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Anita du Toit - Franchising Plus

The first obligation of management is acknowledging that the franchisees are stakeholders in the company. Seeing franchisees as stakeholders means that management will look at more than just maximizing shareholder wealth. They will recognize that franchisees' interests and well-being are vital to achieving the overall objectives.

The number one question franchisees are asking from their new owners is, "How does change of ownership affect me?" There can be numerous benefits for franchise owners that result from an acquisition where management views the franchisees as stakeholders from the beginning. Below are some of the ways that franchisees might benefit from an acquisition.

Potential benefits to franchisees:

Knowledge

Most franchise companies today are lacking some combination of knowledge and resources on how to take their system to the next level. The right knowledge and systems can keep a brand on a growth curve.

Investment

It often happens that the current ownership has already been through the pressure of taking tremendous risk starting the system and reaching the point of success where they are now. They are then hesitant to risk equity in an attempt to move the brand to the next level, especially if lacking in experience of growing and managing a larger system. An acquisition can result in the supply of fresh capital to revive a system and move it to the next level.

Marketing and Advertising

Operating a business continues to become more competitive. If an acquisition can contribute programmes like direct mail, telemarketing, Web optimization, print advertising, and broadcast media in a way that produces qualified leads and traffic for franchisees in an efficient and effective way, increased sales and profits can be realized much sooner than expected.

Targeted Training

Franchisees continuously have to learn new skills, regardless of the type of franchised business. When the acquiring company can offer targeted training that franchisees need, this could revive levels of motivation and competence in the network.

Coaching and Field Support

Although not intentional, there are too many franchises today not providing enough support of the right kind for franchisees to grow. When new ownership is able to provide properly-trained support staff with an effective ratio of support staff to franchisees, someone is there to not only help them, but also to hold them accountable for following through with goals set. When franchisees are setting goals and being supported and challenged to achieve them, results are much more likely.

Technology

If the franchise company is not using the latest technology to communicate and manage information, there could be major inefficiencies that silently drain time and money from both the franchise system and franchisees. This is an area where an acquisition could make major improvements by coming in and updating the technology throughout the system.

Areas of Concern

Franchisees are likely to have a number of areas that they are concerned about. Some of these are outlined below:

Loss of "family feel"

In situations in which smaller systems are being sold by the original founders, franchisees may experience a tough time transitioning into a corporate company focused on growth of new locations and system sales. It's important to ensure that the team spirit of the franchise is preserved. One way of doing this is by facilitating regular franchisee conferences.

Charismatic founder

How close are franchisees to the current ownership and what will happen when the current owners of the brand leave? Succession of leadership is important. Employing the founder for a defined transitional period could be a benefit

Change of vision and strategy

It's very likely that the new ownership will establish new direction and plans for the brand. Of course, the more franchise owners are included in this process the better this will be received.

Uncertainty about the buyer

Buyers who wait too long to meet with the existing franchisees are inviting speculation, rumours and potential ill-feelings regarding the acquisition. For most franchisees, their business represents a significant part of their lives today and in the future. They shouldn't be expected to be patient in regards to meeting the management that will be responsible for the direction of the brand.

In conclusion, buying a franchised group has a dramatic impact on franchisees. It's important to recognise them as stakeholders and to employ change management techniques during the transitional process. By acknowledging franchisees and the role they play in the network, it's possible to achieve buy-in and cooperation at the early stages of the acquisition.

Source: Franchising World