At Franchize Consultants we have long talked about the importance of Leadership and Franchisee Profit as a vital focus for franchising companies.

Consider the Franchisee Perspective

Aligned, our own research showed that the most important reason given for considering a franchise was “greater income and wealth building potential.” It makes sense that anyone who invests in a franchise will have an orientation towards making some kind of return on that investment.

We believe it is important to consider franchisees could have invested elsewhere. Furthermore, experience tells us a franchisee will often concentrate much of their financial capacity into an individual franchise unit versus, for example, a diversified portfolio shares and/or other assets.

Bottom-line, they did not need to invest their money and concentrate their wealth into one particular outlet of one particular franchise system. They will often put often a high degree of faith into the system of choice and its potential to provide them with a vehicle capable (with the right mix of local investment, strategy, resource and effort) of providing an investment return attractive to them – to whatever level they perceive to be attractive.

What this might mean

It means that profit and/or investment return is one of the most relevant concepts to engage with franchisees on. At a personal level it also makes sense that you should want to know how that investment is tracking for them and what you can mutually do to help them build upon their returns.

This is not to suggest a franchisor is responsible for a franchisee’s level of success, nor should they over support or attempt to better operate a franchisee’s unit for them. Instead, we suggest that there are certain steps that we believe are vital in providing the kind of support that are both helpful and also might be expected.

Those steps include:

Thinking about a franchisee\’s initial goals and aspirations, and reasons for purchasing the franchise
Thinking about the franchisee’s total investment, which sometimes grows overtime
Thinking about the franchisees financial outcomes from the business
Thinking about what the franchisee is trying to achieve with the business
Thinking about what you can do to assist the franchisee achieve their expected or better returns from the business, and
Having important dialogue the franchisee on how things are tracking

In an optimal but still basic sense this requires you to be able to:

Capture initial franchisee goals and aspirations
Have franchisees operate and report to a standard Chart of Accounts
Have open access to franchisee financial accounting and non-financial information
Actively benchmark and feedback individual and group metrics
Have a good business planning template
Orientate your field visits around a completed business plan, including the achievement of financial objectives
Regularly review franchisee performance and set new objectives

We also advocate that a focus on profit provides you with a more meaningful and relevant way of engaging with franchisees and having useful discussions that you need to around factors that you\’re already trying to address.