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 #57 Leadership Commitment to Understanding the Franchisee Perspective
A recent meeting with a franchisor highlighted the sometimes-huge differences we see in leadership commitment to understanding the franchisee perspective. We are of the view it is best practice for a leader of a franchise system to be brave and upfront about understanding all perspectives and insights possible.
- Are you sufficiently genuinely open-minded and concerned about understanding franchisee views and issues?
- Do you actively solicit franchisee feedback and ideas?
- What improvements could you make to being more receptive and/or more effective in understanding the franchisee perspective?
Best Practice #56 Monitoring Total Systemwide Sales
This franchisor best practice of monitoring total franchise systemwide sales is simple and included for completeness. Please also compare with monitoring ‘comparable’ sales, a separate best practice. We suggest it important to consider both metrics as important franchisor key performance indicators (KPIs) – as each offers important, but different insights.
- Do you monitor systematically measure and monitor total systemwide sales?
- Are there opportunities for improving the value of insights you gather from this key performance indicator?
Read more on [Monitoring Total Systemwide Sales]
Best Practice #55 Monitoring Comparable Sales
Measuring and monitoring comparable sales is very important because it indicates the effectiveness of established units, thereby controlling for new unit openings and/or closures. Thus, increasing comparable sales is a sign of business effectiveness. Meanwhile, decreasing comparable sales is a sign of weakness, and may be an important warning signal.
Importantly, without monitoring comparable sales, a company might wrongly assume (due to growing new store openings) that sales per unit are increasing. Thus, many companies, and investment analysts, centre in on “comp” sales – as a critical KPI.
- Do you currently monitor comparable sales and, if so, on what basis?
- Are there improvements you can make to improve the value derived from measuring and monitoring comparable sales?
Read more on [Monitoring Comparable Sales]
Best Practice #54 Field Managers Skilled on Franchisee Business Planning
This best practice centres on the franchisee business planning component from a field manager perspective. Here we see field manager understanding and capability around franchisee business planning as an important success factor for achieving comprehensive franchisee business planning within a franchise network.
We know from experience that many franchisees are not receptive (or have resistance) to the idea of franchisee business planning, often because they do not understand its role and potential. It is imperative, therefore, that franchise companies looking to introduce the franchisee business planning can help build franchisee understanding and help facilitate planning as appropriate.
- How could better franchisee business planning improve your franchise system outcomes?
- How deeply do your field managers understand franchisee business planning?
- What opportunities are there to increase field manager capability to facilitate franchisee business planning?
Read more on [Field Managers Skilled on Franchisee Business Planning]
Best Practice #53 Franchisor Executives on Franchise Advisory Council
- Who are your franchisor FAC representatives?
- Are there franchisor FAC representative changes you should consider making?
This best practice speaks to the need for senior franchise executives to be involved in a Franchise Advisory Council (FAC). A FAC’s purpose will often include taking both franchisor and franchisee businesses forward which, in turn, encompasses the whole franchise system. It therefore follows that a FAC should include franchisor representatives that are sufficiently senior so as they can be impactful within the FAC environment.
Read more on [Franchisor Executives on Franchise Advisory Council]
Best Practice #52 Board Meeting Duration
Key here is ensuring adequate time is afforded to the many elements of governance. Our own research, involving a diverse sample of New Zealand franchisors and national master franchisees, indicated the most common duration for board meetings being one full day – however this ranged from a half day to two days. We also note other factors relevant to the board duration decision.
- Is your typical board meeting duration enough to execute your governance role and aligned business strategy?
- What current duration are your typical board meetings and does this need revising?
Read more on [Board Meeting Duration]
Best Practice #51 Crisis Management Plan
- Do you have an up-to-date Crisis Management Plan for your franchise system?
- Do you have procedures and regular training for franchisees, franchisee staff and franchise support office staff on how to deal with common crisis scenarios?History has demonstrated the importance of having an active Crisis Management Plan. Even the strongest and best managed franchising companies, as for any other form of business, could have a crisis hit at any time.
Read more on [Crisis Management Plan]
Best Practice #50 Require Potential Franchisee Advice
- Franchisors: Do you require potential franchisee seek both legal and accounting advice prior to signing the franchise agreement?
