In todays ultra competitive franchise market, it pays to have
The Wow factor in your recruitment material.

I remember speaking to a franchising prospect a few years ago and he told me that he had turned down 3 cleaning franchises purely on the low standard of their information pack.

Gone are the days when you can send out a photocopied, drab information document. This information pack is often the first impression that a franchise prospect has of your company.

This document then travels to the prospect’s franchise adviser, lawyer and accountant, who in turn would probably comment on the low standard of presentation.

A low standard of information material suggests a “can’t be bothered” approach to the franchising process.

So, be honest and take a long hard look at what you’re currently sending out to your potential franchisees.

• Firstly, do you know who your target franchisee is? If not find out.
• Does your marketing material speak to your target franchisee?
• If it doesn’t…. change it until it does.
• Are there spelling mistakes or rambling sentences that make no sense?
• When did you last have an objective professional critique your marketing material? This is essential.

Don’t just think leaflets and brochures with franchise marketing material.

Think video DVD’s and powerpoints with powerful music that stirs the emotions and creates an instant emotional attachment to your business.

There are many specialist companies that can help you with the production of these recruitment tools and it will pay to have an expert’s help. Professionalism is paramount with any type of recruitment material.

The cost may be less than you think, and let’s face it, the sale of only one franchise will well and truly cover the cost of producing a “wow factor” product.

So don’t sit and wonder why you’re not converting franchisee enquiries to prospects, pick up the phone and speak to an expert now.

© franchisingplus

Author ; Carolyn Dufton Dip.Bus(franchising)

Carolyn is the principal of franchisingplus. franchisingplus is a franchising consultancy advising and mentoring on all aspects of franchising on a national and international basis.

The content displayed is franchisingplus copyright and can only be reproduced or re-published with the acknowledgement of the author Carolyn Dufton. www.franchisingplus.com.au/contact/

I spoke to a client recently who contacted me because of having challenges growing his franchise network.

The first question I always ask is, how much is your franchise fee?

A correctly structured franchise fee is paramount to the acquisition of new franchisees and the growth of the network.

Many Franchisors I speak to have literally plucked the franchise fee out of nowhere!

Now this method may or may not have worked for you. If it’s worked so far then that’s great.

Don’t try and fix something if it’s not broken.

If however…you are having troubles selling franchises, and even getting that initial enquiry, then it may be time to reassess.           

 There are various considerations for arriving at the franchise fee.

• If you have an existing franchise business it is most unwise to reduce the fee lower than the fee that other franchisees have paid despite current financial conditions.
• It is prudent to offer reasonable entry levels for the new or small franchise network.
• Don’t “give away” franchises to clinch a sale.
• Don’t restrict the network growth by being stubborn and proud with maintaining a high and maybe unrealistic franchise fee. A slow growing network is not healthy.
• Remember that the initial franchise fee is only part of “the franchising story”. Ongoing income through royalties and/or product distribution should be the focus of your income.
• If you don’t get franchisees on board in the first place, you won’t have any ongoing income! Don’t let an unrealistic upfront fee be a deterrent.
• You may consider offering franchisee finance as an incentive. Speak to your accountant regarding this and decide if you really want to be acting as a banker to your franchisees.
• If you are unsure as to whether your franchise fee is appropriately positioned in the marketplace, seek professional advice from a franchising consultant who understands franchising regarding your franchise fee structure.
• Understand that franchising like other any other industry is currently being affected by lending policies from the banks. Obtaining finance is tough at the moment.
• Find a financier who is able to offer finance at reasonable rates to your potential franchisees to avoid losing sales through finance.
• Ensure that the rest of your fee structures are in line with enabling a franchisee to run a profitable business long term.

 It’s never too late to review your franchise fees.

Franchise network growth should be consistent. Existing franchisees need to feel satisfied that they have bought into a healthy expanding brand. This adds value to their business.

A franchise network with only 2 to 4 franchises after say 2 full years or more of operation is not a healthy network.

Often the one factor holding expansion back is the initial start up fee.

Do not self sabotage your franchise expansion by charging an inappropriate start up fee, it’s just not worth it.

 © franchisingplus

Author ; Carolyn Dufton Dip.Bus(franchising)

Carolyn is the principal of franchisingplus. franchisingplus is a franchising consultancy advising and mentoring on all aspects of franchising on a national and international basis.

