In the business world, franchising has emerged as a powerful model that allows entrepreneurs to expand their brand and reach while enabling individuals to realise their dreams of owning a business. At its core, franchising represents a unique franchisor and franchisee partnership. In this blog post, we will delve into what franchising means, how it works, and the dynamics of the franchisee-franchisor relationship.
Understanding Franchising
Franchising is a business model replicating a successful business concept by licensing the brand, products, and processes to independent franchise operators.
The franchisee pays a fee to the franchisor for the right to operate a business under its established brand, benefiting from proven systems, support, and marketing strategies.
This arrangement allows the franchisee to tap into an existing customer base while the franchisor benefits from expanding its brand without having to shoulder all the operational responsibilities.
The franchisor provides the franchisee with an established brand, trademarks, and a proven business model. So, they offer training, guidance, and ongoing support to ensure the franchisee’s success.
In addition, franchisors develop a comprehensive operations manual that outlines all aspects of running the business, from daily operations to customer service standards.
Franchisors often manage national or regional marketing campaigns, benefiting all franchisees by driving customer awareness and foot traffic.
Franchisee Responsibilities
Franchisees invest in the franchise, paying initial fees and ongoing royalties, also known as management fees. This investment grants them the right to use the franchisor’s brand and systems.
Franchisees are responsible for day-to-day operations, including hiring and training staff, maintaining quality standards, and providing excellent customer service.
Franchisees must adhere to the franchisor’s established processes, quality standards, and operational guidelines outlined in the operations manual and franchise agreement.
Franchisees typically pay ongoing royalties or a percentage of their revenue to the franchisor for continued support and use of the brand. This will vary as some franchise models make their income from the products or charge a flat regular fee.
Most importantly, they provide local knowledge and engage with the community locally.
Mutual Success and Challenges
For franchising to succeed, both parties must work harmoniously towards common goals. Franchisees benefit from established brand recognition and support, while franchisors benefit from rapid expansion and increased market presence. However, challenges can arise. Such as:
Consistency – Maintaining consistent brand experience across multiple locations can be challenging. Franchisees must adhere to the franchisor’s standards to uphold the brand’s reputation.
Communication – Effective communication is crucial. Franchisees must provide feedback to the franchisor, and the franchisor must respond to franchisee concerns and suggestions.
Changes and Adaptations – The business landscape evolves, and both parties need to be adaptable to changes in consumer preferences, technology, and market trends.
Successful franchisors have an open and transparent relationship with their franchisees and ensure 360 degrees of feedback through regular communication, franchisee engagement surveys and the establishment of franchise advisory committees/councils. This develops trust between the two parties, and franchisees can share new ideas and give constructive feedback to develop and continuously improve the brand.
Conclusion
Franchising is a remarkable avenue for entrepreneurs to realise their dreams of business ownership while leveraging the success of established brands. The franchisee-franchisor relationship forms the backbone of this model, with each party contributing to the overall success of the partnership.
As the franchise industry continues to evolve, fostering open communication, mutual respect, and a commitment to shared goals will remain essential for unlocking the full potential of franchising.
Watch our Webinar to find out if franchising is for you.
Contact us if you would like to learn more about franchising or discuss different franchise models.
Creating and building a profitable and successful franchise brand involves a lot of factors; having a great product or service, clear vision and strategy, a profitable business model, success for franchisees, franchisor and customers, effective leadership, an organisation with purpose, a great team of staff and good franchisees with solid alignment to brand and a great relationship with the franchisor.
Where the franchisor sets the vision and strategic objectives for the organisation, it is the franchisee that executes the vision with the customer. It is, therefore, important that the franchisee is clear on the vision and run it well. Franchisees aligned to your brand and able to deliver at ground level as was intended.
So, what are the essential ingredients in franchisee recruitment to have the most excellent chance to succeed in your franchise?