- Potential franchisees: Will you obtain both independent legal and accounting advice before committing to a franchise agreement?
Potential franchisee use of advisors will make for a more informed decision – and a more realistic alignment of expectation to performance. It will help the potential franchisee better understand the franchise system, including the various roles, responsibilities, restrictions and other agreement terms. It will also help the potential franchisee understand support levels, and what will be required to make the unit successful from a management perspective. All of this helps provide for a solid start point in the franchisee-franchisor relationship journey.
Read more on [Require Potential Franchisee Advice]
Best Practice #49 Franchisee Business Planning Template
- Do you have a required franchisee business planning template as part of your franchise system?
- When did you last update that template to encourage greater participation and more effective planning?
We regard franchisee business planning as a critical franchise system management process. We believe comprehensive franchisee business planning to be an important driver of both franchisee and, as a by-product, franchisor performance. Within this area we regard a Franchisee Business Planning Template that is bespoke to the business as an important best practice.
Read more on [Franchisee Business Planning Template]
Best Practice #48 Franchise Advisory Council Franchisee Representation
- How many franchisees do you have on your Franchise Advisory Council (FAC)?
- How representative are your franchisee FAC members?
- What future changes should you consider to ensure better franchisee FAC representation?
A Franchise Advisory Council should involve good franchisee representation.
That means that there should be a meaningful diversity of franchisee members on the council. In our view that diversity or representativeness will help facilitate achievement of the FAC purpose. Importantly also, we believe it will help franchisees (generally) see the FAC as a valid, productive and useful forum.
Read more on [Franchise Advisory Council Franchisee Representation]
Best Practice #47 Scientific Approach to Franchise Innovation
- What testing do you conduct to prove the business case for big systemwide changes?
- Do you sufficiently identify, specify, measure and analyse key change variables, including control factors, as part of your pilot testing programmes?
- Do franchisees perceive the proof you provide as valid?
Here we suggest a basic scientific approach to innovation that provides evidence for proposed changes. Franchisees own their own businesses and, while operating within a franchising framework, are often rightfully concerned about changes impacting on their strategy, processes and resources. Too often they will have witnessed, whether directly or indirectly, a change (e.g., to product/service range, marketing, equipment, technology etc) falling short of its potential and/or promises. All of this speaks to the need to develop a compelling case for change – ideally based on sound logic ‘and’ proof or evidence. In simple terms, this means demonstrating actual positive before and aftereffects and/or performance comparisons.
Read more on [Scientific Approach to Franchise Innovation]
Best Practice #46 Franchise Support Office Surveys
- How regularly do you survey your franchise support office staff?
- What insights do / could they provide to help improve over franchise system effectiveness, innovation and results?
It is good practice for a franchisor to conduct a regular and independent survey franchise support office staff satisfaction and engagement across a range of dimensions. We suggest franchise support office staff satisfaction surveys also probe for improvement suggestions and other insights. We also suggest and benchmark franchise support staff satisfaction and engagement levels over time and across companies.
Read more on [Franchise Support Office Staff Surveys]
Best Practice #45 Formalised Field Visit Output
- Do you have an appropriate and formalised output following franchisee field visits?
- Do your field visits complete with an agreed action plan and/or written report?
Field visits are too expensive and too important not to have a valuable outcome. In turn, an important aspect of ensuring a valuable outcome is the development of a formalised field visit output.
In general, the output of a field visit should encompass a completed and agreed action plan, as a minimum. In addition, we recommend that a written report is also developed, shared and ideally also confirmed as correct by the franchisee.
Read more on [Formalised Field Visit Output]
Best Practice #44 Franchise Governance Meeting Regularity
- How regular are your director or advisory board meetings?
- Are your meetings frequent enough to sufficiently address stakeholder needs and the long-term sustainability of your franchise system?
As we state in other governance-focused best practices, franchising by its very nature demands strong governance. All franchisor businesses require good governance, and more focused governance is typically needed to cope with the increasingly changing and complex environment their businesses face.
Within governance, meeting regularity speaks to a level of focus and resource on franchise system governance. A franchisor needs to ensure enough and relevant (which may mean frequent) time is dedicated to this task.
Read more on [Franchise Governance Meeting Regularity]
Best Practice #43 Potential Franchisee Focus on Profits and Return
- What is the total initial and ongoing investment associated with this franchise?
