1. Franchise before they have perfected and proven the concept.
A business must have an established track record with proof of profit potential before franchising can be considered as a means of expansion.Franchise before they have perfected and proven the concept. A business must have an established track record with proof of profit potential before franchising can be considered as a means of expansion.
2. Become greedy and try make additional money, unfairly, from product supply and the acceptance of rebates instead of driving the price down.
The main profit driver in franchising should be royalties on sales, this multiplies as the network grows. Profiteering from product supply is not sustainable as it’s not legally enforceable in terms of the Competition Act and the Consumer Protection Act. Also, the franchisor’s role should be to get franchisees the best possible price on product supply so that they have profitable businesses.
3. The franchisor is not at risk, so they do not conduct a full site evaluation.
Failure of a franchise would reflect negatively on the reputation of the franchise with banks and property owners. It’s therefore critical that franchisors ensure that site assessments are done properly for each new outlet to prevent franchise failure due to a bad location.
4. The franchisor sells a franchise instead of awarding it, not fully evaluating the suitability of a potential franchisee.
Many new franchisors get caught in a trap of needing the cash injection of upfront fees to survive. Therefore, they will sell a franchise to any applicant with sufficient funds. However, it’s important to ensure that the franchisee has the right personality type for franchising and also that there will be a fit with the organisational culture of the franchise. Psychometric assessments like the Franchising Plus E test can contribute to a better assessment of potential franchisees.
5. New franchisee training is not sufficient.
Many franchisors focus on operational training only, whereas business management training is also critically important to ensure that the franchisee is capable of managing a small business. The initial training should be linked to the operations manual and should cover all aspects of the franchise business.
6. The franchisee support structure is not capable of adding value to the franchisee, but rather acts to police the franchisee’s conduct.
It’s important that franchisee support staff act as business consultants to the franchisee, monitoring financial performance, marketing and administration of the franchise to ensure that the franchisee remains sustainable. Monitoring of standards is important but should be complimented by business consulting assistance from the franchisor.
7. The business concept is not kept up to date in times of significant change.
Disruption has become the norm in business and it’s the franchisor’s responsibility to ensure that the business concept remains relevant to the market and that it is adapted as needed. Failing in this regard could lead to failure of the brand, as demonstrated by franchises in the DVD rental category where online streaming has become the new norm.
8. The operations manual/system is not kept updated resulting in non-conformance to standards.
An operations manual should be a living reference tool that adapts to changes in the business environment. If it’s not kept up to date and doesn’t add value to franchisees, they will ignore it and the basic operational standards represented by it. The best way to counter this is to review the operations manual regularly and to publish it online for franchisees to ensure that it’s user friendly. The Herding Cats Franchise Management Platform available from Franchising Plus offers the means to do so and to also manage communication, performance and conformance in the network.
9. Poor communication: Franchisees want to be heard and can contribute a great deal to franchisor decisions.
Franchisors who are not in touch with franchisee needs and who disregard feedback from their network stand to lose out on a good relationship and valuable feedback from franchisees that could add value to the business. One way of staying in touch is to conduct regular franchisee satisfaction surveys, a service available from Franchising Plus.
10. Implementing poor marketing strategies and neglecting brand development.
A valuable brand is one of the main value drivers in a franchise and a reason that franchisees sign up to the network. Not investing in brand development and marketing is detrimental to a franchise, as competitors are sure to catch up and fill the void quickly. Franchisees expect consistent marketing efforts for their contributions and the franchisor is legally required by the Consumer Protection Act to report back on the spending of franchisee marketing contributions.
New franchisors can avoid these mistakes by getting expert assistance in developing their franchise networks from consultants who are experienced in the industry. Contact us for an obligation free appointment, whether to discuss your new franchise or how to rectify problems in your existing franchise network.