Managing Your Franchisees

In sport it is accepted that a top quality manager can make average players perform above themselves, creating a unit that is greater than the sum of its parts. The same is true of franchisors - but what exactly are the qualities required to effect such improvement and how are they acquired? Paul Golden reports.

One of the key characteristics for a successful franchisor, according to the experts is an understanding of the relationship they have with their franchisees.

"Whilst they may be able to bark orders at employees, they will soon find that approach doesn't work with franchisees who are, after all, in charge of their own business," said Paul Monaghan, director Howarth Franchising, the specialist franchising consultancy firm.

A healthy interest in the well-being of their franchisees is a useful asset, according to Monaghan. "Some of the best franchisors are those who take pleasure from seeing other people being successful and don't simply see their returns in financial terms. Of course the financial returns are necessary, but if they are the sole reason for franchising the supportive element is often more difficult to foster."

A franchisor needs to deal ethically with his franchisees and not rip them off for short term gain, he added. "We tend to speak of franchisors ‘awarding' franchises rather than ‘selling' them. An ethical franchisor will not accept a franchisee who is unsuitable, even though they may be keen to sign up and have the necessary funding in place."

To maximise their chances of success, Monaghan suggests franchisors obtain as much informed advice as possible. "Seek professional advice from experienced franchise consultants on how to best develop the franchise. There is no single ‘right way to franchise' but there is a right way for each individual system.

Given that once you sign your first franchisee you are committed to a long term contractual relationship, the terms of that relationship need to be fully thought through and documented and the franchise agreement prepared by a experienced, specialist lawyer. Take whatever advice is available from the Irish Franchise Association, particularly in relation to aspects of the operation that will examined in any accreditation process."

Jeremy Webster, co-founder of Franchise Guru agreed that franchisors must recognise the difference between franchisees and employees. "The former are putting money into your business and want to work with you."

Snap Printing and Home Instead's Michael Kearney reinforced the view that the franchisor should be extremely diligent in awarding franchises. "It is tempting to give franchises to people as long as they have the money, but in the long term this will be detrimental as you will end up with lots of under-performing franchisees."

Perhaps the most critical action any budding franchisor can take to maximise their chances of success is to run a successful pilot operation. "A franchisor trying to sell franchises without opening a pilot is selling an unproven concept and is not being fair to the franchisee," said Kearney. "I strongly believe that no one should buy a franchise unless a proven pilot has been established."

"The franchisor should offer huge support to franchisees in the initial stages of the business. Opening a new business is a daunting experience and the more help and support the franchisor gives - especially in the initial stages - the better chance they have of success. Ongoing support is also critical as all businesses change and evolve over time. The franchisor should provide marketing and public relations support, ongoing training, assistance with budgets and business planning, help with banking, local marketing and maintaining and protecting the brand."

Our experts identified some of the other skills required to become a successful franchisor. The first was the ability to recognise what might motivate a potential franchisee to take their franchise rather than another and to develop a marketing strategy that promotes those reasons. Secondly, the recruitment skills to select franchisees with whom they can forge a lengthy relationship is also important. "This is a more in depth process than recruiting an employee who can be dismissed fairly easily if they don't come up to scratch," said Paul Monaghan.

In addition, franchisors need to have good motivational skills to get the franchisees to do what they need to do without simply telling them they have to do it.

Tony Fitzpatrick, managing partner Emerson French Consulting, which also advises many successful franchisors, reckons the skills needed to be successful in franchising are the same as in any other industry. "You need to be a good communicator and have high levels of energy and motivation. In particular, you need to be a good manager with the ability to lead people to improve themselves personally and professionally. These skills come naturally to successful people but you can learn some of them with appropriate training."

A franchisor needs to commit to training a franchisee and his staff to operate his system successfully, to improve, enhance and develop that system and to provide ongoing advice and support, he continued. "Sadly, some franchisors fall short on the support side. This is difficult to understand since they only make money when the franchisee makes money and their job should be to keep the franchisee firing on all cylinders."

Fitzpatrick is another advocate of obtaining expert advice from day one. "Talk to someone who understands the industry and knows the pitfalls. Once you have created a franchise, or have bought a master licence, you need to promote it. Advertising in the print media and on specialist websites are good ways of generating leads," he says.

"Franchising is not easy and it is not cheap. You will have wages to pay and a budget to cover the cost of marketing and you cannot do this on a shoestring. Front end costs can be considerable and it may be several years before your investment pays off. Remember, however, that when you sell a franchise you are creating an income stream for the foreseeable future."

Any good manager will learn the skills required to be a successful franchisor, but you need the inherent business skills, added Jeremy Webster. "People can see franchising as a way of expanding their business quickly and at a lower cost than growing it organically, but then they are going to be running two distinct businesses -the core business and the franchise operation - and many potential franchisors don't understand this."

Such skills are not easy to acquire and many only come with experience, said Michael Kearney. "I have been personally involved in selecting more than 50 franchise owners and it is still a challenge to find and pick the right people. There are not enough courses or programmes available to prospective franchisors in Ireland, although the Irish Franchise Association is working closely with Skillnet to develop the necessary courses. One of the key challenges here is to find the right people with the relevant experience to present the courses."

Paul Monaghan of Howarth Consulting admitted that the franchisor's duties to the franchisee are not always compatible with their responsibilities to the parent company, which is an added complication. "For example, the parent company may wish to open additional outlets to increase market share, but if this would be against the interests of the franchisees the franchisor would need to speak up for them. Likewise, changes to distribution methods or prices may have an adverse impact on franchisees and would need to be carefully considered."

Michael Kearney agreed that while the parent company should play an important role and work closely with the franchisor, this does not always happen - to the detriment of both franchisor and franchisee. "In my view the parent company has a huge role to play in terms of training materials, marketing and strategic direction."

The relationship can be particularly fruitful when the parent company is prepared to take on board suggestions from its franchisors and franchisees. "At Snap Printing, we initiated many business ideas that were subsequently adapted back in Australia, such as creating a central printing hub and having full time sales people in each centre managed by corporate office," says Kearney.

In addition it is not unusual to find franchisees who will sometimes recommend improvements to the franchisor's operating system or come up with a new product or service that may eventually become part of the company's intellectual property and so enhance the business. "This could have an influence on how well the company does in other countries," acknowledged Tony Fitzpatrick.

Just as important is the fact that the parent franchisor must understand their local market before they get involved. According to Andy Cheetham of the UK-based Franchise Shop.

"Likewise, a brand entering a country for the first time must be prepared to listen to its franchisor. In the case of a fast food brand, for example, the master franchisor would have influence locally, for example by suggesting changes to the menu to reflect local tastes," he says.

Franchisors also need to be even handed in their dealings with franchisees, concluded Jeremy Webster of the Franchise Guru. "One of the things you learn as a franchisor is that once you have an agreement, you need to be consistent in your use of it. You cannot afford to make concessions to some franchisees and not others as this will create resentment," he adds.

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