How to be a compliant franchisee

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How to be a compliant franchisee

Even though becoming a franchisee means you can operate your own business, you are doing so on behalf of an established brand. Therefore, there are rules in place to make sure you don’t stray too far from the business plan and are successful in the long run. Want to learn more about what this actually involves? Read our guide to being a compliant franchisee.

As a franchisee you are essentially a flag bearer for the franchisor’s brand. One of the biggest perks of running a franchise is that you operate under a successful business model and don’t have to start completely from scratch. You don’t need to reinvent the wheel. The business concept, infrastructure and system have all been created for you. The franchisor has developed the tools and training that you need to thrive in the franchising world, as well as ensuring that all franchisees execute the same level of service.

However, this can come at a cost. As a franchisee, you’ll need to adhere to the rules set out in the franchise agreement. Decisions about elements of the business such as trading hours, the branding and the culture have all been made on your behalf. All you have to do is stick to the rules so that consistency is achieved. This is important so that customers receive the same service regardless of which franchisee they deal with. So, let’s now find out how you can make sure you are a compliant franchisee and acting in a way that benefits both you and the franchisor the most.

How to be a compliant franchisee

Consistency is crucial to the success of a franchise business model. For you to succeed as a franchisee, it's essential that you understand the need to comply with the rules of the franchise.

1. Do all you can to protect the brand

The franchisor will have spent many years building the franchise brand and its reputation, so they’ll want to protect it. Maintaining brand consistency is one of the critical elements to get right for a franchise to be successful. Consistency throughout the brand helps your franchisor to attract new franchisees and customers, so they need to keep control over your use of marketing materials, the name, and the logo.

2. Make sure the quality is always top-notch

To remain compliant, you'll need to ensure that the quality of your products and services are always first class. You have to make sure that your franchise is clean, staff look professional and sales materials are up-to-date. This will involve regularly updating the fit out, repainting, changing the menu, buying new uniforms etc. Don’t forget that making sure your brand presentation is compliant involves a financial commitment. But it’s worth it for the success of your individual business and the franchise brand.

3. Pay a marketing fee

Many different fees come as part of the franchise business model. One fee that is often overlooked by prospective franchisees is the marketing or advertising fee. This tends to be charged on a monthly basis and is calculated as a percentage of your gross sales.

This fee contributes to a shared marketing fund which finances large, national advertising campaigns. All franchisees benefit from this marketing activity as it raises awareness and profile of the overall brand. Most franchisors make it compulsory to contribute to the marketing pot, but if it's optional, then you can maintain your compliance by participating.

If you decide not to contribute to the fund, the marketing material will have to include statements such as ‘only in participating stores’. This weakens the power of any advertising and reduces the impact of the campaign for franchisees that have paid into the pot.

4. Buy stock from a specified supplier

There’s usually a condition in the franchise agreement that states that you need to buy certain stock items from a particular supplier. This makes sure that the consistency of product offering is the same across all franchise locations. It also enables the franchisor to negotiate an agreement with the supplier to receive a rebate.

This rebate not only benefits the franchisor but is good for you too. By dictating which supplier you use, the franchisor can invest the reimbursement they receive back into maintaining and developing the franchise system. This can even lead to your royalty fee being reduced.

5. Seek authorisation before making big decisions

You’ll also need to get permission before you launch any local marketing activity. To make it easier for you to conform to brand guidelines, some franchisors provide pre-approved, brand-compliant templates that you can use. This not only ensures that your material is on brand but also saves you the time and effort of producing collateral from scratch.

6. Attend conferences and other important events

This may be an area of compliance that you hadn’t accounted for but attending conferences and meetings hosted by the franchisor is important for the overall franchise. Having all franchisees together to share stories, ideas and problems is extremely valuable for all concerned, and so they should be attended as a matter of priority.

To comply in this area though you must be prepared to put your hand in your pocket. Conferences usually involve travel and an overnight stay, so make sure you budget for these events accordingly.

7. Apply what you’ve learned to the operation of your franchise

At franchise conferences you get the chance to network with other franchisees and hear from those that are more experienced than yourself. You can then use what you’ve learnt to benefit your franchise on return from the conference.

For the franchisor, it’s an opportunity to listen to any issues or areas for improvement first-hand which is essential for the continued success of the franchise and future franchisee recruitment.

8. Communicate with the franchisor effectively

Reporting is an integral part of the franchise system and involves franchisees sharing information about their business with the franchisor on a weekly, monthly and annual basis.

Not only does this enable the franchisor to identify any performance issues throughout the network but it allows them to accurately calculate royalty and marketing fees (if based on gross sales).

The franchise agreement will detail the information that you’re obliged to provide and the frequency at which you have to share it with the franchisor. Failure to adhere to these terms could result in a breach of contract with penalties applied.

Use these tips to be a compliant franchisee

Following the rules and maintaining franchise consistency is a crucial part of your role as a franchisee. But it's not for everyone. If you have a strong entrepreneurial spirit and find uniformity difficult, then starting an independent business may be more suitable for you. But the fact that when you join a franchise system you benefit from a tried and tested business model with a proven track record of success is too good to resist for lots of aspiring business owners.
Also see our five tips for maintaining a healthy franchisor and franchisee relationship.

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