A recent UK study – the Franchise Awareness and Preferences Survey – showed that nearly twice as many consumers would rather buy from a franchise than a non-franchised business. There are a lot of business owners out there franchising their business idea right now. Many entrepreneurs see it as an easy way to make money and expand their businesses with less work and money on their part. Not true!
Having seen some franchises that just limp along, I know franchising brings its own challenges, so I asked Katryn Harris – franchise expert and owner of Open Box Integration (http://www.openboxinc.com/franchise/) – to enlighten Make It Business readers on some of the pitfalls to be aware of when building a franchise. Katryn’s company created the product Franchise Success, which helps franchisors enhance performance and strengthen the franchisee relationship to save time and money, and sell more franchises.
My question to Katryn: What three things have to be in place for a franchise to succeed?
1. Realize your core business has changed.
Your main focus has now moved from running the original business to selling franchises. You need to attract quality franchisees who will build on your brand promise. Select the wrong franchisee and you’ll see a negative impact on your brand and your bottom line.
Don’t be too quick to sell to the first interested party that comes along – be very clear on what skills and qualities a franchisee will need to be successful in your business. In speaking to franchisors recently, every single one of them told me that they often sold to the wrong person in the early days of franchise sales, because they didn’t have a clear idea of whom they were looking for. They basically took anyone who came along with a cheque.
2. Put good training and support programs into place for your franchisees.
Most franchisors are entrepreneurs who have built financially successful businesses and they assume, often wrongly, that franchisees should be able to do it just as easily. They massively underestimate the amount of “hand-holding” you need to provide to franchisees. You should develop an operations manual that covers every detail of building and running the business.
Both Subway and McDonald’s have highly successful franchise programs; one of the main reasons for their success is the highly detailed operations manuals both companies have created. And, they enforce those systems stringently. Seems like overkill to you? Well – it’s not. These companies know that if you do the small details well and in the same way, every single time, you create a great, consistent brand experience that brings back customers.
Over the years, Katryn has seen franchises fail because their systems couldn’t provide the information and support franchisees needed to be successful. Franchisees buy because they see a successful business idea, and they are paying the franchisor to share the secrets of their success, which means providing a lot of information and support to them.
3. Compliance is key.
Many entrepreneurs underestimate the amount of information and compliance needed to run multiple franchises. You need a strong back-end system that will help you with planning and resource allocation. When it comes to your franchisees, you want to make sure they are doing the marketing and prospecting they need to be doing to be profitable.
You need to be sure they are following the operations manual. You want all your customers to have a great experience with your brand, no matter what franchise location the customer visits. Plus, you need to be able to track revenues and profitability. If you think you are busy running your own business, imagine how crazy things get when you have 10, 20 or 30 franchisees reporting in, asking questions, needing help! You need a good system to manage all of that.
So there you have it, the Coles Notes to building your franchise. Pay attention to all of these three things when doing your planning, and you’ll be ahead of the majority of your competitors.
Fiona Walsh started FM Walsh & Associates Inc. when she saw how many business owners struggled to sell effectively, An expert in sales and business development, she has worked with hundreds of businesses throughout North America to double, even triple their revenues. She offers tips for growing your business at www.fmwalsh.com. Our extensive genealogical research has found that Fiona, though blessed with the same name, is not related to Michael Walsh.