The content displayed is franchisingplus copyright and can only be reproduced or re-published with the acknowledgement of the author Carolyn Dufton. www.franchisingplus.com.au/contact/

What is a Franchise Advisory Council?

These organisations can operate under many titles and you may choose to call yours a;

•  Business development group         
• Filter group
• Advisory committee
• Network council

and really anything else that appeals to you!  I would suggest that you don’t get too hung up on the name and that you keep it simple.

So the name aside, why and how would you form a franchise council within your franchise network? or if you have already one, how could you improve what you’re doing now?

Some franchise councils are formed specifically to address a particular niche of the business. This could be ;

• Marketing
• Product R and D
• Conflict
• Service

In general terms the group should be formed to aid consultation on matters of deemed priority by The Franchisor and The Franchisees.

Most franchise councils do not cover specific topics and are broad based discussion groups.

Many Franchisors are apprehensive about forming franchise councils as they fear that will become group “whingeing” opportunities.

Q. Have any of your current or former franchisees used any of the following methods to communicate negative messages about your system?

Response

Notes: 1) A total of 59 franchisors provided a response from an expected  286.

             2) Multiple responses were recorded for some respondents.

2008 survey carried out by the Asia-Pacific Centre for Franchising Excellence.

Interestingly, this perception could be fairly accurate as according to the 2008 survey carried out by the Asia-Pacific Centre for Franchising Excellence, 44 negative approaches were made by franchisees at group meetings. This is certainly not an ideal situation and can affect the morale of the franchisees and the Franchisor. Nor would a Franchisor feel happy about franchisees stirring the pot by chain emails yet there were 36 cases of this reported with no doubt many more not being reported.

So why would you establish a Franchise Council? Are there pros and cons?

Like any committee, yes there are advantages and challenges to setting up an effective council.

Effective is the key word here. A franchise council should only meet when there are matters to discuss.

Some of the benefits of creating a Franchise Council are;

Communication

• Councils provide an excellent opportunity for The Franchisor or its representative to engage in meaningful dialogue with a selection of franchisees. This openness creates a feeling of inclusion and respect for the franchisees opinions.
• The Franchisees feel that The Franchisor is more accountable as they have an opportunity to express dissatisfaction.
• The Franchisor can gain feedback on proposed new initiatives and products before launching.
• The Franchisees are able to present their ideas to The Franchisor in a non threatening environment.

Increased Commitment

• Franchisees who are part of The Council are taking on the responsibility of representing the whole group. This can result in these franchisees having an increased sense of loyalty and commitment to the franchised company.

 Increased Trust

• Suspected “Hidden agendas” become obsolete. The Franchisor can speak openly and honestly at council meetings.
• The Franchisees can broach The Franchisor on sensitive subjects in a proactive manner. Potential problems can be discussed with all parties seeking resolution rather than conflict.

 Increased efficiency and sales

• Yes, franchise councils actually aid in improving the performance of the network.

 Disadvantages of a Franchise Council

• Historically, franchise councils necessitated franchisees travelling to meet together. Travelling incurs costs.

Who should pay for the cost? It would be a very benevolent franchisee who chose to take time out of their business and incur expenses for the “good of the group”.

• A poorly structured and managed council can create more problems than it solves. It should not be allowed to be an opportunity for negative franchisees to influence the rest of the group.

How do we form our own Franchise Council?

There are many guidelines to be used when starting a Franchise Council as it is imperative that is structured and run effectively.

Research other councils that work well for their Franchise network and that have achieved positive results. Find out what works and what doesn’t for others and assess how you can apply these guidelines in your own Council.

© franchisingplus

Author ; Carolyn Dufton Dip.Bus(franchising)

Carolyn is the principal of franchisingplus. franchisingplus is a franchising consultancy advising and mentoring on all aspects of franchising on a national and international basis.

The content displayed is franchisingplus copyright and can only be reproduced or re-published with the acknowledgement of the author Carolyn Dufton. www.franchisingplus.com.au/contact/

A business has been approached by a third party who has expressed interest in buying into their business.

This prompts the business owner to consider if and how they could include the interested party in their business.

• Could they offer them a partnership?
• Could they sell them a licence?
• Could they become an agent?
• Or should they consider franchising?

