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.
Leadership and Franchisee profit
To sum up, I believe that there are are some questions that every franchisor should know about the leadership and franchisee profit. These include:
- How much have they invested?
- What were their original financial goals when buying a franchise?
- How has their performance tracked to date?
- How has that performance tracked compare to where they wanted to be and where you would like them to be?
- How does that performance compare to others within your franchise system?
- Where does the franchisee now want to be in 3-5 years time?
- Where are the gaps and opportunities for this franchisee to do better?
- What are your field staff doing to identify opportunities and work with the franchisee to improve their unit-level returns?
If you are a franchisor and you feel a little weak on one or more of these points don’t worry – you’re in good company. But you also, like those other companies, have an opportunity, we believe, to improve both franchisee and your own results through an improved focus on franchisee profit. Contact our team for more about leadership and franchisee profit.