Getting your franchise structure right from the outset is absolutely vital. Decisions you made at the beginning go on to influence both your (as a franchisor) and your franchisee’s capacity for growth, development and long term prospects for survival and success.
Every franchise system encompasses a number of key structural components, each of which require configuring with the utmost care. Examples of seven key areas include:
- Responsibilities – such as who is going to do what across all possible functions
- Franchise Support Office structure – including how this will be organized and developed as the system grows
- Franchised form – what type of franchising (e.g., single-unit, sequential franchising, area development, area representation and subfranchisng) is appropriate for your business
- Network income design – what income streams and levels (e.g., fees, royalties, rebates, marketing contributions etc) are optimal for your business
- Territories – what structure and associated protocols are appropriate to maximize opportunities
- Franchise term and renewal periods – need to be configured to deliver value but also provide for necessary adaptations
- System documentation (e.g., franchisee, franchisor and specialty manuals) – including key responsibilities, policy decisions, and guidance on how the business should be operated
These are just some examples. All are interdependent – meaning changes in one influence another. Getting the configuration correct is essential. Failure to optimise all but one component can result in poor performance, or even spectacular failure affecting numerous franchisees.
To be successful you must plan carefully and involve specialist advisors where necessary. Sound initial franchise-specific strategic and feasibility analyses, implementation planning, ongoing guidance, and training, are of paramount importance to achieving success at the franchisor (and franchisee) level.
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