The reality of the situation is that a business cannot choose whether to call themselves a franchise.

Franchising is a regulated industry and is governed by the Franchising Code of Conduct. If you are operating within certain parameters you are by definition a franchise and have to conform to the franchising code.

Nor can you engage a franchisee without having provided the legally required franchise documentation.

What are the franchising parameters?

 A franchise exists by definition when;                                   

• one party (the franchisor) grants another party (the franchisee) the right to carry on the business of offering, supplying or distributing goods or services under a specific system or marketing plan
• the franchise business will be substantially or materially associated with a trademark, advertising or a commercial symbol owned, used, licensed or specified by the franchisor
• the franchisee is required to pay, or agree to pay, a fee to the franchisor before starting or continuing the business.

 Simply because a business is called a licence or distributorship does not mean it cannot be a franchise. If a licence or distributorship meets the above definition, it is most likely a franchise and must comply with the code.

Franchising is not a dirty word

 So what if the system that suits your business best should fall within the franchising definition? Well don’t be scared, franchising is nothing to fear if approached professionally.

In fact…. franchising your business could be the best thing you ever did!

 Franchising is an involved process which necessitates expert input. It is not a quick procedure and cannot be “rushed through”.

Contrary to many business owners’ belief, there is no need to wait for a potential franchise buyer before proceeding with the franchising process.

Having a potential buyer in the wings is a comfort, but is not the norm.

Are you concerned that your existing business may fall within the franchising definition?  What could the consequences be?

 The ACCC has the power to prosecute any deemed franchise that is   not complying fully with The Franchising Code so act decisively;

• Firstly, seek expert opinion to ascertain whether the business is technically a franchise.
• Engage a franchising expert to conduct an in depth analysis of the current business model and the proposed franchising model including financial scrutiny.
• If the franchising feasibility stacks up, proceed down the franchising path with haste!
• If franchising does not appear to be viable, the franchising consultant should suggest an alternate business model.

 The benefits of franchising are numerous;

• Franchising is the ultimate in business leverage
• Documented control over the application of your business system and service
• Upfront franchisee fees provide cash injections into your business
• No outlay for expansion costs e.g. fit out, stock etc
• Ongoing franchise fees
• Effective distribution
• No employees!! Franchisees are self motivated business owners
• No more working “in” your business.

The advantages are plentiful.

Could franchising be your vehicle to success?

© franchisingplus

Author ; Carolyn Dufton Dip.Bus(franchising)

Carolyn is the principal of franchisingplus. franchisingplus is a franchising consultancy advising and mentoring on all aspects of franchising on a national and international basis.

The content displayed is franchisingplus copyright and can only be reproduced or re-published with the acknowledgement of the author Carolyn Dufton. www.franchisingplus.com.au/contact/

Is this a reasonable objective, and is it really possible to have perfectly satisfied franchisees?

Human nature would suggest not.

However it is essential that a Franchisor’s prime objective should be to nurture an environment of franchisee satisfaction. Satisfied Franchisees sell franchises.

So how does one approach this?

Let’s consider;

Income

If a franchisee is running profitably, the chances are that they are happier than a franchisee who is not operating a profitable operation. Does your system have methods in place to discuss the franchisees financials on a regular basis?  

Relationships and communication      

Franchisee /Franchisor relationship evaluation should be an integral factor in a franchise system. Without regular, honest communication any relationship will sour and go stale and franchising is no different.

A Franchisor should not allow a Franchisee to refuse meetings with franchise support staff.

A franchisee may use the “too busy” excuse for refusing meetings.

This is often another way of saying, I don’t need your support, I don’t value your support, leave me alone.

This is a dangerous situation as communication channels will close and the relationship will deteriorate. It can also signify a deeper level of franchisee dissatisfaction.

An efficient franchise support system should incorporate strategies for dealing with the non communicative franchisee, to enable them to enjoy a healthy relationship with The Franchisor and support staff.

Consistency

Is one franchisee treated in exactly the same manner as the next?

Inconsistency in treatment from The Franchisor is a common complaint amongst franchisees.

Interestingly, franchisees feel very strongly about non compliant franchisees not being brought into line. Some Franchisors feel that they are being benevolent by not insisting on compliance within a franchise system however the reality is that complying franchisees feel that they are being disadvantaged by this type of situation.

