hampers.
Make this a regular feature by hosting an annual convention to honor the best franchisees. This will bolster healthy competition among them.
8. Get feedback
Treat your franchise owners like one big family. Whether they’re showering bouquets or bricks, make yourself accessible and address their queries. Besides, since they deal with customers on a regular basis, they might have some good ideas.
It’s best to have a robust feedback and ideas system. Everyone can throw in their suggestions and you can implement the best ones of the lot.
Having a feedback system will also help you understand business issues. For instance, if many franchise owners in a region are complaining about their products going bad, there could be a supply chain issue.
9. Use tech solutions
You don’t have to be present everywhere physically or deal with administrative work manually.
Whether it’s a conference, audit, or troubleshooting session, they can be dealt with virtually. Besides, there are many franchise management software solutions in the market that ensure smoother operations. They help you deal with onboarding, training, marketing, and performance tracking.
Adopting such tech solutions will save your time so that you can focus on other important aspects of the business.
10. Keep innovating
After onboarding over 30,000 franchisees in their network, McDonald’s could have stuck to serving Big Macs and fries. Instead, they continue to grow by reducing overhead costs, introducing technological changes, and expanding their network.
There’s always a new franchise management system, a CRM, or invoicing software in the market. Whether it’s delivery times, supply chain, or marketing, try to optimize your existing processes. By adopting a continuous management strategy, you can establish a strong foothold in your industry.
Your franchisees are the face of your business. You can create a successful brand only if you manage to keep them happy. This requires meticulous planning, a structured workflow, and a dedicated franchise management system.
Here’s a round-up of everything we covered in this article.
- Use franchise management solutions to make your job easier
- Franchises can help you scale quickly without having to make major capital investments
- Communicating, training, and supporting your franchisees is essential to keep their morale high
- Conducting frequent trials and audits will ensure smoother operations across your franchisees
- Share all your big plans with the franchisees and get their feedback from time to time
- Incentivize the top-performing franchisees to get the best out of them and keep them motivated
- Adopt tech solutions and look to innovate your brand operations at all times
Want to improve communication with your franchisees? Listen to this episode of The Fitness Founders Podcast where Steve Pirt, the CEO of Friction Free Fitness, talks about franchisee management, industry playbooks, and more.