Burying your head in the sand and hoping your problems will go away will NOT WORK.

Being in denial of re-occurring issues in your franchise will only lead to a massive blow out of the issue …whatever it may be.

Remember, that since March 2008 when the new disclosure changes occurred, you must disclose

ALL YOUR FRANCHISEES’ CONTACT DETAILS – Past and present.

There’s no picking the best of the bunch to act as advocates to franchise prospects as has happened in the past.

Typical “Ostrich triggers” for  Franchisors are ;

Underperforming Franchisees

Complaining and negative franchisees

Out of date and inaccurate franchising documentation

No growth in network numbers

No plan

No support. A franchisor’s role can be a lonely one at times.

The impact

 So how can these issues affect your wellbeing and your business? And what can you do about them?

Underperforming Franchisees

These franchisees will affect the network morale.

Underperforming franchisees =unhappy franchisees.By being proactive in your network you can prevent many problems from arising

 Be aware of general underperformance and also of a sudden drop in sales figures. Are there extenuating circumstances?

Do you have systems for measuring and dealing with underperformance?

Most importantly do not ignore these people and hope the problem will go away. You do not want them to fail in their business as this will impact on the whole Franchise network.

Deal with their situation sensitively, effectively and expeditiously.

Complaining and negative franchisees

Meet with these franchisees individually.

They are often not so vocal without an audience.

Try and understand where the root of their dissatisfaction lies. Don’t talk – listen and allow them to vent their grievances.

These franchisees can be the bad apple that rots the barrel.

Once you have more insight into the franchisee’s situation you will have to decide how best to deal with it.

You may need to seek external guidance from a franchising professional with mediation skills.

Out of date and inaccurate franchising documentation

Some franchisors have franchising documentation that was prepared by solicitors with minimal franchising experience.

This may not present a problem when all is going well (although is not ideal) but can involve serious risks for The Franchisor if a franchisee seeks legal advice.

 Documentation should be as a minimum:

•  Up to date with the 2008 changes. ( I have seen many that aren’t when franchise prospects are seeking advice on a franchise purchase – and it doesn’t reflect well!)
•  Clear and unambiguous
•  Compliant with the Franchising Code of Conduct in all regards

 No growth in network numbers

Unless a Franchisor has reached his National capacity, this suggests underlying problems.

The longer between Franchise sales, the harder it becomes.

It is also demoralising for existing Franchisees.

Seek urgent advice and assistance to get your network rollout plan on track.

No plan

A Franchisor must lead by example. If the Franchisor doesn’t plan, It is likely that neither will the Franchisees.

We all know the old adage “A business that fails to plan , plans to fail “.

Sit down with the decision makers in your business and work out your plan for 2010 and beyond.

 If it’s all too hard, seek help, but don’t find excuses for not doing it.

 No support.

 I know that a Franchisor’s role can be a lonely one at times. I’ve been there!

 If you’re a sole Franchisor with no business partners, you have no-one to confer with.

You can sometimes feel unappreciated or frustrated and have no sounding board.

Try to find a business mentor. An experienced business person who also understands the human psyche and the reality of being a Franchisor and the many roles you play in your business. Counsellor/diplomat/adviser/teacher…… and the list goes on!

So make this year a great one Franchisors!

© franchisingplus

http://franchisingplus.com.au

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/

Creating a system requires both an investment of finance and time and external professional direction. No business should proceed down the franchising path without a full analysis and awareness of their business.

Some Pre-Franchising FAQ’s

 Q. Can I put together my own franchising system?

•   Technically yes, providing you comply with The Franchising Code of Conduct and prepare the relevant documentation. Being mindful of not contravening the TPA which governs the code.

 Q. I think I know how much to charge franchisees. Can I make the decision about this?

•  As a Franchisor you have huge potential and scope to charge a wide range of fees. A franchise feasibility study  will provide insight into how and what to charge.

Q. Is creating a franchise system an expensive process?

•  Creating a franchise system responsibly is a lengthy process. None of our clients have ever complained about their investment after the process as they have seen how much work is involved.

            fp+ have an instalment plan in place which eases the process.

            It is common for the sale of the first franchise to cover the franchise costs.

 Q. I don’t know anything about franchising! How do I know if franchising is right for my business?

•  Firstly read as much as you can about franchising.
•  Secondly, the feasibility study is comprehensive and will provide clarity about whether you and your business are suited to franchising.

