How Much Ongoing Support -- and What Kinds -- Should You Provide to Your Franchisees?
Mark Siebert delivers the ultimate how-to guide to employing one of the greatest growth strategies ever -- franchising. Siebert shares decades of experience, insights, and practical advice to help grow your business exponentially through franchising while avoiding the pitfalls. In this edited excerpt, Siebert describes a number of ways you can provide support to your franchisees to help them succeed.
Ongoing support can come in many forms, including field support through on-site visits, new product development, advertising assistance, purchasing programs, public relations initiatives, technology development, national accounts sales programs, and backroom services (billing, collections, etc.). And while all have associated costs and may require staffing by the franchisor, the goal of all these ongoing services is to contribute to higher quality and more profitable franchisees.
Site Support Visits
Most franchisors consider periodic visits to the franchise location by qualified field representatives an integral part of system support. These visits have two primary objectives. First, they provide an opportunity for the franchisor to observe how the franchisee's business is being run and reinforce brand standards. But more important, they allow the franchisor to coach the franchisee in the field on ways to improve business operations.
While many new franchisors think of their field consultants as the "brand police," the best field consulting programs incorporate a number of responsibilities into a single role:
- The field representative will be a brand compliance and quality control officer, going through a checklist of brand standards to be sure a franchisee is in full compliance and, if they're not, taking the appropriate corrective action.
- They need to act in the role of field trainer, providing the franchisee with ongoing training on new products, new initiatives, and improved methods -- along with refresher training as needed.
- At the same time, they want to work collaboratively with the franchisee in the role of an operations consultant to help them run their business more efficiently based on observation, comparative analysis, and the use of key performance indicators.
- A closely related role is that of a marketing expert who'll focus on ways in which they can grow their revenue base from the standpoint of advertising and sales.
- At a higher level, they need to be a business planning expert, who can use financial analysis to identify potential problem areas and, if merited, help franchisees plan to acquire additional units. They need to act as a cheerleader, encouraging franchisees to continue their good efforts even when sales are down.
- And finally, they need to function as a brand ambassador, fostering good relations between the franchisor and the franchisee.
As a new franchisor, you'll need to institutionalize all these roles in a single person (and later in a team), so be sure you select someone who is highly qualified and who will be credible in the franchisees' eyes.
Remember: It's imperative that your franchisees not only receive adequate support, but that they also feel you, as a franchisor, truly care about their success and their future. Perhaps one of the most common franchisee complaints in younger franchise systems is that they rarely see the franchisor and feel abandoned. Make sure your franchisees know how much you care. Without their respect, your ability to lead them toward a common objective will be greatly diminished.
Products or Services Purchasing Programs
Another key benefit of many franchise systems is the franchisees' access to purchase arrangements with key suppliers negotiated by the franchisor. Purchasing programs can provide very tangible benefits to franchisees and can have a substantial positive impact on both franchise sales and franchisee profitability.
Of course, franchisees with large purchasing needs can always negotiate with vendors directly. But it behooves the prudent franchisor to take the lead in this area, both to build value into the services it provides the franchise network and to retain quality control over the goods and services its franchisees buy.
Your next task is to decide whether and how you should recover the associated expenses for these services. Should you keep any rebates for yourself? Allocate some portion to the franchisees? Allocate rebates to some other systemwide benefit such as a national advertising fund? Or simply negotiate the lowest possible prices on behalf of franchisees as a benefit to the system?
Approved and Designated Suppliers
As a franchisor, you'll likely want to place strict controls on your franchisees' sources of supply. To the extent to which these decisions impact the quality of the product/service offered, you're within your rights to control the specific products carried and, often, the sources of those products. And, as the discussion of rebates above alludes to, these provisions can be a profit center for you as a franchisor. Should you choose to profit from supplier programs, these relationships are subject to disclosure in Item 8 of your franchise disclosure document. And more detailed disclosures must be made if the franchisor itself (or an affiliate) is acting as the supplier.
While you're certainly entitled to sell products to your franchisees, mandating certain purchases may subject you to antitrust issues, such as tying arrangements. To the extent that you can show that proprietary recipes, methods, or products are being supplied, these supplier designations are readily justified. If, on the other hand, you intend to require franchisees to purchase products that are only differentiated in that they're imprinted with your logo, you may have to argue that you're seeking to control brand standards or to provide franchisees with the buying power that results from group purchases. As a startup franchisor, you should carefully consider whether you should use supplier designations as profit centers or forgo these additional revenues and instead get value by providing a real economic benefit to franchisees.
Advertising and Marketing Support
The best franchisors are constantly looking for ways to help their franchisees increase revenues, as this will impact both franchisee and franchisor profitability. Providing advertising assistance is perhaps one of the best ways to accomplish this. Franchisees are paying for the right to exploit the franchisor's market identity and reputation, and thus will typically rely on the franchisor to enhance the brand by developing national, regional, and local advertising programs, as well as assisting the franchisee with neighborhood or unit-based advertising and marketing programs.
As a franchisor, you'll control every aspect of the advertising message and the media in which it's presented. Obviously, you'll supervise all national advertising expenditures. But even local advertising undertaken by franchisees will need to use franchisor-created advertising materials or will need to be approved in advance by you.
Other Forms of Support
Franchisors can also support their franchisees in any number of industry-specific ways. For example:
- Some advertising or publication franchises will provide editorial content, ad design, and printing services to their franchisees. This frees you from tasks for which you may not be well-suited while allowing you to focus your efforts exclusively on marketing and sales.
- With hospitality or travel franchises, a major part of the value proposition is often found in the reservation system.
- Some temporary placement franchisors will assist their franchisees with payroll financing, allowing them to better leverage their assets.
- In manufacturing and direct sales concepts, the franchisor may provide assistance in the areas of consumer financing with an eye toward helping their franchisees sell.
- While the practice has come under increasing scrutiny at the state level (where some are claiming it creates an employment relationship), franchisors in the janitorial services industry will sometimes sell accounts on behalf of their franchisees.
And, in a number of industries, franchisors will provide backroom support services that can be better leveraged centrally. Such services can include call centers, national accounts programs, direct marketing, routing and scheduling appointments, centralized billing, and even collections.
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