The most successful franchise relationship are built on a foundation of mutual respect between franchisors and franchisees. Much like a marriage, these relationships require open communication, collaboration, respect, trust, care and commitment in order to work. In their very nature, franchise relationships are characterised by an interdependence which requires the franchisee and franchisor to commit to the success of the other. Franchisors and franchisees need each other to succeed.The franchisee-franchisor relationship is more than a business agreement. The recipe for success is in these seven essential ingredients:
Shared values
A poor fit and lack of shared values is one of the main reasons franchise relationships fail. Before investing in a franchise, you should have a thorough understanding of the franchise and how it operates, be enthusiastic about the company, share its values, and feel excited and confident about contributing to its successful expansion. Importantly, you must believe in the products or services that the franchise offers. Think about it; how can you sell or evangalise something you do not believe in?
Likewise, franchisors need to be discerning of franchisees. If they are not picky enough, they will pay the price with a weak system and badly performing franchisees. So it is important for franchisors to recruit franchisees that understand and align with the company's mission, vision and business model. If there is a bad fit from the get-go, the franchise partnership is unlikely to succeed.
If a franchisor is dishing out franchises to anyone, rather than being selective about who they trust with their brand, consider it a red flag and move on.
Excellent communication
Excellent communication is the most important ingredient in every relationship, including franchisor-franchisee partnerships. A franchisor’s first priority is to develop and protect the franchise system and its brand so that franchisees across the network can prosper. From the beginning of the relationship, vision, mission, regulations, expectations and standards should be communicated.
But, communication should be open, participative and bi-directional. Franchisees should not feel as though they are being governed or left unheard.
Franchisors should have processes in place to encourage communication and engagement with franchisees. Regular meetings, conferences and feedback mechanisms must be available to facilitate open lines of communication.
Franchisors that invite and value franchisee’s input benefit from a stronger franchise system that has a culture of collaboration. A culture of engagement and collaboration strengthens the brand and improves the opportunity for success. If this is not there and you feel as though there is a lack of communication or you are not being heard, is it the kind of relationship you want to be in?
Education and support
There are tremendous benefits associated with buying into a franchise. Amongst the biggest advantages are the training, support and credibility that come with it. Any well established, self-respecting franchisor would want its franchisees to be educated on the brand, its products and services, as well as be trained on their models, tools and systems.
Franchisors should provide support to franchisees to assist them in running and growing a successful business. This promotes operational efficiency and improvement of overall business performance.
For their investment into a franchise, franchisees can also expect support with marketing, sales and admin. Franchises often assist with lead generation and referrals which can help franchisee to get business lined up.
In return, franchisees are expected to operate the business according to the franchisor's way. The top reason why franchisees fail is because they aren't following the franchisor's system. Read our tips on choosing a franchise.
Set framework and tools
Running a business is a juggling act, especially as a new business owner. Almost every aspect of your business is your responsibility so it can be difficult to keep up with business operations, marketing and finances. The beauty of buying into a franchise is the proven approach, tried and tested methodologies and structure which mitigates the need to learn what works by trial and error.
A well established franchise will offer access to systems, tools, support material and models to help business owners to run their businesses efficiently. For example, our ActionCOACHes have access to the library of proven systems, tools and processes. Franchisees should carefully assess different franchises to determine what exactly they will be getting for their investment.
Similarly, franchisors must demonstrate their commitment to investing in their franchise systems, striving for constant improvement and offering innovation and cutting edge tools and technologies.
Goal orientated and growth driven
As with any relationship, there should be a vested and common interest to work towards and meet shared goals. Franchisors and franchisees should challenge one another to drive performance, elevate standards and streamline operations to ensure the best growth. The franchisor should set clear goals both for the short-term and long-term.
Growth targets and goals should well-documented so that both sides are on the same page. Franchisors should also work continuously to enhance systems and control across the network and ensure that franchisees are meeting key performance indicators. After all, a franchise is only as good as its franchisees.
When franchisees understand the goals and can see the value in being part of the network, they are more likely to strive for growth. Franchisees that are engaged and continue to grow will not only benefit themselves, but the entire franchise network.
Honesty and transparency
Honesty and transparency form the basis of every trusting relationship. A great franchisor is honest and transparent about fee structures, earning and profit potential, the rules of engagement, as well as any challenges that a new franchisee might face. Franchisees should be kept informed about changes and new developments at the franchise level that could affect their business.
When purchasing a franchise, you will sign a contract for a set amount of time. The agreement will cover the rules and conditions of the franchise. If there is anything that is unclear or makes you uneasy, query it. It is worth consulting with a legal advisor to make sure that you understand your rights and obligations under each clause.
Franchising in Australia is regulated by the Franchising Code of Conduct. Before entering a franchising arrangement, you should be given certain documents including your franchise agreement, code of conduct and disclosure statement.
Talk to other franchisees for feedback on their experiences and any issues they might have faced with the business model or dealing with the franchisor. If lack of transparency surfaces as a common complaint, move along. Download our guide on what to consider as a first time franchisee.
Profitability
For any franchise and franchise relationship to be sustainable, it must be profitable for the franchisee and the franchisor. As a prospective franchisee, it is important to do the due diligence to determine whether a franchise will be profitable.
Don’t be blindsided by promises. Carefully evaluate the earning potential of the franchise against the costs of investing into it. You might be bound by rigid pricing structures or geographical locations that could limit your earning potential. Do the math and be realistic about what you could earn.
Ask to see the franchisor’s financials and talk to other franchisees in the network about what you can expect in terms of profits. The more you explore other owner’s financials, the better you can predict your own.
On the flip side, franchisors want franchisees that are committed to maximizing the profit potential of the business and growing the brand. This doesn’t mean simply having strong sales. It also means keeping satisfactory margins and controlling costs.
Franchisors spend thousands of dollars every year to grow their brand. As a franchisee, you’ll be expected to do your bit to ensure that your business, and the franchise as a whole, is profitable. [stm_sidebar sidebar="619"]