 Q. How long will it take to franchise my business?

•  After the feasibility study has been completed, it is usual for a 6 month process to be undertaken. During this time the system is created together with franchise documentation.

 Q. Do I need a lawyer?

•  Yes and it is imperative that a lawyer with franchising experience is used. Engage a franchising advisor who will work collaboratively and extensively with lawyers to create the full franchising complement.

© franchisingplus

http://franchisingplus.com.au

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 process in which the participants, with the support of a mediator, identify issues, develop options, consider alternatives and make decisions about future actions and outcomes. The mediator acts as a third party to support participants to reach their own decision.”

Mediation is used successfully with relationship issues, workplace relations between employees, B to B disputes and certainly in franchise disputes.

A mediator does not judge or advise, they simply facilitate open discussion between two parties, with a view to coming to an agreement that both parties can accept.

The benefits of mediation are many. The obvious one being that mediation is simpler and less expensive than a court of law.

Mediation allows issues that may have been suppressed, to be aired and expressed in a safe and neutral environment. This can be very helpful in a workplace where poor working relationships can affect staff performance and general morale.

A disagreement between businesses, perhaps involving service delivery and payment is often mediated successfully leaving both parties feeling that the issue is resolved and that they can “move on”.

75% of all franchise disputes mediated reach an agreement in only one mediation session.. The Franchising Code of Conduct stipulates that if either franchisor/franchisee requests a mediation process that the other party must attend and share the mediation cost.

Advantages of using mediation to resolve issues in your workplace or with clients/ suppliers.

• Confidentiality (to the extent permitted by the law)

This is of great benefit as the terms agreed to within the mediation do not set a precedent.
Concessions can be made without others knowing.

• Everyone has a chance to have their say.

• Cost effective. Much cheaper than the courts.

• Time efficient. The courts process is lengthy and stressful.

• Mediation allows for often creative and satisfying resolutions to be achieved.

Not all situations are ideal for mediation but the mediator will determine the suitability at a preliminary meeting held privately with each party.

Mediation when used appropriately and conducted professionally and neutrally is an extremely powerful process.

© franchisingplus

http://franchisingplus.com.au

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/

Are you enticing new Franchisees?

…..and if so are you breaching The Franchising Code of conduct?

“Want to go to Hawaii?” the headlines shout.

Is this an advert for a travel company or an airline?

No, this advert appears in the Business and Franchise Opportunities in a newspaper column. The “carrot” is, if you buy this franchise for $ 200K, you will also get a “free holiday.”

This type of advertising for new franchisees is disturbing and hopefully not the beginning of a new trend.

Has the economic downturn driven Franchisors to desperate measures? And does this type of advertising really pay dividends for The Franchisor or the incoming Franchisee?

In addition to sensationalised advertising to entice new franchisees, it is also apparent that some Franchisors are finding ways to cleverly avoid certain aspects of the franchising code.

Whilst the Franchising Code of Australia dictates that Franchisors must disclose all materially relevant facts about their business, and encourages Franchisees to obtain professional advice before signing the franchise agreement, it would appear that some Franchisors are finding loopholes to avoid full disclosure before payments are made.

Take for example the recent case of a franchisee being offered training prior to the disclosure document and franchise agreement being provided. The Franchisee accepted the offer to undertake training as “training programmes are only offered periodically and you’ll miss out”.

The Franchisee then made a non-refundable payment for training and attended the course.

Some three weeks after training, the disclosure document and franchise agreement had still not been provided and the franchisee has not been able to commence business operations.

This company is not a small franchise company who could claim any form of ignorance of the Code. The company is a national company with 00’s of franchises. This company is in breach of the Franchising Code.

One must ask, is this a deliberate policy of franchisee enticement?

It is also “standard practice” according to one franchising lawyer, that franchisees are asked to sign letters of intent and pay large sums of money to The Franchisor which according to the letters are “refundable less costs”. Unfortunately, as the letter of intent is issued prior to the provision of the disclosure document, there is no way for a potential franchisee to ascertain what these costs could be.

Furthermore, how can a potential Franchisee conduct any meaningful due diligence until a full list of Franchisees has been obtained as is provided in the Disclosure Document.

One must ask the question, what is the intention behind the signing of a letter of intent and a large amount of money being paid?

Why is not possible for a generic disclosure document and agreement to be provided before the letter of intent is signed?

Who are the franchising professionals putting this type of documentation together? And what are their intentions?

Could this practice ever be considered as “best franchising practice”? I think not.

