5 Ways Franchisors Can Avoid Their Franchisees Failing

16/02/2018 18:00 | Start a business

How to avoid franchise failure

Franchising your business is a great way to expand your already successful venture. With owner-operators putting up the necessary capital and taking full operational control of their units using your business model, its a relatively low risk growth strategy.

Youll also give your investors a great franchise business opportunity. Together you and your franchisees will work towards a common goal to operate a successful business. As the success of your franchisees is crucial to your success, its in your best interests to do everything in your power to help them avoid any pitfalls that will result in their failure.

Heres 5 ways you can help keep your franchisees on track.

1. Develop a robust recruitment process

Today prospective franchisees can access franchise information from a wide variety of sources. Your website will enable them to find out lots about your business before they even complete the initial expression of interest form.

This has its advantages because by the time you get to meet them, they will have already identified whether they have what it takes to be a franchisee. The franchise information that they will have reviewed will explain the pros and cons of the franchise model so they can make an informed decision about whether franchising is right for them.

Its still important that you develop a recruitment process that reassures you that the franchisee candidate has the required skills, mind-set and financial resources to be successful. You can initially achieve this by creating a comprehensive application form. The answers provided will allow you to narrow the pool of candidates by disregarding those that dont meet your criteria.

For those that make the first cut, arrange several meetings, including one where they get to meet with existing franchisees. Its essential that you allow prospective franchisees the chance to ask your existing franchisees questions during the hiring process. It may make the candidate realise that your franchise business opportunity isnt for them. Although this may be disappointing, its better to find out before any more time and effort is invested in their recruitment.

Finally, its imperative that franchisees have the necessary funding, not only for the franchise fee, but for the ongoing financial commitments. Fees, leases, loans and an element of working capital will all be required. Franchising your business will only be a success if your franchisees have enough money to invest, and continue to pay, for the use of your brand and business model.

2. Encourage business plan updates

During the recruitment process youll have reviewed the business plans of all potential franchisees. Now that the successful ones are on board, it can be easy for them to focus more on running their business, than developing and growing it.

So that the franchise doesnt stagnate, you should always encourage your franchisees to spend time reflecting on their business plan, and updating when necessary. Taking a more strategic view of their franchise business opportunity every now and again will allow them to consider whats next? in a proactive manner, rather than having to react to economic or environmental factors. Being prepared is the best way for franchisees to secure longevity.

3. Visit often

When franchising your business, it can sometimes become difficult to visit all franchise units as much as youd like. This is particularly tough if you have many franchises located across the country.

It is important though, that you, or your business development team, visit franchise sites regularly. By seeing your franchisees in action, its much easier to identify if there are any training needs. A franchisee may not necessarily recognise that they are lacking a set of skills, or may feel too embarrassed to approach you about receiving extra coaching.

Visiting units also allows you to maintain standards for your brand, products and service. If any of these elements arent right when you visit, then it acts as a warning sign that all is not well in the franchisees business.

4. Maintain financial transparency

Making it clear to your franchisees right from the outset that you expect financial transparency across the franchise will set expectations from day one. Having access to your franchisees financials can bring your attention to any issues which may need your support to avoid franchise failure.

Its important that your franchisees know that this isnt a case of Big Brother but a tool to allow you to benchmark performance across the network and share the results for best practice reasons.

5. Create a franchisee support network

The popular saying amongst the franchise community is that youre in business for yourself; not by yourself. This is the element of franchising that less experienced entrepreneurs find most appealing. Not only do they have the support and experience of the franchisor, but they also become part of a network of like-minded franchisees.

A great way to ensure that your franchisees are always learning and improving their skill set, is to organise opportunities for your franchisees to meet up regularly. The format of these events is less important than what they stand for. Informal or formal, workshop or conference, local or national; it doesnt matter. The point is that your franchisees get to share best practice and discuss improvement ideas. The investment of your time organising such events will be repaid with happy, supported and successful franchisees.

Anti-failure checklist

So, what happens if you identify a franchisee that is struggling? Taking pre-emptive measures to help a franchisee when a problem is first identified will make the journey to getting back on track much quicker and easier.

Ask yourself these questions:

  • Do you have a prepared plan in place which all franchisees are aware of should they need to reach out for help?
  • Do you encourage a culture of openness and honesty which means that a franchisee would feel comfortable approaching you for help without feeling embarrassed?
  • Do you have the resources and funding in place to implement the necessary training, mentoring or coaching that your franchisees may need?

If the answer to any of these questions is no, then its time that you put the infrastructure in place to give your franchisees the best chance of achieving success.

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