This is the home of the Franchising Best Practice 500 series of franchise best practices. Franchize Consultants is sharing and publishing these best practices weekly for building great franchisor and franchisee businesses. We know that better knowledge and execution of franchising best practices leads to bigger and more valuable franchisor and franchisee businesses.
About the Franchising Best Practice 500 Series
We have termed this series the Franchize Consultants’ Franchising Best Practice 500, because there really are that many Best Practice areas and aspects in franchising. In franchising there are best practices from a franchisor and franchisee point of view, and there are best practices from a pre-entry to an operating standpoint – from both perspectives. In turn, some best practices are very specific (e.g., ensure your royalty is optimal or have all franchisees operating to a Common Chart of Accounts) to more conceptual (e.g., demonstrate a leadership focus on improving franchisee profit). Such is the nature of franchising.
It is fair to say that the main focus of the Franchize Consultants’ Franchising Best Practice 500 will be from a franchisor point of view and in terms of what a franchisor could or should do. But the intention is that that is of good mutual benefit to franchisees. It might even, dare we say this, help some franchisees push their franchisors to improve a bit. Accordingly, we think any franchisees that view this series will quickly see that we have a strong focus on franchisee returns.
Franchising is an area where you never stop learning. Like anything, the more you learn about a particular area the more you typically realise you don’t know. Franchize Consultants is in it’s 30th year of operation and yet we continue to develop new franchising insights daily.
Whether you are a franchisor or a franchisee, a service provider, a student or have another interest in franchising, we hope you find the Franchize Consultants’ Franchising Best Practice 500 valuable.
Franchising Best Practice 500
Best Practice #30 Managing Franchisee Tenure
- Do you track and set targets for Franchisee Tenure?
- What areas are you working on (or could you work on) to improve Franchisee Tenure?
- How could improved Franchisee Tenure improve both franchisor and franchisee businesses?
Franchisee tenure is an important reflection of franchise system health and franchisee satisfaction. Long franchisee tenure can help drive a large and very productive and valuable franchising company. By contrast, short tenure can be problematic and involving – as demonstrated.
Average franchisee tenure is therefore an important KPI for franchisors to understand. If you are a franchisor, you should know your average franchisee tenure and track this over time. You should also set average franchisee tenure targets and identify actions to improve tenure (if that is an objective).
Read more on [Managing Franchisee Tenure]
Best Practice #29 Maintaining Franchising Focus
- What actions are you undertaking to ensure you maintain a focus on franchising developments and trends?
- How engaged are you with your franchise association, including attending regular events and conferences, and entering franchise awards?
- Do you regularly seek consulting or legal advice on your franchise structure and management, including how it can be optimised for the future?
Franchisors operate in two business arenas. First is the business that came first; namely the business associated with finding and satisfying customers – and all that entails from a resource, value proposition, profit formula and process standpoint. Second, is the business of franchising which, while integrating with, and enabling the first, introduces its own factors that need to be understood, configured, and executed to make the franchise system successful.
This Best Practice recognises the need for an active and consistent focus on franchising. Both the business and franchise domain aspects are subject to a changing environment. What once was progressive or forward thinking – may now be the norm or even outdated.
Read more on [Maintaining Franchising Focus]
Best Practice #28 Clear Field Visit Purpose
- What is the underlying purpose of your field visit programme?
- How well do your Field Manager roles and training align with your Field Visit Purpose?
- Do you have a Field Manager Toolbox, containing the right tools, to help your Field Managers achieve your underlying Field Visit Purpose?
Our research conducting comprehensive Franchise System Reviews and work with many franchisors suggests an often-great opportunity to clarify the purpose of a field visitation programme. In turn, this helps create a platform for a more effective field visit programme – for the benefit of franchisors, franchisees, and field managers (themselves).
Best Practice franchisors will have a very Clear Field Visit Purpose that can be articulated clearly to Field Managers and franchisees. That purpose maybe singular, or multi-faceted – like improving franchisee profit, capability, brand alignment, satisfaction and facilitating systemwide adaptations. In turn, such Clear Field Visit Purpose then helps set the scene for what is needed to deliver it – like Position Descriptions, field manager selection, training, field management tools, support, and so on.