Compliance is an essential part of a Franchisor’s role. A franchise system has been created and all franchisees should work within the system. There is no room for the maverick.

Support

A Franchisor should be pro-active with their franchisee support not re-active.

Discussion about core franchisee concerns should be encouraged and Franchisor generated.

The more professional the support, the more successful the franchisee is likely to be, which in turn benefits the whole franchise network.

Many franchise companies are now including business coaching as part of the support arrangement. The coaching can be by external consultants, or franchise support staff who are trained coaches. This support approach appears to work well and is appreciated by Franchisees.

Franchisor self appraisal

Be honest with yourself. Are your franchisees happy?

Do they respect you and do you respect them?

Have you ever had that discussion with them?

Does your support system provide the opportunity to have that discussion with them?

Maintaining healthy Relationships within a franchise system can be challenging, but it is extremely worthwhile for the Franchisor, the franchisee and the business as a whole.

©franchisingplus

Author ; Carolyn Dufton Dip.Bus(franchising)

Carolyn is the principal of franchisingplus. franchisingplus is a franchising consultancy advising and mentoring on all aspects of franchising on a national and international basis.

The content displayed is franchisingplus copyright and can only be reproduced or re-published with the acknowledgement of the author Carolyn Dufton. www.franchisingplus.com.au/contact/

Master Franchising allows people or corporations to purchase the rights to sub-franchise within a certain territory. This allows the Master franchisee the opportunity to grow a viable business in a fairly short timeframe.

 The Master franchisee should enter into this role with both sales and management experience, since he or she will not only operate a unit, but will also be responsible for the smooth operation of several other locations as well. Additionally, a Master franchisee holds the responsibility of obtaining and educating other franchisees. He or she needs to be available for continuous support for the other franchisees.

Here’s how it works:

A Master franchisee helps the overall franchise company by recruiting franchisees to open units within a specific territory. The Master franchisee purchases this specific territory from the franchisor and then shares in the revenue from franchises in that territory.

For example, your Master franchise agreement with the franchisor may state that you will receive 50% of the franchise fee and 50% of the royalty fees for each unit sold within your territory. You will be responsible for recruiting and training other franchisees. You will also need to be available for ongoing support.

NB this is not a percentage we are suggesting, we are merely using this figure as an example.

Advantages

Purchasing a Master franchise offers an investor the opportunity to partake in a business concept that has already been fully developed. In addition, by partnering with the larger entity, the Master franchisee receives support and expertise as needed from the franchisor as well as access to new systems, products and general business initiatives.

The Franchisor is able to relinquish day to day responsibility for regional areas as determined by the Master Franchisee’s territory.

Considerations

•  Serious attention should be paid to the financial viability and implications of engaging a Master franchisee. Many franchise organisations do not have the financial capability to support an additional tier of franchisee.
• Master franchisees can have responsibility for a region, for a state or for a country. Territory allocation should be approached with caution.
• Franchisees should be consulted before introducing a Master Franchisee to their region. If a consultative approach is not adopted, it is common for franchisees not to co-operate with their new representative.
• Franchise agreements should be adapted and changed to reflect the new reporting and responsibility structure.
• The skill set needed for the Master Franchisee is far more extensive than the franchisee requirements. The recruitment process should be stringent.
• Appointing a Master Franchisee should not be a process that is implemented without serious consideration to the long term impact. The appointment of an unsuitable Master Franchisee can have disastrous results on a franchise network.

FAQ’s

•  Is it advisable to appoint a Master franchisee from outside the network?
• Would an existing franchisee be an ideal choice for a Master franchisee?
• How are a Master franchisee’s royalty fee and other payments calculated?

Structuring a Master franchisee tier should be done in consultation with franchise experts who will assist a Franchisor in the brainstorming of creating a workable model.

©franchisingplus

Author ; Carolyn Dufton Dip.Bus(franchising)

Carolyn is the principal of franchisingplus. franchisingplus is a franchising consultancy advising and mentoring on all aspects of franchising on a national and international basis.

The content displayed is franchisingplus copyright and can only be reproduced or re-published with the acknowledgement of the author Carolyn Dufton. www.franchisingplus.com.au/contact/

This was a question posed on Linked in by Kelcey Lehrich a US franchising consultant.

This question turned into a discussion that was contributed to by many players in the franchising industry.