Firstly, you need to know what it takes to be successful in your organisation and the attributes that make a franchisee successful in your brand. This might be their work ethic, how they interact with customers, lead their team or specific attributes required for your industry. It will also help understand and identify their characteristics and assess when they apply to be a franchisee. As a franchisor who has been in business, you will be able to train in the practical skills, but you must determine what they are at the recruitment stage to create a development plan before they start in their franchise. You will also need to ensure that they have the financial capital to succeed. In some cases, it can take over twelve months to reach profitability. Therefore, the franchisor needs to understand that the prospective franchisees have enough working capital until profitability is achieved. This will vary for different industries. Finally, you will need to train and prepare them to run their own business under your brand. This may include business acumen and industry skills, brand culture and onsite practical training.
Prospective Franchisee Candidates
It would be best to determine what makes a successful franchisee in your brand. These may be personal or professional attributes. Profile and criteria that contribute to their success.
Some candidates are cooperative, decisive, impulsive, egotistical and often afraid and sceptical. Determine what works for your brand’s success.
Are they able to communicate with your customer and future employees? For example:
Need to be able to communicate with individuals ages between 30 and 50
What is the profile of your prospective franchisee? Gender, age, industry experience, profile. Are they:
husband and wife teams
out-placed executives
partners
existing entrepreneurs
immigrants
Are they able to transition entering into a new world of self-employment?
Do they have support?
It is essential to identify an individual’s decision making, overall attitude, dedication, work ethic, eagerness to engage in a long-term relationship and follow a business operating system. Additionally, an individual’s net worth and education do not correlate to utilising their financial resources and working capital during their start-up phase and a first full year in business. Personality, life circumstances (family, health, marriage, personal interests), local and national economics, employee availability, and customer response must also be factored in; local and national economics, employee availability, and customer response all play into the franchisees’ high, medium and low business results.
While measurable evaluative criteria are essential, controllable and uncontrollable factors (seen and unforeseen) influence the outcome of the business, such as family disruption, illness or divorce. Franchisees may possess all of the measurables of a great franchisee. However, there is no guarantee of their success or failure. High quality and thorough franchisee “interviewing and approval” process will help identify the intangible factors that will lead to success. Even then, there are still no guarantees; however, if you formulate a set of behavioural questions which will objectively evaluate and assist in better understanding the candidates.
When I was recruiting for a restaurant franchise, I used the Nathan Profiler’s recruitment tool to assist in this process.
Once you have determined the attributes and formulated a set of interview questions and a schedule, you will need to advertise to attract prospective franchisees. You may hold discovery days for groups or individuals (these may be in a metro or regional area). The most effective way is to have a robust website with lots of information to enable prospects to understand your brand.
Leverage your website
Before their initial contact with the franchisor, franchisee applicants are armed with much more information today than they used to be. They can compare available opportunities online and typically make a preliminary assumption about whether the opportunity is right for them and, equally as importantly, on the business’s professionalism before they first get in touch. During this initial search, you must make a good impression by attracting prospective franchisees to your website and engaging them to interact and seek more information.
How much is real estate on your website dedicated to franchisee enquiries? Do you regularly update content on your website? Online tools such as Google Analytics allow you to measure who is visiting your website, where they came from, what they are doing and when they leave. Keeping your website regularly updated with fresh, relevant content will allow you to appear higher in organic search results. The higher you appear, the more clicks and franchise enquiries are likely to flow onto your website.
If you do not feature prominently in organic search results, it may be worthwhile investigating a Google Adwords campaign, so you can appear when specific terms are searched. The beauty of this is you can measure how effective every dollar you are spending is at the click of a button. Would you like to be appearing each time someone searches for “Buy a franchise”? Maybe you would prefer to focus on more specific terms such as “Buying a food franchise” or “Buying a beauty franchise”? Like when selling to your customers, it is essential to understand what your target market is looking for and how best to attract them.
Attracting Prospective Franchisees and managing the enquiries
The fundamentals of building trust and awarding franchises to qualified candidates remain highly personal, consultative and relationship-oriented. Do not fall into the trap that website automation and technology are the “be all and end all”.
These shortcuts and impersonal approaches are the root cause of declining contact rates, contributing to failure. It would help if you considered how you communicate via live telephone calls, messaging, and emails, including professionally printed and electronic collateral material, videos on your website and testimonials.
