Change is nothing new, and with change comes the need to conduct a Franchise Review and adapt.
McDonald’s and many other blockbusting franchise companies would simply not be around today had they not regularly reviewed and revised their business formats, applying best practice to achieve and maintain their market their leadership.
New Zealand franchise companies are no different and our experience suggests that many franchisors, along with their respective franchisees, have a lot of opportunity to improve their profits.
What are the indicators that a franchise review is needed?
There are several indicators a franchise review is needed. One is simply time. With time business models, franchise structures, knowledge and concepts of best practice just outdate.
A second indicator relates to physical performance and a situation where franchisees and/or the franchisor may be facing suboptimal / declining returns. Post GFC this was common, but it is also common in many sectors subject to increasing competition (including internet retail).
A third common area relates to franchisee sentiment, and factors associated with sentiment. Often companies with low franchisee satisfaction, or franchisee satisfaction that varies from very high to very low, is an indicator that something in the franchise system is less than optimal.
A fourth very common and important indicator is that many / selected elements of the franchise structure, including aspects like agreements and manuals are simply outdated, or perhaps never even sufficiently suited the business from the outset. This area is, unfortunately quite common, particularly in situations where the franchisor has taken a DIY approach to franchise system development.
And finally, by example, a fifth common indicator (and there are many others) is that the unit-level business model, operated by franchisees (and aligned company-units) is simply no longer relevant and therefore ill-adapted to current environment. This, in turn, can be the result of many factors.
What should be involved in a franchise review?
Franchise networks are complicated structures and management systems, and there is also an important franchise relationship to consider. It follows there are many elements to a franchise review and many possible areas of improvement. Accordingly it is important that any recommendations are considered for their importance and that there is prioritisation. The franchise system environment also commands that any review undertaken, if it is to be successful, both involves and takes both the franchisor and franchisees on a journey. After all, a franchise system requires both elements, long-term, and in our experience improvement opportunities always exist on both sides of the fence.
The franchise system review needs to consider the franchisee and franchisor perspective, including the structure, management and performance and outlook of each.
Franchize Consultants has been conducting comprehensive franchise system reviews, involving many different companies, for over a decade. The opportunities to improve all stakeholder returns are significant. The rationale, process and outcome potential is perhaps best put by one of our clients:
We came to them with a home grown franchise that was incorrectly structured, franchisees that were upset for various reasons and some wanting to break their agreements and leave. We asked them to conduct a review of the current situation and formulate a way of getting the franchise format and structure correct and get the business back to good health. The results was that a comprehensive franchise programme was put in place that included proper structuring and a good franchise support programme was installed to assist the franchisees to increase profits and business growth. Happy franchisees and growing franchisor company have been the results.
Question: Is it Time to Review Your Franchise System?
- Are you providing effective field visits?
- Are you monitoring key franchisee metrics?
- Do you have an appropriate focus on franchisee profit?
These are all pointers a Franchise Review might be valuable.
Contact us at firstname.lastname@example.org or 09 523 3858 for more information.