What You Should Expect From Your Franchisor

28/04/2018 08:00 | Start a business

What to expect from your franchisor

If you’re considering becoming a franchisee and don’t know what you should be looking for in a franchisor, we’re here to help. Below, we've compiled five essential traits and qualities that every franchisee should expect to find in their franchisor. Signing up for a new franchise involves a committing to a close relationship with a franchisor, so you need to be 100% sure that you’re making the right decision.

Industry expertise

One of the reasons the best franchises are an attractive proposition is because they’ve accrued the industry expertise and experience required to understand how the market works. Much of this knowledge is indispensable to you as a new franchisee, and a good franchisor will ensure that they're always on hand to offer advice and direction.

Setting up a franchise involves a steep learning curve, and no new franchisee should be expected to tackle their problems without being able to refer to the industry expertise of their franchisor. Whether you’re looking for advice on real estate and store location, or want to understand your key demographics better, an experienced franchisor will be able to provide you with much of the information you’re looking for.

Likewise, franchisors should always be trying to learn from their franchisees. Much of their knowledge of what's happening in different locations around the country will come from franchisees and their staff. An excellent franchisor will not only share their expertise, they'll also work tirelessly to ensure they're continually learning and responding to the challenges faced by individual stores and units.

Professionalism

Professionalism is an essential attribute for franchisors. Not only is a professional attitude necessary if a business is going to portray itself in the right way to its customers, but it's also essential because, as a new franchisee, you will be entering into a professional business relationship with the franchisor. This means that the success of your entire relationship will be determined by the extent to which you can work together. In turn, working closely together requires professionalism from both parties.

When we talk about professionalism, we’re talking about a variety of factors. These include professionalism in the franchise’s products or services, their media and marketing materials, how they conduct business, how they communicate with customers and staff, and how they relate to their franchisees. This is by no means an exhaustive list, but it does give some idea as to what to look out for.

Professionalism is a trait that should run through an entire business. If the franchisor prides themselves on professionalism, it’s highly likely that everything they do will be influenced by this attitude. However, it isn’t always the case. Though a franchisor may appear professional at first, it’s important to be on the lookout for areas where they may have let standards slip, too.

Honest costings

All good franchisors should be able to provide you with accurate up-front investment details without any issues. If a franchise is cagey about how much it costs to set up a new franchise or if they won’t reveal the investment costs immediately, it’s a warning sign that all may not be as perfect as it seems. Whether the start-up cost is low or high, franchisors should have absolutely no problem providing figures, as they should reflect the potential for profit in the future.

Similarly, better franchisors will provide potential franchisees with honest and accurate figures for how much they can expect to invest in the first few years of business. This will often differ drastically from the minimum initial investment and start-up cost, as it will include estimates for additional marketing materials and unforeseen expenditures, amongst other things. When it comes to talking money with a franchisor, it's vital that you feel as though you're being given the truth and won’t face hidden costs in the future.

Exclusivity

New franchisees should expect their franchisor to grant them exclusivity in two distinct and important ways. First and foremost, a franchisor should grant a franchisee exclusive rights to a particular territory. This territory should be well-defined, and of a size that’s able to sustain a business and allow for growth. No franchisee should work hard to build their unit, only for the franchisor to open up a new unit nearby and syphon off a significant percentage of customers. For this reason, franchisees need to be sure that their franchisor can offer them exclusive territory rights.

Secondly, a franchisee should expect their franchisor to sell them any necessary products or services at an exclusive, preferential rate. It’s not uncommon for franchisors to sometimes sell their products to 3rd parties outside of the franchise business model, as it allows for an additional revenue stream. However, they should not be selling these products and services at the same rate at which they provide them to their franchisees. Franchisees – in the form of their franchise fee – can pay a great deal for preferential access to goods and services and should not have to compete with 3rd parties just because the franchisor can make a little additional income.

Support

Though it can be somewhat of a vague and general term, franchisors should be offering franchisees a considerable amount of support. This support can manifest itself in several different ways, but a franchisor should always be contactable, ready to discuss issues, and prepared to work to resolve them as quickly as possible.

Support may mean providing assistance with digital sales systems, offering advice on how to best target marketing materials, or providing training materials for new staff. It may come from the manager responsible for new franchises, from a member of the staff at company headquarters, or from a legal representative. The most important factor is that the franchisor is willing to help, always keeps communication channels open, and works to resolve any issues you have promptly.

Conclusion

Any franchisee looking to set up a new franchise needs to be aware that the franchisee/franchisor relationship is one of the most important determinants of success. Find the right franchisor and you give yourself the best possible chance of growing your business and turning a hefty profit. Find the wrong franchisor and you're likely to run into problems from day one. Though the five qualities listed above aren't the only factors that constitute a good franchisor, they're important qualities that all franchisees should be on the lookout for.

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