By Eric Parker
The overall consensus is that the economy will still be under threat in 2014. Quantative easing is being reduced internationally and it is predicted that interest rates will start to increase from the 2nd quarter. This together with fuel, toll and overall price increases will reduce the average consumer’s expendable income.
The market will be further stretched by new outlets continuing to be opened into a relatively flat market.
So what do we suggest successful franchisees need to do differently in 2014?
1. Supply additional help and support to start up franchisees.
We hold the view that new franchisees should pay additional management service fees (royalties) for at least the first 3 months of operation to enable the franchisor to offer much needed support. The franchisor should have an “A team” of highly experienced staff who spend the first two months with the new franchisee. They should only be withdrawn when the franchisor is confident the new franchisee is on his feet and successful. We have always held the opinion that a new franchisee should pay higher royalties than an established successful franchisee e.g.
2. Improve/change Franchisee Selection Criteria
The profile of the franchisee may need to be more entrepreneurial in these difficult times (use psychometric assessments such as the E test to determine the profile of the franchisee) and carry out extensive site evaluations to limit the risk of failure. Many franchisors are reverting to multi-unit franchisees which can be good, provided the downsides are covered. The negatives could include franchisees that are spread too thin between outlets and being too demanding due to their size.
3. Improve the Initial Training
It is critical that new franchisees are fully trained in all aspects of the business, not just the operations skills. Many franchisees do not have the financial skills to run their business. An extensive training programme is required and we suggest that it concludes with a test that the franchisee must pass. It should also contain exercises with their projected figures.
4. Business Orientated Support
Most field service Consultants are very operationally orientated and are unable to offer the franchisees business and financial support to maximise his business. We are working on a method of the Franchisor being able to hire an experienced business executive to call on the outlets on a quarterly basis.
The franchisor needs to introduce benchmarking into the business so that he can compare the more successful outlets with the less successful ones and indicate the areas that need improvement.
6. Suppliers Support
The suppliers are also going through difficult times and they want the franchisees to be successful. It is a good time to involve the suppliers to give support in training, marketing, merchandising aids, better deals related to volume etc.
7. Utilise experienced successful franchisees
Many franchisors have been successful in utilising experienced successful franchisees to mentor new franchisees. In many instances these experienced franchisees do not even expect financial gain but will do it for the status and satisfaction.
8. Aggressive marketing
In difficult times we need to carry out more promotional type advertising with an objective of increasing customer counts. Consumers have a strong focus on value, and this will be the case in the foreseeable future.
The franchisor should be formulating campaigns both at a national and local level.
Don’t forget to involve the suppliers in these campaigns.
In conclusion these are some of our ideas going into 2014. We would welcome your comments and ideas.