By Eric Parker
The franchise mechanism is a great business tool to develop your business if implemented correctly. However it does leave itself open to abuse if exploited. Often inexperienced Franchisors make mistakes out of ignorance in the early days.
The most common mistakes made by Franchisors are:-
1. Get your concept right before you franchise
You only have a clean piece of paper once. Make sure your concept is optimum before you role it out. It is difficult to go back to franchisees later and say “I want to change this or add this etc”.
2. Franchisee selection is critical
The franchise relationship is long term and it is critical you select the right franchisees. Not everyone is suitable to be a franchisee and you must award a franchise not sell a franchise.
There are tools available to assist you such as the E test. Check references and ensure the franchisee will operate in the outlet and that your business has his full time attention and commitment.
The selection of an incorrect franchisee will cause you untold problems down the line!
3. Franchisee Training
It is critical that the franchisee and his/her staff are well trained. The operations manual becomes the vehicle around which training is built. You require classroom and onsite training.
A franchisee needs to be in training for a minimum of 6 weeks and he needs to have direct (operational) and indirect (financial) training. We encourage our franchisors to make the franchisee write a test at the end of the training to ensure he is fully trained. Find out more about what training we offer here…
4. Site Selection
Often Franchisors do not insist on the correct site evaluation criteria, mainly because they are not at risk and do not need to sign personal surety on the lease.
It is irresponsible for the franchisor not to assist on the full site evaluation criteria, even if it means that you don’t conclude the deal with a new franchisee. We suggest that you use G.I.S. (geographic information systems) for a full site evaluation.
5. Initial Support
The franchise business must open as effectively as possible and give the clients an optimum service from day one. The franchisee really needs the franchisor in his initial trading and ideally a team from the franchisor should be present for the first 2 weeks. Remember the franchisee represents your brand and you must ensure he operates at your required standard.
It is critical that the Franchisor assists the franchisee to compile a detailed Business Plan with realistic projections. If the projections are not being met the franchisor must intervene.
From a franchisee point of view it is critical that the initial sales out perform his projections. The franchisor must insist on an active launch campaign.
We suggest that the franchisee spends a minimum of R50 000-00 on this campaign.
7. Franchisee Staff
The franchisee has not had the experience to employ ideal staff. The Franchisor must work with the franchisee to ensure he gets good staff. Often the franchisee employs inferior staff in order to keep costs down.
8. Franchisee Accounts
Make sure the franchisee employs a competent accountant who firstly ensures he has met all the statutory requirements and then has a full set of accounts on a monthly basis.
The franchisor must go through these accounts with the franchisee on a monthly basis and add value e.g. through benchmarking.
The franchisor must also ensure the franchisee is up to date with all payments e.g. creditors, tax, VAT etc.
These tasks are normally carried out by the Franchisor’s Field Service Consultant, who is critical to the franchisees performance. If the franchisee is not up to scratch he should be placed in I.C.U. and helped by all staff at the franchisor level.
Franchising is built around a business relationship and both parties need to do all they can to develop a successful relationship and grow it. A relationship revolves around trust and the franchisor must be honest and transparent with the franchisee. We have often seen this trust broken by the franchisor accepting confidential rebates without disclosing them or by offering poor ongoing support..
Again, good luck in your franchising drive and if you would like to meet with the Franchising plus team contact us.