Read more on [Clear Field Visit Purpose]
Best Practice #27 Updated Franchisee Profile
- What characteristics and attributes do you look for in potential franchisees?
- What are your negotiables and non-negotiables when it comes to selection?
- Are you taking forward learnings from your top and bottom franchisees?
Experienced franchisors know the difference between a ‘Good’ and ‘Great’ franchisee. More than 20 years ago, in my own research, a multi award-winning franchisor commented on the sometimes-stark performance differential – even when controlling for other relevant factors:
“The new owners took it from $660,000 to $1,890,000 in less than three years. We’ve got a number of examples like that; same site, same people (staff), same rent, same everything.”
Read more on [Updated Franchisee Profile]
Best Practice #26 Being Detailed and Specific – Leadership
- Do your franchisees regard you as being detailed and specific, versus vague and imprecise?
- Are you sufficiently detailed in your communications with franchisees?
- Are you frustrating your franchisees by making broad statements, lacking underlying detail and justification?
- Are you specific about what needs doing, and do you follow up accurately by doing what you said you would do?
A franchisor leader needs to take care to be sufficiently detailed and specific in their communications and interactions with franchisees, whether by email, face-to-face discussion, presentation, agreements or follow-up.
Read more on [Being Detailed and Specific – Leadership]
Best Practice #25 Long-Term Communication & Support Plan
- What does your franchisee communication and support plan look like?
- Do your franchisees know what to expect, including the timing of field visits, assessments, business reviews, planning requirements, etc?
- Do your team, including field managers, think sufficiently strategically about the bigger picture, when executing individual elements of support and communication?
Franchise systems need to have a franchisee communication and support plan that details what will happen when. The franchisee support and communication plan should cover a number of areas, like:
- Franchise conferences and regional meetings
- Field visits, ongoing training and business reviews
- Business and marketing planning and approval dates
- Audits, assessments and awards
- Franchise newsletters and updates
Read more on [Long-Term Communication & Support Plan]
Best Practice #24 Working With Valid Data
- Do your Field Managers have access to valid (and comparable) franchisee performance information increasingly needed in their roles as Business Advisors?
- Do you as a franchisor have sound information on which to build a business case for any proposed franchisee change initiatives?
- Are there areas of data you wish you had, whether to improve internal operations or help franchisees understand suggestions you make?
“Garbage in, garbage out” or ‘GIGO’ is the phrase and acronym originating in Computer Science to explain the only too-common phenomena of outputs or arguments being flawed if their original premise or data was wrong.
Best practice franchisors will ensure data collected for use is valid
Read more on [Working With Valid Data]
Best Practice #23 Franchise Support Office Structure Aligned
Is your franchisor team of a size capable of completing all necessary Franchise Support Office functions, activities and tasks?
Do you have an over-reliance on one person, who takes responsibility for almost all Franchise Support Office functions and tasks?
Has your organisation defined all of the key Franchise Support Office functions, activities and tasks essential to it, and what is required to execute them?
We know from our work planning, reviewing and improving many franchisor companies, of all different sizes and backgrounds, that there is often a lack of alignment between a franchisor’s situation and plans, and the structure and operations of the Franchise Support Office team.
Best practice is ensuring your Franchise Support Office Structure is aligned with your situation and strategy.
Read more on [Franchise Support Office Structure Aligned]
Best Practice #22 Field Managers as Business Consultants
What is the purpose for your Field Visits, and are you or your Field Managers capable of fulfilling all necessary roles to achieve it?
As a Field Manager, are you focused on driving improved franchisee performance and profit?
As a Field Manager, are you comfortable engaging with franchisees on their total business, including the preparation of a comprehensive [and ultimately franchisor approved] Franchisee Business Plan?
Field Managers need to wear many hats and fulfil multiple roles. We have for many years been helping franchisors transition their Field Visit Purpose, and Field Manager capability, toward adding a Business Consultants role, capable of engaging with, and positively influencing, franchisees at a ‘business’ level.
Read more on [Field Managers as Business Consultants]
Best Practice #21 Clear Field Visit Objectives
- If you are a Field Manager, do you know your specific objective/s for your visits in advance?
