10 things that make a great franchisor

What makes a market leading franchisor so much better than their competitors?

1. Consistent execution of the fundamentals

At the heart of any business is the customer proposition. While this may seem so basic that you may say that every business has one, the best practice franchisors have a focus on the customer proposition that develops loyalty and keeps them coming back. There is an understanding that each customer is more than just one transaction and that the ‘lifetime value’ of their customers is many multiples of the first transaction. This lifetime value is being calculated and bench-marked across the network.

2. Well defined KPI’s, bench-marking and financial reporting

Alfred P. Sloan, the Head of General Motors in the 1950’s, said “The purpose of an enterprise is to make a profit”. Franchise systems that flourish have highly developed point-of-sale systems linked to management reporting processes that measure and benchmark KPI’s across the network. Many best-practice franchisors publish store by store profit and loss, and educate their franchisees on how to analyse this data and their performance relative to others in the group.

3. Comprehensive compliance management

A complaint of many dedicated franchisees is that the franchisor is soft on compliance and is letting other franchisees operate poorly which reflects badly on their franchise and ultimately its value. These dedicated franchisees soon sell-up and migrate to networks with more professional compliance standards. Great franchise systems understand that the customer promise conveyed by advertising and marketing must be faithfully reflected at the customer end of the business.

4. Field staff as coaches, not auditors

The best franchise systems are focused on developing their franchisees to become better business people through education rather than policing. It’s important that field staff don’t develop a culture of blame, and instead, take every opportunity to earn the confidence of each franchisee. Quality field staff develop far better franchisees and businesses when they have invested the time to listen and understand each franchisees goals and motivation.

5. A focus on the value of intellectual property

Real champions are brand champions! They understand that the brand is one of the few ways to add a premium price to an otherwise commoditised product or service. We see the best franchisors don’t just focus on the trade mark and colour scheme alone but understand their intellectual property also embraces systems, processes and documentation.

6. Real marketing and advertising muscle

Nothing builds a business like a commitment to advertising, both nationally and locally. Together with strategic marketing from head office, many leading franchise systems enable, train and even expect their franchisees to lead local area marketing activities. This is because the market leaders understand that marketing can drive community engagement and going beyond the storefront or printed vehicle, out into their local community creates many more opportunities.

7. Continual innovation

Innovation is how the best franchises keep ahead of the pack. They realise that competitors will eventually copy the market leaders and understand that differentiation is important – not just in product but in every aspect of the business.

8. Supply chain management

When franchisors start to treat their suppliers as strategic partners they start to approach best-practice, not only in franchising but in business generally. By harnessing the know-how and experience of their suppliers, good franchisors find a willing partner in new product research and development because suppliers understand that assisting customers to grow will result in increasing sales volumes.

9. Sound two-way communication

The franchisor-franchisee relationship is the cornerstone of a successful franchise network. Those with higher franchisee satisfaction find better execution of growth and change strategies. Strong two-way communication between head office and franchisees help build a trusted network that can support new ideas, and make difficult change management programs successful. This communication process often starts with an open mind, and a willingness to listen and respond to franchisee concerns. The process of monitoring and responding to franchisee concerns is where great franchise networks excel. Franchise advisory councils, franchisee product development input, regional advertising committees and annual conferences are all hallmarks of outstanding franchisors.

10. Induction & ongoing training

When a franchisee applies for a franchise, they do so because they want the support and expertise of the franchisor and brand. If the recruitment and selection processes are professionally developed and executed, every franchisee will understand the standards expected, and the processes they need to follow in order to be successful. However, good franchisors understand that the initial induction and training are merely an orientation process – the real training is continual, and really gets started after the first few months of trading.

Almost all networks that fail to thrive lack many of the above key features. Great franchise networks are also great businesses, and are constantly monitoring the outcomes, and seeing how they can improve. How well each feature is developed and executed can determine a franchise’s position in this competitive environment, both nationally and internationally. The value prize for excelling in best-practice is market leadership, and the rewards it brings for all stakeholders in your business, including customers, staff, franchisees and shareholders.

Want to know more about becoming a franchisee? Start with the mistakes to avoid when buying a franchise.