In 1891, the first brand-specific franchise ever was created. In the US, there are currently approximately 770K franchise businesses. 8 million people work in this industry, which generates $760 billion in sales.
Without their franchise operations, giants like McDonald’s or Burger King struggle to remain in business. This demonstrates how crucial they become when your firm must grow.
So how can you create a successful franchise business?
We’ll learn why franchising is crucial for the expansion of your company in this post, along with some advice for running a franchise network.
What is a franchise?
In franchise systems, a company grants another company permission to use its goods and trademarks in return for a fee and royalties. The first is referred to as the franchisor, and the second is referred to as the franchisee.
Franchise connections generally fall into one of two categories: business model franchising or traditional franchising.
Franchises with a business model include instructions and training for all aspects of the business. Franchisees must set up their businesses using the franchisor’s branding, goods, packaging, and designs. This explains why Wendy’s hamburgers generally have the same flavour throughout the US.
Traditional franchising agreements include fewer restrictions on how businesses must operate. The best illustration is a Shell or Chevron petrol station. As long as you sell their brand of fuel, they don’t care how you run the gas station. Additionally, the soft drink, automotive, and spare parts businesses use traditional franchises.
Why do you need franchises?
Even after opening a few profitable stores, many firms encounter obstacles. It can be as a result of regulatory obstacles, a lack of investment, or increasing capital requirements. They can expand their reach most easily by franchising their company.
Here are some reasons why franchising can be a successful business strategy:
- Given that you won’t have to spend money on rent, salaries, equipment, or promotion, it’s a low-risk choice.
- Royalties provide a consistent source of revenue.
- It is the easiest way to gain a foothold in more recent markets.
- You could start to compete with the top players in your business if you have fewer resources.
- Franchisees possess their setup, so you may anticipate a higher level of dedication from them.
The benefits of franchising your firm are numerous. If you adhere to the most outstanding franchise business procedures, you may maximize the potential of this system.
10 tips for effective franchise management
1. Communicate effectively
Effective communication with your franchisees is essential if you want them to replicate your success.
Have conversations with them frequently. Partition your talk so that you can spend time on each business-related topic (marketing, human resources, and legal). Finally, make sure to write down what you say. Have comparable meetings with your regional managers if you collaborate with numerous franchisees over a large area.
Trust will be built between you and your franchisees through such conversations. They’ll confide in you with all their worries because they know you have their back.
2. Provide training
You have a plan for the company. Do your franchisees, however, have the same outlook?
The best method to unite the entire corporate network around common values and objectives is through training. You might transmit knowledge and increase team productivity in customer service, marketing, or operations.
Training exercises no longer need to be drawn out thanks to the internet. To instruct the franchisee teams, you can send them films or host online training sessions. If you’re teaching the team on-site, give them at least a week or so to assist them to understand key ideas. The most effective training programs are those that are ongoing and involve franchisors instructing store staff for a few days each year.
Franchisees of small businesses can undoubtedly gain from such training initiatives.
3. Lend support
Some potential franchisees can find it difficult to launch their firm.
They can want assistance with submitting franchise disclosure forms (FDD), buying real estate, or creating business strategies. Additionally, there are several state and federal requirements that could be too much for young business owners to handle.
Create a 24-hour help desk if you have franchisees in various time zones so they may receive support in real-time. Appoint relationship managers and make sure that the network has access to their contact information.
Make a method to deal with other problems as well, such as financial difficulties or natural disasters. You can disburse emergency funding in these circumstances to keep them afloat.
Such steps are essential for creating a dependable and effective franchise network.
4. Conduct trials
The freedom to test out new items in various markets is the largest benefit of having a large franchise network.
You can run beta tests in a few stores prior to launching new products on a large scale. This will indicate whether your products need modifications or new variations. For new brand guidelines, software, and standard operating procedures, you can follow the same steps.
5. Audit franchises
Even though your franchise strategy is great, it will only work if it is well carried out. You can determine if this is being done through audits.
It is crucial to explain how audits might benefit a franchisee’s business because they frequently perceive them as a threat. Create an audit plan, then present it to your franchisees. Based on objective criteria like income, growth, or foot traffic, you can choose which stores to visit.
To conduct an audit, you don’t have to go to every single franchise location. Instead, you can request balance sheets, interview the franchise’s staff, and examine how smoothly business is conducted. You can make a management plan to address any abnormalities you discover.
This is an essential component of managing the reputation of your brand. Any issues with a franchise ultimately fall under the purview of your business.
6. Have clear goals
By clearly outlining the purposes of each action, you can get all the franchise owners on the same page.
The franchise should be informed immediately if a new product enters the market at one of your outlets. Explain the reasoning behind a new marketing initiative when you introduce it. Inform them of the anticipated effects on sales if the price structure changes.
The basis of this business concept is synergy. No one can stop you from rising to the top of your industry as long as the entire network is constantly informed of the most recent developments.
7. Recognize and reward
What is the secret to retaining the motivation of your franchise owners? Give them rewards for good work; it’s that easy.
Keep track of all franchisees’ profit margins and recognize and reward successful business owners. The payment is not required as compensation. The franchise team can receive a complimentary vacation, a club membership, or some gift baskets.
By holding an annual conference to recognize the top franchisees, you can make this a recurring event. This will encourage friendly competition among them.
8. Get feedback
Treat the franchisees like one big family. Make yourself available to them, whether they are throwing bricks at you or bouquets, and respond to their questions. Additionally, as they frequently interact with clients, they might have some useful insights.
A strong feedback and idea mechanism is ideal. Everyone is welcome to offer suggestions, and you can use the ones that work the best.
A feedback system can also aid you in comprehending business-related concerns. A supply chain issue might exist, for instance, if numerous franchise owners in a region complain about their products spoiling.
9. Use tech solutions
You don’t have to physically be present everywhere or deal with administrative tasks by hand.
Any meeting, audit, or problem-solving session can be conducted virtually. Additionally, there are several software programs on the market for franchise administration that guarantee more efficient operations. You may manage onboarding, training, marketing, and performance tracking with their assistance.
By utilizing such technological solutions, you can focus on other crucial facets of the company while saving time.
10. Keep innovating
McDonald’s could have continued to sell Big Macs and fries after enrolling more than 30,000 franchisees into its network. Instead, they keep expanding through lower overhead expenses, technical advancements, and network expansion.
A new franchise management system, CRM, or invoicing software is always available on the market. Try to optimize your current procedures, whether it be for supply chain, marketing, or delivery timeframes. You may build a solid foundation for yourself in your sector by implementing a continuous management plan.
In Summary
The public face of your company is your franchisees. Only if you can keep them satisfied will you be able to build a profitable brand. This calls for careful preparation, a well-organized workflow, and a focused franchise management system.
- A summary of everything we talked about in this essay is provided here.
- Use franchise management tools to simplify your work.
- Franchises allow you to expand swiftly without needing to make significant financial commitments.
- Maintaining the morale of your franchisees requires regular communication, training, and assistance.
- Regular trials and audits will ensure more efficient operations among your franchisees.
- Share all of your ambitious objectives with the franchisees, and periodically solicit their input.
- To motivate and elicit the finest performance from your top-performing franchisees, provide them with incentives.
- Adopt technological solutions and continuously seek to innovate your brand’s operations.