There are varying degrees of etiquette and courtesy on when to contact candidates (hours) and how to respect the value of time. When a candidate is serviced professionally during this partnering process, they will be much more receptive to your field support representatives throughout the life of your working relationship.
Types of franchise inquiries.
Live telephone inquiries
Internet portals
Consultant referrals
Tradeshows
Corporate website
Customer referrals
Qualifying Leads
It is crucial to ensure your franchise opportunities page encourages people to search for information (essentially pre-qualifying themselves). By the time they contact the franchisor, they already understand the business and the offer. You only need to look as far as Ben & Jerry’s to see an inviting franchisee enquiry page. Videos are intuitively interactive and provide a great tool to promote the opportunity. If prospects are comparing options, they will seek to see clear points of difference. You should already have defined your franchise offer, so communicating the benefits should be relatively straightforward.
Lead Management:
One of the essential things about pre-qualifying leads online is being as transparent as possible and explaining the process. This indicates the business’s professionalism and sets a good benchmark for the rest of the process. It is worthwhile to outline the recruitment process carefully so the applicant knows what to expect. Dominos has a straightforward application process outlined on their website, so the prospect is already informed of what lies ahead for them.
Items to consider to process and manage prospective leads:
Each inquiry is a human being with dreams and aspirations.
Each individual should be treated as a customer, not a lead, regardless of their financial or educational pre-qualifications to own your franchise.
Each prospect deserves an equal opportunity to be considered.
We are courting individuals more than qualifying leads.
Regardless of the lead source, each inquiry should be processed fairly and equally.
Franchise Approval/Accreditation Process
Detail the process, so candidates know what to expect. For Example:
Initial enquiry
Telephone calls (1, 2 or more)
Franchise application submission and confidentiality
Interviews (individual and/or panel)
Accreditation
Induction and Training – culture, marketing and support.
Include information along the way on the positives and detail any obstacles and challenges they will encounter throughout the journey. Include details on training such as industry or non-industry professional experience they require or will receive from the franchisor (restaurant, retail, etc.).
Franchisee Funding:
It is essential to request an in-depth financial analysis of their completed franchise application (unique net worth composition).
Ensure their net worth has been pre-qualified to complete your discovery process.
Provide funding strategies and consult with your franchisee candidate on various methods of funding their business.
Disclosure and Validation:
Franchisors must not give prospective franchisees misleading or deceptive information and follow the Franchise Code of Conduct. As part of the legal compliance steps, franchisors must provide information to prospective franchisees. For instance, you must provide your candidates with a Franchisor Information Statement. This will assist the candidates in understanding your business and its purpose.
Individuals who want to learn more about franchising and determine if franchising is the right investment choice should consider completing the ACCC free online course. You will know how franchising compares to independent small business ownership, what you are likely to find in a typical franchise agreement, why it’s essential to do due diligence and some of the common issues you can face. Franchisors should consider recommending the course to ensure that prospective franchisees understand what it takes to be part of a franchise system.
Manage the Franchisee Recruitment Process
It is one thing to generate good leads, but appropriately managing the recruitment process and selecting the best franchisees is equally essential. Many disputes in franchise networks are caused by something that occurred during the recruitment process. So, please do not assume that prospective franchisees’ advisors cover essential information. Include clear and simple information that is easy to understand and provides ample opportunity for the applicants to ask questions and make informed decisions.
Final comments
The common saying in franchising is:
You get the franchisees that you deserve!
So, ensure that you understand the factors that help franchisees succeed in your brand, set up a profile, and then build a recruitment process that helps you identify these factors in prospective franchisee applicants. Additionally, it is necessary not to take any shortcuts when recruiting because this could have devastating consequences in building a successful relationship with franchisees. It is essential to use the recruitment process to identify applicant skill gaps that you need to address before starting their business, creating a robust induction and training program to prepare them for success. Recruiting the ideal franchisee is not simple but will lead to mutual success for the franchisor and franchisee when done well.