- What is the full range of profit and cashflow outcomes possible and likely?
- What is my profit and return objective for the business and what would I need to do to achieve it?
This best practice is for potential franchisees. If you are considering purchasing a franchise, then we suggest you place great focus on the potential returns of any franchise you consider.
It is important that you don’t get carried away thinking about the type of work of the franchise, without giving adequate attention to what the business will need in financial terms upfront – and what it could or should look like as it grows and develops. This is to help you understand the full range of potential and likely outcomes, and therefore attractiveness to you. By following this process you may also find some of the best returns available to be associated with franchises in industries you weren’t initially aware of and/or attracted to.
Read more on [Potential Franchisee Focus on Profit and Returns]
Best Practice #42 Structured Field Visit Agenda
Field visits should have a structured agenda that is known to both parties (i.e., franchisor and franchisee), and organised to create the most value from the field visit. It is important for field visits to be productive because both parties depend on it, and field visits are costly to resource from a franchisor and franchisee standpoint.
Regular field visits should at least include the following high-level types of areas within the agenda. But, of course, they can and should be a lot more prescriptive as well – depending on the field visit purpose and field visit objective.
Read more on [Structured Field Visit Agenda]
Best Practice #41 Review your Marketing Structure and Fees
- Has the marketing and communication landscape changed for your business?
- Has that impacted what you are or could / should be doing?
- Have you taken time to review your marketing structure and fees for the future?
The last 20 years have taught us many things. One is that the world of marketing and communication can be turned on its head. Think about the advent and resultant impact of email, commercial websites and search engines in the 1990s and Social Media platforms in the early to mid-2000s.
The changing landscape, including a decline traditional print, TV and radio spend means what might’ve been optimal in the mid-1990s is no longer optimal today. The reality is new media represents new opportunity opportunities (and threats) and evolving franchisor decisions need to be made on what to use, how to use and who (i.e., franchisor and/or franchisee) organises and implements what marketing.
Read more on [Review your Marketing Structure and Fees]
Best Practice #40 Governance Focus of the Future
- How much future focused governance time do you need to ensure your long-term franchise system sustainability?
- Does your governance resource dedicate enough time currently and, if not, what changes do you need to make?
Franchising boards, and/or associated governance structures, need to ensure that enough time is focused on the future, as opposed to the past and current issues and decisions. In simple terms – enough time needs to be allocated to being ‘on’ the future business rather than in the current or past.
It is natural that different companies will have different future focus time needs, given each company faces a unique operating context. Notwithstanding, all franchising companies need to invest the governance time needed to foster a sustainable franchise system, long-term.
Read more on [Governance Focus on the Future]
Best Practice #39 Use of Unannounced Field Visits
- Do you make use of unannounced field visits and, if so, for what purpose?
- Are any unannounced field visits unexpected in the context of your franchise system?
Unannounced field visits can be a valuable tool for both franchisor and franchisees, albeit franchisees are less likely to see the positive side of an unannounced visit when it involves them.
The key is that the unannounced field visit or a surprise field visit should not be an unexpected field visit, with the inference being that an unexpected unannounced field visit is one that is totally out of the ordinary within a particular franchise system
Read more on [Use of Unannounced Field Visits]
Best Practice #38 Review Franchise Employment Compliance Structure
- How confident are your directors in knowing your levels of employment compliance?
- What is your franchise system approach to ensuring employment compliance?
- What, if any, changes are needed to ensure better employment compliance (and/or provide greater confidence) into the future?
It is important franchisees comply with all laws. Compliance with employment law is particularly critical. Employment law is especially important because it involves people, one of the organisation’s most important assets – if not the most important asset. Employment law compliance also speaks to basic human rights, and ensuring people receive their legal entitlements (as a baseline).
Read more on [Review Franchise Employment Compliance Structure]
Best Practice #37 Prospective Franchisees Complete Pre-Entry Training
- Have you completed pre-entry training as part of your franchise purchase process?
- What questions will you ask of yourself, target franchisors (and their existing franchisees), and the advisors you may engage, as part of the due diligence and purchase process?
Anyone considering buying a franchise business should complete a pre-entry training programme, provided free of charge in many countries. In New Zealand, a free pre-entry training programme is provided online by the Franchise Association of New Zealand (FANZ).