Surely, the Franchising Community should be working together to create a transparent, clear franchise recruitment process.

A process;

where Franchisors can find ways of engaging with sincere prospects’ applications in an unambiguous manner.

where unsuspecting naïve potential Franchisees are not being “reeled in”.

There are no winners here.

No Franchisor should want to “entice” franchisees into their network.

Franchisors should be seeking high quality Franchisees who will add value to their network and not compromise their existing Franchisees by recruiting the” first body with a wallet.”

If times are tough and Franchisors cannot recruit new Franchisees, then they should recess and reassess.

They should use the time to re-evaluate their recruitment methods, and their offer as a Franchisor.

Enticing Franchisees is a destructive process that will end in tears.

© franchisingplus

http://franchisingplus.com.au

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/

Establishing KPI’s in your franchise often means going back to basics, and exploring the fundamentals of your franchise.

Are your franchisees achieving what they want from their business? or are they complaining that they can’t make any money?

Is your system flawed? and if it is are you brave enough to firstly acknowledge that there is an inherent problem and THEN seek professional advice to restructure?

It is futile to expand a franchise network where existing franchisees are not making money and are unhappy in their business.

It is widely recognised that many franchises were started by Franchisors plucking royalty percentages out of nowhere, or using the “average industry norm.” As every franchise system is different, it is unwise to use percentages or flat fees without first conducting some form of financial feasibility study.

In a franchise where no real due diligence was performed when creating the franchise system it is common for franchisees to complain about the lack of profit in their business.

It is The Franchisors responsibility to re-examine their business to create a profitable model. This then creates the solid foundations necessary for the business to grow effectively.

A franchise system can be “re-invented” for the benefit of all.

Being a Franchisor can be compared to being a parent of a very large family. Some of your franchisees are “problem children”, to some you’re a proud parent, and others you hardly notice because they just plod along achieving mediocre results without rocking the boat.

Sometimes the easiest approach is to adopt a “re-active” position. If and when things go wrong you try to fix things, appease the people and move along until the next time. Many Franchisors adopt this “head in the sand” attitude.

Let’s examine this situation more closely to consider why an alternative approach would be more constructive.

Carefully constructed K.P.I.’s (Key Performance Indicators) can assist both The Franchisor and the Franchisee in measuring anything in the Franchise business that the Franchisor deems to be of importance.

Ensure that what you track has a big impact on your success results. Concentrate on the things that really matter.

For a busy Franchisor and in order not to burden franchisees, simplicity is the key in structuring your K.P.I.s.

• K.P.I.’s can include areas such as quality control, lead conversion rates, marketing strategies and sales figures.
• K.P.I.’s provide information for the benefit of the Franchisee, who can measure their own performance in an effort to improve their business overall.
• K.P.I.’s are a reliable source of information for The Franchisor who can step in to address any areas where the Franchisee’s performance levels are not meeting defined levels.
• K.P.I.’s allow a level of pro-activity on the part of The Franchisor before a situation worsens.
• K.P.I.’s present an informed, factual report opposed to a vague perception or concern.
• No Franchisee can ‘slip under the radar’.
• Regular reviews of K.P.I.’s by the Franchisor and Franchisee opens up the communication channels in a systematic format. Even the worst communicators can discuss K.P.I.’s.

Ideally a potential Franchisor should identify K.P.I.’s in the initial stages of formulating their franchise system with their franchising adviser.This allows for K.P.I.’s to be included in the franchise documentation and to form part of the franchise agreement.

This has many benefits including providing security to Franchisors in the case of underperforming Franchisees.

As K.P.I.’s should be specific and defined, this also provides clarity to a Franchisee who then has defined performance measurements to assist them in fulfilling their obligations as a Franchisee.

Newly introduced K.P.I.’s can be confronting to a franchise network. So seek professional advice about how to establish and identify the K.P.I’s in your business, and then on how to introduce them into your network and your franchise agreements.

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 Franchisee is a business owner who owns a franchised unit, for example a Bakers Delight, Subway and many many more less well known brands.(please note I am not suggesting that any Bakers delight or Subway franchisees are disillusioned!)

As a franchising consultant, I see a fair few franchisees, and due to the nature of my work, many of them are very disillusioned.

It is most advisable for a franchisee to be referred to or to seek out a franchising expert if they are having problems or are just generally not happy in their role. 

Often after just a one hour meeting with a franchising expert problems, which are often in essence very simple, can be talked through and resolved. To the Franchisee at the time they seem insurmountable but after sharing with an objective expert ear the “problems” are often overcome. 