In essence, there were two camps. The one camp that maintained that it is not necessary to operate a business prior to franchising and who stated:

“Franchising is its own industry. A Franchisor can achieve the same results with a franchisee who purchases the first franchise and uses it as a “showcase” facility. Out of the 76 industries that franchisors are presently franchising more and more are NOT opening company operations. Most franchisors that do have company operations will sell them after starting to franchise.”

 The reply to this was;                                                     

 It may be possible however my question would be why in the world would anyone be willing to pay a franchise fee if there are no units open and no demonstrated record. When I put myself in the position you are obviously thinking about it seems this is not a franchise at all but a possible partnership with one-person who has a yet unproven idea and one believer in the business idea. My thought would be either become a partner and help open a unit or take the financial risk in exchange for a very sweet deal.

And a US lawyer’s input was:

There is no legal requirement that a business ever exist prior to it offering franchises. Indeed, at congressional hearings about a decade back the issue of franchisor competence was discussed and it was found that franchisors did not owe a duty of competence to its franchisees. All you need to be a franchisor in the United States is a Franchise Disclosure Document and in some state file or submit it for review and registration.                                                                         

Putting that aside, there is no support in the professional community, and that would include stretching the word “professional” to include the franchise packagers – be they consultants or lawyers – for franchising based on a concept that has never had a working prototype. One of the baselines for a threshold analysis of whether a company is franchisable, in all of the literature i have ever read on the subject is the existence of the model being based on a working prototype – at least. States merely require disclosure – unless there are other facts for your clients that support their claims – there may not be much they can do.

The failure rate for start up franchises is already too high as many companies move into franchising simply by completing the legal requirements. There is nothing to prevent them from doing that. But it is a terrible practice and one that does not have much support in franchising. But unfortunately, it happens. Given that the laws in the United

As it relates to having company owned locations while a company is franchising, (they closed or sold off company owned locations), many companies do not have owned operations – including many of my firm’s clients. Different issue and different debate.

The discussion was stimulating and fascinating and I can recommend it to anyone who understands or wished to learn more about the industry.

Here is the link ; (you have to be registered to LinkedIn to access this link)

http://www.linkedin.com/groupAnswers?viewQuestionAndAnswers=&gid=698197&discussionID=17164486&split_page=1

So, is it true, do you have to have successfully operated a business prior to franchising?

Best practice franchising is a business model that replicates a proven successful system.

You will note the use of the term “best practice”. 

It is apparent that there are franchise models that have not operated their business prior to franchising. In this case these businesses do not have a proven system. They are dependent on the franchisees to provide them with the “proof”.

It is also apparent that there are business owners who are not only prepared to spend time and money creating the proof but who are also prepared to pay a Franchisor money for the opportunity to do so! Astounding!

There is no legislation which states that a franchise has to have run successfully or unsuccessfully for that matter, before being franchised.

Most responsible franchise consultants would advise a potential Franchisor to operate a business at one or more locations (in the case of retail particularly) before Franchising the business.

It is then commonplace for a Franchisor to “sell on” the original operation/s and to not retain a company outlet. Some Franchisors find that operating a company store assists them with;

•  Cash flow
•  Training
•  Staying in touch with business operations
•  Operating a flagship store

Either method is quite acceptable.

The Franchisor has operated the business themselves prior to Franchising and can sell franchises with confidence in the proven system.

I am often approached by businesses with “great ideas” and my answer to them all is always the same. Go and build the business, test and refine the system. Create a profitable business.

When you feel confident that you could teach someone else to do exactly the same thing and get a positive result, let’s talk franchising.

 ©franchisingplus

Author ; Carolyn Dufton Dip.Bus(franchising)

Carolyn is the principal of franchisingplus. franchisingplus is a franchising consultancy advising and mentoring on all aspects of franchising on a national and international basis.

The content displayed is franchisingplus copyright and can only be reproduced or re-published with the acknowledgement of the author Carolyn Dufton. www.franchisingplus.com.au/contact/

So you’ve undertaken a franchise feasibility study, and franchising seems to be a workable option.

The franchising consultant has helped you assess the viability of franchising and the numbers and you’ve ticked the boxes;

•  The business has long term viability
•  There is sufficient profit within the business to create a Win-Win   situation for Franchisor and Franchisee alike.
•  The business has been tested and has been running efficiently and profitablity
•  The system can be taught and replicated
•  All the numbers stack up ensuring long term profitability for the franchisee
•  All intellectual property matters have been acknowledged and are in hand.