- Do your Field Visit objectives alter throughout the year, or to suit specific needs?
- Are Field Visit objectives aligned with the business strategy?
- If you manage multiple Field Managers, are their core objectives aligned to ensure the company is providing co-ordinated and consistent support?
Field Visits need to have clear objectives to maximise their potential and drive impactful outcomes. Clear objectives are also important with multiple Field Managers in order to deliver coordinated support and harness efficiencies (e.g., in preparation and approach).
Read more on [Clear Field Visit Objectives]
Best Practice #20 Measure and Manage Customer Satisfaction
Customer satisfaction is critical for business and franchise networks. The importance and logic could not be more clearly stated than by the late Sam Walton, founder of Walmart:
“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”
It follows that measuring customer satisfaction should be high-priority for franchisors. Understanding customer satisfaction at the franchisor or group level and the franchisee level should be of paramount importance. After all customer satisfaction is variously associated with outcomes (established by research) that matter. Examples are:
- Customer referrals
- Repeat business
- Customer frequency
- Customer spend, and
- Price sensitivity
Related, there are many important considerations, as described in the article.
Read more on [Measure and Manage Customer Satisfaction]
Best Practice #19 Franchise Technology Plan
Technology is such a vital and important area today with the power to inform, innovate, improve, power or even disrupt a business – as those in video rental, book retail and photo development businesses would attest.
Consider the following technology areas as examples: Accounting, E-Commerce, POS, Analytics, CRM, Apps, Benchmarking, Artificial Intelligence, Augmented Reality, Voice Recognition, Social Media, Phones, Computers/Tablets, Vehicles, Printing, Security and Search.
A Technology Plan and planning process plays a vital role in developing a sustainable franchise system – assisting great technology decisions, technology roadmaps, and change management plans – all of which needs to consider franchisee engagement and collaboration.
Read more on [Franchise Technology Plan]
Best Practice #18 Demonstrate Strategic Thinking Leadership Characteristic
While one could argue strategy and change (given today’s dynamic environment) have never been more important, research also tells us that one of the aspects attracting franchisees to buying a franchise is the concept of having an established and proven business model – encompassing direction for the future. Franchisees, in turn, sign long franchise agreements and it follows can rightly expect a franchisor to provide great strategic leadership.
We assert that franchisors would do well to foster their reputation for sound strategic thinking – adding to franchisee respect for the franchisor and, adaptability to future.
Read more on [Demonstrate Strategic Thinking Leadership Characteristic]
Best Practice #17 Economic Model Review
A periodic review of a franchise system’s economic model is important – to ensure it is optimal, for both franchisor and franchisees alike, for the future.
Some companies simply didn’t get it right to begin with.Put simply, many companies suffer from not conducting a Franchising Feasibility Assessment, including structured modelling, prior to franchising in the first place. For many companies, though, circumstances and strategies commonly change with the passage of time – either necessitating or making reviewing the economic model critical or more important.
Read more on [Economic Model Review]
Best Practice #16 Regular Performance Monitoring and Review Cycle
The important thing here is ensuring that there is a consistency to what is being measured and reviewed, by franchisees and the franchisor.
A best practice franchisor will tie a regular performance monitoring and review cycle into the field management and greater performance management cycle. In turn, this enables the franchisor to consistently understand (and act upon) their own levels of achievement to franchisor business plan objectives.
Read more on [Regular Performance Monitoring and Review Cycle]
Best Practice #15 Franchising Right From The Start
Franchisors, franchisees, and advisors need to recognise the important role good franchise system development plays in the ability to create and sustain franchisor and franchisee business value. The type of assessment and developments outlined above are critical to ensure franchising is indeed appropriate for the business, and, to ensure critical franchising decisions, structure and infrastructure are in place to govern and support the franchise network.
Read more on [Franchising Right From The Start]
Best Practise #14 Regular Action Planning
Action Plans, most certainly, need to be at the centre of the franchisor-franchisee relationship, documenting key actions needed on both sides. Both parties need to prioritise and make sure that important things that need to get done do get done.
For franchisors working with franchisees there can also be an important performance element to Regular Action Planning – whereby the franchisee may be formally obligated to complete any agreed Action Plan tasks.