In my experience, the most common reasons for disillusionment are: 

• The potential Franchisee had no, or poor, initial advice and education.
• The Franchisee did not really understand the nature of franchising when buying the franchise.
•  The Franchisor (i.e. the owner of the Franchised system) does not really understand the nature of franchising. As ridiculous as that sounds it is not uncommon.
• The Franchisee has genuine cause for real concerns, which a Franchising Consultant can help the Franchisee address. This can sometimes involve discussions with the Franchisor.

There are complaint handling procedures stated within the Franchising code and a franchising consultant should be aware as to when these procedures are relevant. The Franchisor is then obliged to attend mediation. It is always recommended that mediation should be attempted before seeking legal action.

I have found that the troubled franchisees I have seen over the years have found a great benefit in sharing their concerns with an objective, experienced third party and have found clarity in their situation.

It is my hope that ethical Franchising Consultants and lawyers will be preparing new franchise systems that are based on “responsible franchising” and best practice methods, that will reduce the number of disillusioned franchisees in the future.

© franchisingplus http://franchisingplus.com.au

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 re-published with the permission of the author. www.franchisingplus.com.au/contact/

Much is discussed by franchising “experts” and government bodies about introducing more legislation to improve the world of franchising.

But how much would increased legislation actually reduce franchisee risk?

Potential Franchisees are advised to seek professional advice from a lawyer, accountant and consultant. How many lawyers and accountants are really “au fait” with franchising practice?

How many professionals would admit to clients that their franchising knowledge is minimal?

And how often do potential franchisees not seek any advice at all?

I cite a recent incident where a potential franchisee was about to “put their house on the line” and yet refused to pay for a one hour consultation with a franchising expert.

And what about all the unscrupulous franchisors we hear about? Would legislation keep them on track and turn them all into Mr and Mrs nice guys?

Perhaps the key to creating “best franchise practice” is more about educating potential franchisees and franchisors to the reality of franchising.

Will increased legislation increase the development of clever loopholes? This is happening now in Australia, the most highly regulated franchise system country with a mandatory code of conduct. Loopholes always exist for the devious.

Do some franchising consultants need more education? Education in ethics perhaps?

Who is assisting Franchisors in creating franchise systems that are doomed for failure?

Or can we blame the “franchise in a box” type of documentation for assisting new franchisors to create their own inadequate and onerous franchises,

Franchising professionals should have confidence and pride in creating a fair, well structured, franchise system which ultimately creates a profitable franchise system for franchisees and franchisor alike.

The debate will continue in franchising circles around the world and so it should. Only, by extensive honest and thorough discussion by informed parties, will the franchising world be equipped to develop best franchising practice as “the norm” not the exception.

© franchisingplus http://franchisingplus.com.au

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 re-published with the permission of the author. www.franchisingplus.com.au/contact/ 

The International Franchising Association Code of Ethics states that the following points are essential ingredients in good franchising;

Trust, Truth and Honesty – Are the foundations of franchising. 

Mutual respect and reward – Result in winning together as a team. 

Open and frequent communication – Successful franchises thrive on it! 

Obey the law – This refers to all laws including compliance to the franchise system. 

Conflict resolution – Deal with potential conflict swiftly and effectively.

So how does a franchisor apply those “ingredients” to a franchising network?

• A Franchisor should insist on compliance of the franchise sytem by all franchisees. This provides security to franchisees and ensures the brand’s reputation is upheld.

Make sure you have no favourites who get away with murder!

This is very common! 

• The Franchisor should lead by example and set a culture and standard of excellence for all franchisees to follow.

Remember, “do as I do” is much more credible and powerful than “do as I say”

• The Franchisor should demonstrate strong fair leadership qualities.

This will result in respect from the Franchisees. People need a leader.

• There should be ongoing product and systems development by the Franchisor. The development plan should be shared with all franchisees.

A business that stands still can stagnate. R & D should be an integral part of any healthy franchise organization 

• The Franchisor should show empathy to any Franchisee’s concerns and provide constructive feedback. A Franchisee’s concerns should never be dismissed or ignored.

A disillusioned franchisee can cause disruption to the whole network. It is in The Franchisor’s interest to deal with the Franchisee’s concerns effectively and expeditiously. 

• Franchisees buy into franchises as they are buying into a proven system.

Franchisees should never be used in a testing situation without consultation and their approval and consent.

