Common mistakes made by franchisors
If you are a franchisor, or are in the process of franchising your business, keep in mind these common mistakes made by franchisors.
- Not investing in expert advice
Franchising is a complex and specialised industry. Before you franchise your business you should take time to properly research and invest in advice from the experts. Professional consultants will carry out a franchise feasibility study for your business and provide you with the tools you need to franchise effectively. The feasibility study is a key part of the process as this will indicate the areas within your business that require additional work to be successful in the franchise industry. The experts will have the know-how and the connections you will need to make sure you are franchising correctly and ethically.
- Not reviewing regularly
Franchise systems need to be reviewed on a regular basis to ensure they are running effectively. Changes in the economy, buyer-trends and fashion can alter the way franchises need to trade. Ignoring the review process will negatively affect both franchisor and franchisee. The franchisees will not be able to successfully operate their businesses using a flawed system. An objective opinion can be a worthwhile way to check over the systems in place and to see where gains can be made.
For best practise, franchise agreements should not change from franchisee to franchisee. The agreement should be the same for everybody to ensure consistency and fair deal. Often franchisors will be eager to close a sale of a franchise and to do so will adjust the franchise agreement to secure the deal. This can result in each franchisee having a slightly different deal to each other.
Inconsistency can also occur in terms of the amount of support or benefits the franchisees receive. This can result in a franchisee being at a disadvantage to the others which may result in less profits or a break in the franchise agreement.
It is important that the franchisor keeps a keen eye on the consistency of the franchise and ensures any situations are handled carefully and effectively.
- Not enforcing compliance
The franchisor/franchisee relationship is very important and not to be underestimated. Part of that relationship is being able to lead or to be led. It is the franchisor’s obligation to protect the brand and the systems on behalf of the franchisees. To do so, franchisors will need to ensure all franchisees are being compliant with the approved systems and services provided. By turning a blind eye to one franchisee, others may soon follow suit and this will result in loss of profits and damage to the brand. The key is to be firm but fair when enforcing compliance.
- Compromising on franchise recruitment
Franchisors can sometimes be so determined to recruit their first franchisee, or to grow their franchise quickly, that they compromise on the calibre of the candidate. If you do not carefully consider each candidate then they will be doomed to fail. As a franchisor, it is your responsibility to make sure the prospective franchisee is suitable for the franchise, and the franchise is suitable for the candidate.
By appointing the wrong franchisee, the long-term income potential could be negatively impacted. You may also have a very difficult franchisor/franchisee relationship on your hands. To ensure great franchisee selection, consider quality over quantity.
If you are in the process of franchising your business, or feel you need some expert business advice, contact our team of consultants today.
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