So now, there’s a decision to be made. To franchise or not to franchise?

It is common for prospective Franchisors to get cold feet at this stage……and that’s good!

Franchising should never be undertaken lightly.

No responsible franchising professional should ever persuade a business to franchise.

Franchising should be a decision based on………                

• Specific facts about the business to be franchised
• The reality of being a Franchisor.
• Thorough research to understand the franchising industry
• A commitment to building a professional franchise network
• An understanding and acceptance of the responsibilities of being a Franchisor.
• A desire to share a business concept and to help others succeed.

There are common questions that are asked prior to making the franchising decision.

Are there any long term costs associated with running a franchise operation?

Essentially no.

You may choose to join the Franchising Council in your country, for which there is an initial joining fee and annual membership.

Incoming franchisees pay their legal costs to you. This covers the prospect’s lawyer speaking to your lawyer on legal points, and the preparation of the specific documentation.

There are associated expenses with running a franchise organisation and these should have been covered in the feasibility study.

Annual conferences are at the franchisees’ expense.

You may choose to provide training days or sessions at a cost to the franchisee or at no cost.  This does not need to be pre determined.

It is advisable that general support and personal visits are at no cost.

Other costs such as national marketing can be included in a marketing levy to which all franchisees subscribe.

Running a franchised business has similar ongoing business expenses as a non franchised business.

As the Franchise network grows expenses will increase but this should have been addressed in the feasibility study and not present any surprises down the track.

How will I recoup my initial investment in the franchise process?

The franchise process presents an ideal opportunity to analyse all aspects of the business to be franchised. The franchising process examines the business systems and strategies are developed. This is worthwhile in itself.

In many regards undertaking the franchising process is similar to having business coaching and it is certainly similar from a costing perspective.

The main difference is that there is a tangible outcome at the end of the franchising process which is a documented franchise system.

It is quite usual for the first one or two franchise sales to cover the costs of the initial franchise process.

I am frightened of losing control over the business system if I franchise.

Franchising offers the ultimate in control over the system and can and should incorporate extensive reporting measures.

 A franchise agreement clearly states the Franchisee’s obligations and if the obligations are not met the franchisee is in default of the agreement.

Expansive reporting structures and software applications can assist the Franchisee and the Franchisor with achieving compliance to the system.

 Best franchising practice ensures that Franchisees understand the benefits of compliance and are encouraged to comply with the system.

 What are the main benefits of franchising my business? Is it worth the cost and effort?

• Franchising provides a growing business with a low cost expansion method.
• Franchising contractual obligations provide an enforceable method of quality control.
• Franchising provides ongoing income.
• Franchising accelerates market dominance and brand recognition.
• Franchising provides bulk buying opportunities.
• Franchisees are self motivated independent business owners with a desire to succeed.

© franchisingplus

Author ; Carolyn Dufton Dip.Bus(franchising)

Carolyn is the principal of franchisingplus. franchisingplus is a franchising consultancy advising and mentoring on all aspects of franchising on a national and international basis.

The content displayed is franchisingplus copyright and can only be reproduced or re-published with the acknowledgement of the author Carolyn Dufton. www.franchisingplus.com.au/contact/

No it doesn’t happen often does it?

But it occurred to me whilst flicking through the pages of a business magazine that some Franchisors do appear to be charging too little.

I came across a Franchise organisation with around 50 franchises and “many in the pipeline” so the reader was led to believe.

The ongoing monthly fees were minimal and there was no marketing fee.

So I began to wonder………

How many new franchise systems pluck a franchise fee out of the air?

How many new franchise systems pluck their monthly royalties out of the air?

 …..and  what are the repercussions for a franchise network with franchisee fees that  have not been researched and analysed?

Let’s consider the following;

•  A Franchisor needs to be profitable.
•  A Franchisor is in business and should be in business to make money.
• Franchise fees may be the only income producing source for  The Franchisor.
•  Alternatively a Franchisor may be a manufacturer or a wholesaler of goods to the franchisees in which case fees can be set lower as The Franchisor enjoys profit from the on sale of goods.
•  If there is limited franchisee income, will The Franchisor reduce the level of service and support accordingly?
•  Will the Franchisees ultimately suffer from paying low fees?
•  If there is a double whammy of low fees and no marketing fee, what support are the franchisees receiving?
•  Is the concept of charging a low ongoing franchise fee a deliberate strategy to excuse poor franchise support?