Read more on [Regular Action Planning]
Best Practise #13 Good Franchisor Presentation Skills
Franchisor staff presentations, we believe, play an important role in achieving conference and important other objectives – like respect for franchisor leadership. And the better the staff presentation skills, the more likely those objectives will be met.
Read more on [Good Franchisor Presentation Skills]
Best Practise #12 Present and Discuss Benchmarking Results
This requires the franchisor, normally through their well-trained field managers, taking an active role in presenting and discussing benchmarking results with franchisees. Together then, both parties can identify trends, issues, areas of strength or weakness, consider improvement opportunities, priortise objectives, updates plans and make SMART actions for implementation.
Read more on [Present and Discuss Benchmarking Results]
Best Practise #11 Long-Term Brand Positioning
A clear brand positioning strategy is important for explaining to franchisees who the business is, what it is trying to achieve, what the brand elements are, how the brand is positioned in the market, and how everyone needs to market and operate to execute in unison to achieve the desired positioning.
Read more on [Long-Term Brand Positioning]
Best Practice #10: Join Your Franchise Association
As a franchisor you should be a member of your local Franchise Association, for the benefit of your franchisees, the franchising business model and, as a by-product, the long-term value and sustainability of your own business.
Read more on [joining your franchise association]
Best Practice #9: Group Marketing Fund Reporting
The group marketing fund report should include information that is meaningful to franchisees, both in terms of marketing fund sources of income and expenditure. A good group marketing report will provide a useful and insightful breakdown of actual marketing expenditure and, ideally measures of associated effectiveness.
Read more on [franchise group marketing fund reporting]
Best Practice #8: Comprehensive Franchisor Business Plan
A franchisor business is involved and complicated and the work is never totally done. A comprehensive Franchisor Business Plan is important to ensure there are clear objectives, covering impactful and important areas unique to a franchise system, along with prioritised areas of focus.
Read more on [comprehensive franchisor business plans]
Best Practice #7: Consistent Field Visit Visitation
Field visits are an important part of a franchisor’s communication, support and development plan. Within this plan, established franchisees should receive a consistent level of field visit visitation.
Read more on [field visit visitation]
Best Practice #6: Franchisee Business Planning
We regard franchisee business planning as a critical franchise system process and it is referenced in many Franchise Agreements. Yet, more franchisors could encourage comprehensive franchisee business planning with all of their franchisees. Franchisees must be receptive, too.
Read more on [franchisee business planning]
Best Practice #5: Comprehensive Franchise Advisory Council (FAC) Constitution
An FAC is an important communication and development mechanism and involves a lot of franchisor and representative franchisee effort. It therefore follows that it is worth ensuring that the basis for the FAC (i.e., the constitution) is structured in an optimal way for the business.
Read more on [comprehensive franchise advisory council constitutions]
Best Practice # 4: Regular Franchisee Satisfaction Surveys
Franchisors need to know how franchisees feel individually and collectively. This is important because franchisee satisfaction has the power to help build or damage a franchise system, depending on whether it is positive or negative. We would recommend an annual or biannual franchisee satisfaction survey conducted by an independent party.
Read more on [regular franchisee satisfaction surveys]
Best Practice # 3: A Common Chart of Accounts for Franchisees
Franchise systems need a common basis for understanding and comparing franchisee performance. A common Chart of Accounts is essential for these activities – and refers to having the same account breakdown for all revenue, expense, asset, liability and equity items. This practice should also extend to other financial and non-financial metrics of the particular franchise.
Read more on [common charts of accounts for franchisees]
Best Practice # 2: Up-to-date Franchise Manuals
Franchise Manuals help the transfer of a successful business model and the protection of a valuable brand. Franchise Manuals also help franchisees understand how they are to operate within the franchise system. They need to include information that is relevant and practical to franchisees and they need to be up-to-date.
Read more on [up-to-date franchise manuals]
Best Practice # 1: Leadership Focus on Franchisee Profit and Returns
The crux of the point here is that a franchisor needs to understand and help franchisees drive performance in a total sense; not just sales performance, but also profit performance – and profit in relation to their total investment.
Read more on [leadership and franchisee profit and returns]