• Good franchising practice creates a WIN – WIN situation for both Franchisor and Franchisees.

If as a Franchisor you don’t embrace this fact entirely, then you will and your franchise network will suffer the consequences.

© franchisingplus http://franchisingplus.com.au

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 re-published with the permission of the author. www.franchisingplus.com.au/contact/ 

I don’t want to be a Franchisor anymore!

As a Franchisor have you ever felt like that?

The answer to that could depend on:

• The length of time that you’ve been a Franchisor.
• The number of franchises in your network
• Your initial reason for franchising in the first place
• The level of support you have from family
• Your internal management structure.
• The strategic planning within your business
• Your commitment to goals
• Vision
• Succession planning

This is a lengthy topic, but one that my day-to-day contact with Franchisors leads me to believe deserves attention.

It is well acknowledged in the franchising sector that Franchisees go through developmental stages;

Initially there is dependence on the Franchisor.

This changes to independence where the Franchisee can feel that they no longer want to be a Franchisee. They can “do it on their own”

Ideally, the Franchisee, with guidance, works through this stage and the end result is interdependence, which is the ideal working relationship between Franchisor and Franchisee.

Greg Nathan refers to these stages as The Franchise E-Factor.

However, little has been researched or documented on the development stages of a Franchisor.

We would LOVE to have your contributions and personal experiences as Franchisors on this topic and have prepared a questionnaire, which you can complete anonymously on this subject.

Please download the questionaire by clicking here and return to us.

http://franchisingplus.com.au

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 re-published with the permission of the author. www.franchisingplus.com.au/contact.htm.

Many people have aspirations of franchising their business but have absolutely no idea at all of the reality of doing so.

 Some people have franchised their business but are not calling it a franchise when legally they should. They think they can choose how to categorise their business, whereas the reality is that franchising is a highly regulated industry. If a business falls within the technical definition of a franchised business, one cannot choose to call it anything else and therefore all franchising procedures should be implemented.

 Others sensibly admit that they know nothing about franchising but would like to know more.

 Franchising can indeed be a minefield. The worst “minefield experiences” are with businesses that have attempted to franchise themselves with no professional advice or input from the experts.

 They have opened themselves up to potential litigation by breaching the Trade Practices Act every which way. Disgruntled franchisees will have no problems “bringing the Franchisor down” as a result of sloppy legal and operational documentation or lack of it. The sad part is that the rectification of such cases often costs the Franchisor much more in the end than if the business had sought professional advice from the very start.

 Potential Franchisors tend to be very entrepreneurial. They have big plans for their businesses.

This is great, when the Franchisor has;

• Created a proven profitable business system

• done their homework
• researched franchising as a business system.
• Is prepared to invest in franchising advice to create a professional system.

 BUT unfortunately and all too commonly it is sometimes just a case of ;

• A business trying to sell a “good idea” rather than a proven business operation.

• A business gambling on the success and selection of their franchisees on a hunch.
• Territories being chosen with the flick of a pen and no research data.
• The franchising documentation is created with the help of the local conveyancing lawyer.(at best)
• An attitude of “Everything will work out fine.”
• ” I can do it myself. I don’t need help. Think of the money I will save.”

 There certainly are fantastic opportunities available for a good Franchisor who is keen to achieve a  “win win” situation with potential franchisees.

It is crucial however that any potential Franchisor should consult with experts on how to structure the new franchised organisation in order not only to comply with legislation but just as importantly,   to create a harmonious and potentially very profitable enterprise.

 It is advisable, that before a business launches into the franchising process; they should produce a thorough business plan to self assess their viability to franchise.

There are products available to help Potential Franchisors self assess the suitability of their business and themselves to franchising. Franchising is not just about the business, it’s also about the Franchisor’s ability to create and maintain relationships.

 If the business owner then/still feels that they have a potentially “franchiseable ” business, they can then proceed to the next stage, which is for a franchising consultant to research and explore with full consultation with the client, the feasibility and viability of franchising the business.

 Franchising is a very specialised area and it is not for the half hearted. Any business vaguely considering franchising should research everything that can be found about the topic. 

Most importantly, businesses must do their sums. They must know how much the process is going to cost.

Time and money spent on franchising a business professionally and with lengthy consultation and consideration is truly an investment. If done professionally, the returns both financially and personally, should far exceed the expenditure.

http://franchisingplus.com.au

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 re-published with the permission of the author. www.franchisingplus.com.au/contact.htm.