Franchise fees need to be structured to enable The Franchisor to provide an efficient franchise support system. The Franchisor’s operation  is the engine room of the Franchise network and should run effectively for the benefit of all franchisees.

This franchise operation generates its own costs. Franchisees are a Franchisor expense and the costs need to be covered by an income source.

Often when I speak to existing Franchisors in a coaching environment, it becomes apparent that when setting up the franchise system the costs that are incurred in running a franchise operation  had not been considered. The anticipated income from franchise fees had been regarded as an unencumbered income source.

A Franchisor  “going bust” is a nightmare situation for Franchisees. It is a situation that should be avoided at all costs.

Part of a franchisee’s pre-purchase due diligence should include the analysis of The Franchisor’s financial records for the sole purpose of assessing The Franchisor’s solvency and their general financial standing.

A Franchisor who is charging franchise fees at random, and not monitoring the real costs of running a franchise could be putting the system in jeopardy.

The structuring of franchisee fees should be done in consultation with franchise experts and/or accountants who understand the criteria for setting an equitable fee.

© franchisingplus

Author ; Carolyn Dufton Dip.Bus(franchising)

Carolyn is the principal of franchisingplus. franchisingplus is a franchising consultancy advising and mentoring on all aspects of franchising on a national and international basis.

The content displayed is franchisingplus copyright and can only be reproduced or re-published with the acknowledgement of the author Carolyn Dufton. www.franchisingplus.com.au/contact/

The operations manual is therefore a vital business document that needs to be accurate and consistently updated.

The Operations Manual should be a Franchisor’s best friend.

A breach of the operations manual constitutes a breach of the franchise agreement.

Tips for a great Operations manual  

• It is usual for operations manuals to separate Franchisee versions and staff versions. Franchisee versions include the specific details regarding their franchise arrangement and procedures.
• Staff versions are generally operational only.
• Write the manual for the intended reader. If you have unskilled labour or labour with limited language capabilities, ensure that your manual has plenty of diagrams and use very simple language.
• Bullet points make for easy reading.
• Include measurable KPI’s (Key performance indicators) for the crucial aspects of your business.
• Be cautious about including financial KPI’s in the manual. This could be very onerous for a Franchisor.
• Develop a clear procedure for advising franchisees of changes to the operations manual being sure that all Franchisees are made aware of the changes.
• Allow franchisees the opportunity to discuss the changes thoroughly with the Franchisor/team.
• Ensure your operations manual is transparent. Don’t “sneak” changes to the operations manual because you fear the changes may be unpopular.
• Use the operations manual as a starting point for discussion in franchisee meetings. Doing this will enforce the importance and the relevance of the manual in the business and will encourage franchisees to refer to it more often.
• Ask an outsider to review your operations manual to assess whether they can understand the content. It is often hard for a Franchisor who understands the business inside out to explain processes clearly for the first time reader.
• Ensure that the manuals are clear and unambiguous.
• Assess… if any procedure in an operations manual was challenged in a legal dispute, would it be a “black and white” matter, or “grey”. Eliminate any grey areas from your manual.
• Do you have a section in your operations manual specifying franchisee social media guidelines and restrictions? If not you need to develop one now before you have to go into damage control.
• Do you need a written and online operations manual? Which is your preferred method of delivery? Or do you need both?

A well written, professionally presented Operations Manual reflects well on The Franchisor and the brand. It sets the standard of Franchisor professionalism. It demonstrates the level of detail expected by The Franchisor.

The Operations Manual is the first document a new Franchisee will receive after starting the business. Ensure that this first impression is impressive.

© franchisingplus

Author ; Carolyn Dufton Dip.Bus(franchising)

Carolyn is the principal of franchisingplus. franchisingplus is a franchising consultancy advising and mentoring on all aspects of franchising on a national and international basis.

The content displayed is franchisingplus copyright and can only be reproduced or re-published with the acknowledgement of the author Carolyn Dufton. www.franchisingplus.com.au/contact/