Ways to Support Franchisees During a Time of Escalating Costs

Use these tips to attract more franchisees and help them cut costs.

Prove your system's value to franchisees every day. That's the mantra of growth-oriented franchisors, especially given the current economy. If ever there were a time to help franchisees lower costs or find favorable financing sources, this is it. Some franchisors are doing just that, and they are willing to share their cost-saving secrets for everyone's benefit.

Turn Veggie Oil to Fuel
Seeking to help franchisees slash fuel costs, Adam Scott found inspiration in the kitchen. As CEO and co-founder of Wing Zone, a 120-unit chicken wing take-out and delivery chain based in Atlanta, Scott is instrumental to the program to convert the chain's used vegetable oil into fuel for Wing Zone's 120 trucks. By forgoing regular unleaded gas, the fleet will consume 190,000 fewer gallons of gas annually, saving about $8,000 per vehicle per year. Participating franchisees purchase a $3,000 conversion kit, Scott says. Those who convert to vegetable oil will pay an alternative fuel tax, but most franchisees will see return on investment in approximately six months, Scott says. Franchisees will also save by eliminating the expense of grease disposal.
"Our franchisees think it's great, and the customers' response was fantastic," Scott says. "The only way fuel costs go down is if you decrease demand."

Scrutinize Expenses, Pricing
Many franchisors seek to streamline costs. Take Paul Mann, founder and CEO of FETCH! Pet Care, a pet sitting and dog walking concept headquartered in Berkley, Calif. Mann renegotiated credit card processing costs, enabling franchisees to slash fees by nearly 15 percent, he says. Mann is also consolidating from three marketing providers to one, which in turn can offer better pricing in exchange for the increased business.

Kevin Brennan, the franchisor of Rockn' Joe Coffeehouse and Bistro headquartered in Cranford, N.J., examined his system's menu offerings and found ways to maximize profits without detracting from the customers' experience. The system switched from high-surface-area sandwich bread to flatter, less costly bread "that still gives a great appearance," Brennan says.

He also trained franchisees and their employees to maintain portion control and reduce waste, getting that extra slice of cheese from a mozzarella ball or two extra slices from a cake.
Rising Roll Gourmet is an Atlanta-based concept with 12 units, three more under construction and another 30 on the way. CEO Mike Lassiter cut the cost of entry for franchisees by reducing layouts from 2,400 square feet to 2,000 square feet, which slashed rent by 17 percent without hampering operations. The company replaced its brick-walled and tiled interior with warm-colored sheetrock, stained concrete and dark furnishings. The system also sped up its baking process without sacrificing quality and worked with vendors to switch to better priced packaging, including reusable, high-end trays that are both environmentally friendly and less costly.

Ramp It Up
As competitors slash advertising budgets, William Brennan Jr., CEO of Kalologie Skincare, a Los Angeles-based luxury medical spa concept with eight units and two more underway, increased his expenditures. He sees opportunity in online advertising, especially since the cost of purchasing key words decreased.

"While the total amount of money we spent on advertising increased from $9,500 to $11,000, our cost per impression decreased from nine cents to less than eight cents, and our total number of impressions increased almost 40 percent," he says, adding that he saw a boost in revenues, too. Through a PR campaign, Kalologie landed a skincare product mention in US Weekly--a plus for the brand, Brennan notes.

Yet another avenue to take is grassroots marketing. David Asarnow is the franchisor of CLIX, a portrait studio concept in Mariette, Ga., with 23 locations and six more underway. In July CLIX launched its "Cutest Kid Contest," a promotion where parents urge friends and relatives to vote for their child. Each person tells about 20 others to vote, Asarnow says, building buzz for CLIX virally; voters are educated about CLIX locations and receive coupons. Voting spans September and October, leading right up to family-portrait season just before the holidays.

Asarnow, who is also a CLIX franchisee, has the opportunity to test his unit marketing strategies, which he then recommends to other franchisees. One such approach is cross promotion with local businesses to draw in new customers.

Fetch forms alliances with large organizations, including American Automobile Association, offering discounts to AAA members, making it easy for franchisees to grow their client roster. Fetch offers similar discounts to more than 75 million employees, customers, and members of various companies and associations, including Blue Cross-Blue Shield, Safeway and Bark Busters. "There is virtually no cost to our franchisees under this model," Mann says.

Or enhance your product line. Rising Roll, for example, ramped up its offerings, expanding its menu offerings and adding breakfast to the mix so franchisees can boost volume.

Add Support
Adding new initiatives can require additional staffing, which is why since July 2007, Fetch brought on four new employees to handle marketing, training and support. That investment, along with Fetch's low-cost initial franchise fee of $12,000, is fostering the system's growth. Currently Fetch adds five to 10 new franchisees a month. In early 2009, Mann expects to add between 10 and 15 a month, and by late 2009, 15 to 20 a month.

Prospective franchisees may need support finding financing, says Peter Tourian, founder and CEO of Synergy HomeCare, a non-medical home care concept with 48 franchisees, headquartered in Gilbert, Ariz. For this reason, in 2007 Synergy HomeCare became a U.S. Small Business Administration-approved franchisor, expediting loans for qualified franchisees. With this program, the loan process, which otherwise can take as long as five months, is "knocked down to about four weeks," Tourian says. And to provide additional options, Synergy HomeCare now partners with -third-party financing companies, including BORSA, enabling franchisees to fund the purchase of their unit with their 401(k) without incurring penalties.

More Coaching
Franchisees look to the home office for guidance and expertise. Low-cost webinars make it easy. Fetch provides webinars to educate them on streamlining and containing costs and overhead, marketing initiatives, and adjusting prices and discounts as necessary to maintain adequate profitability levels.

RE/MAX of New York Inc., the master franchisor for New York, undertook new initiatives since 2006. Carolyn Weber, executive vice president of RE/MAX of New York, and her team saw that the real estate market was changing. To address emerging needs, RE/MAX promoted an in-house staffer to director of regional development; the person now visits franchisees statewide, conducting business reviews that include analyzing facilities and expenses, business on the books, and number of active agents. The director of regional development provides "remedial training where needed" and raises awareness so operators "recognize that they need to make changes to weather any market fluctuations that might be coming their way," Weber says. RE/MAX also offers quarterly motivational and recognition programs featuring guest speakers.

Pare down costs without compromising your brand, boost your marketing program, point prospects to solid funding sources and your franchisees will sing your praises. Their enthusiasm will inspire new franchisee candidates, the surest path to overall growth. Prove your value every day as a franchisor and your system will be stronger for it.