Read more on [Prospective Franchisees Complete Pre-Entry Training]
Best Practice #36 Governance Structure Fit
- How would you describe your current governance structure?
- How optimal is that structure for your business in 1-3 years’ time?
Franchisors need a governance structure that befits their situation and plans. And franchisors need good governance, as 1) franchise companies are naturally complex businesses to lead and manage, and 2) all companies face an increasingly dynamic operating environment.
There is no one structure suited to all situations. And for literally all franchising companies, the governance structure will need to be planned and evolve overtime. After all, not all companies can afford to invest more than $200,000 per year in directors’ fees from the outset!
What is important here is a fit between the situation of the business and its governance structure – to ensure the franchise system has the best and most appropriate governance it can afford.
Read more on [Governance Structure Fit]
Best Practice #35 Formal Franchise Recruitment Process
- How rigid and formalised is your franchise recruitment process?
- When did you last review the steps, content and process of your franchise recruitment process?
Franchisors should have a formal franchise recruitment process, a process that is adhered to with all potential franchisee candidates. That doesn’t mean all candidates will pass through all phases of the process, but it does mean that key steps are practiced in the right sequence to ensure a robust recruitment process.
Read more on [Formal Franchise Recruitment Process]
Best Practice #34 Regular Access to Franchisee Financial Statements
- How regularly do you have access to franchisee financial statements, and on a comparable basis?
Franchisors need access to franchisee financials so they can understand how franchisees are doing and how the unit-level business model performs in different situations. Access to franchisee financials is also critical so that a franchisor can individualise and optimise support for individual franchisees. Other important reasons include an ability to monitor performance and set strategy. Access to franchisee financials is also valuable for field manager goal setting and effectiveness measurement.
Read more on [Regular Access to Franchisee Financial Statements]
Best Practice #33 Agreed Field Visit Agenda
- How is field visit agenda setting handled? Do your franchisees input sufficiently into the process? Do your field managers approach it similarly?
- Are your field visit agendas mutually agreed in advance?
Best practice field visit management means not only a structured agenda with clear objectives but an agenda that is mutually agreed by the field manager and franchisee in advance of a visit.
An agreed field visit agenda is beneficial and important for many simple reasons, not least:
- Field visits are for franchisees and the franchisor, so it is important franchisees have an opportunity to contribute to the agenda.
- Franchisees [quite obviously] appreciate knowing what the franchisor wants to talk about in advance, and vice versa.
- Both parties then have an opportunity to prepare properly for the field visit.
Read more on [Agreed Field Visit Agenda]
Best Practice #32 Enter Franchise Industry Awards
- Do you enter your category for Franchise Industry Awards? And do you encourage your Field Managers and franchisees to enter awards?
- Have you considered what benefits regular Franchise Industry Award entries could bring to your franchise system at a business and personal level?
- How could entering Franchise Industry Awards contribute to a Best Practice or High Performance Culture within your franchise system?
If you have a desire to be competitive in the market and with your franchising programme then you will certainly benefit from the process of entering and learning from franchising awards.
Many franchisors enter without winning first-time, but then go on to win the second time – having made significant business and sometimes performance advancements in between. Franchisors often extoll the learning value and describe it as a journey rather than a destination. The entering process can be time-consuming, and a little stressful, but is often considered incredibly valuable in retrospect.
Read more on [Enter Franchise Industry Awards]
Best Practice #31 Franchise System Reviews
A comprehensive franchise system review considers a multitude of elements of a franchise structure (e.g., franchise agreement elements, manuals, communication, field visits, unit-level business model, marketing, performance management, etc), along with the governance and management of key management processes. A comprehensive franchise system review also reviews performance (financial and non-financial, including franchisee satisfaction) at all levels, as well as harnessing the input and review of franchisee operations and perspectives. It is a substantial and important undertaking.
A regular and comprehensive franchise system review sets an important foundation from which improvements can be generated and addressed for the benefit of all key stakeholders.
Best practice, in our view, is undertaking a comprehensive franchise system review, every 5-8 years – with the regularity dependent on the situation.
Read more on [Franchise System Reviews]
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 [Join 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.
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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 [Consistent 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.
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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]
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