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Melissa Ontong - Franchising Plus

By Melissa Ontong

Revamps are a necessary evil to equipment intensive franchises especially those in the food industry.

Revamps are often not welcomed by franchisees as it usually means more debt for them to incur (usually when they are quite close to paying off their initial debt obligations from purchasing or setting up the franchise). However it has been proven that revamps can lead to a 15-20% increase in sales in franchised businesses.

Here are some tips on how to assist your franchisees in preparing for a revamp, so that it is not an unwelcome surprise:

  • Ensure that your franchisee is aware when the revamp will be due and has a fair idea of what the costs are likely to be– this can be mentioned in the franchise agreement and then reminders and updates given by your field service consultants.
  • It is best to try keep revamps (equipment and signage revamps) for every 5-7 years of operation, any more frequently will simply be too onerous on the franchisee’s cash flows. Minor paint and touch-ups can be done every second year or so – just to keep outlets looking fresh and neat.
  • You should try to keep the costs of the revamp to a minimum so as not to overburden your franchisee and reduce the duration of the revamp exercise eg: if existing equipment or signage can be used, (be it from another franchised store that has recently closed or the original store) this is a far more cost effective option. Keeping costs down also includes not updating your brand or corporate image so often that your franchisees need to keep updating signage and marketing material.
  • You as a franchisor should also try to assist your franchisees with landlord negotiations, whether it be: reduced rental during the time of revamp; rental of a mobile type space to ensure franchisee continues trade whilst the revamp is ongoing; staggered payments of rental to ensure optimum cash flow for the franchisee; or even perhaps to get contributions from the landlords themselves towards revamp costing.
  • You should encourage your franchisee to try save in advance for the revamp so when the time for the revamp comes, they have cash available to pay for whole or part of the revamp rather than financing it.
  • Some franchisors have a “revamp” / “development” fund. All franchisees contribute a percentage of their monthly turnover to this fund and when the time comes, the franchisee can then borrow on more lenient terms from this fund in order to finance a revamp. This is a good consideration to ensure franchisees will have access to funds when they do need to revamp.
These are just a few ideas on how to assist your franchisees in preparation for the revamp, it is your responsibility to assist with the process and keep costs to a minimum. The aim is to keep your franchisee engaged and continuously adding value to their business. An increase in sales due to a revamp makes for a win/win situation for both you and your franchisees.