Is franchising about big business or small business? What’s more important – network growth or franchisee business growth? How much involvement should you have in your franchisees’ businesses? These are just some of the challenges facing franchise leaders today. We could simply share our thoughts on which are the biggest seven challenges and how to deal with them – but we thought we’d let you be the judge.
1. Is franchising about big business or small business?
Franchise leaders have brought this one on themselves. And they’re still doing it – selling franchises on the premise that franchising is about small businesses taking advantage of the benefits that only big businesses normally enjoy. No wonder governments and legislators around the world are confused. Perhaps franchisors need to decide for themselves? Big or small?
2. How do you get more leads from prospective franchisees?
Pretty much every survey of franchising challenges puts franchisee recruitment at the top the list. But my own informal surveys of franchise recruitment websites reveals that not much has changed about the way franchisors go about attracting leads – with a few remarkable exceptions. In an age where the internet has put all the power into the hands of buyers, it is estimated that 70% of the purchase decision has been made before the prospective franchisee contacts the franchisor. The key? A franchise recruitment website and other online collateral that attract prospects and provide them with all the information and evidence they need.
3. Franchisee selection: The right franchisee vs the willing and monied franchisee
Franchising is a delicate balance of different tensions that exist within the model. One of these tensions is the conflict between the need to grow the franchise and the need to get the right franchisees on board. If there’s any one must-have success factor in franchising, it’s most likely to be franchisee selection. But too often franchisors have an angel on one shoulder and a devil on the other when it comes to actually making the selection. “Is this prospect really, really right for the franchise?” the angel is whispering. “Hey, you need to grow and the prospect is ready to hand over the money – what else do you want?” taunts the devil.
4. What’s more important – network growth or franchisee business growth?
This is the Marshmallow Test of franchising. When offered the choice between taking one marshmallow right now or delaying and getting two later, what would you do? Many franchisors, especially in the early days of their franchises’ development, focus on the short-term gains made possible by selling bucketloads of franchises. After all, it’s hard to balance the needs of the franchise against the needs of the franchisees when your resources are stretched. But what will happen to your royalty income if your franchisees’ businesses start to falter? How many new franchisees will be willing to sign up then?
5. What’s more important – franchisee revenue or profitability?
This can be a battle in any company, but especially so in franchising, where one of the central conflicts is this – franchisees make money from their profits but franchisors make money from the franchisees’ revenues, not their profits. The simple answer is to go for both revenue and profitability, but as anyone who’s ever run a franchise knows, it’s never that simple.
6. What’s more important – entrepreneurialism or compliance?
In some franchises, this isn’t an issue, of course. All they want from their franchisees is compliance – follow the system and you’ll do all right. But in a growing number of franchises, entrepreneurialism – the ability for franchisees to add their own value to franchised businesses – is also critical to success. Where your franchisees should be positioned on the sliding scale between compliance and entrepreneurialism depends on the type of business you’re in and, to an extent, the type of franchisor you are. But making the right decision on that is a vital part of the franchisee selection criteria we talked about earlier.
7. What’s the seventh challenge?
One of the biggest challenges in writing this article was figuring out which challenges should be in the Franchising Top 7. We had no trouble until this point and then – uh oh, we thought of more than one more challenge. But we wanted to limit the number to seven because we wanted to keep this article short, sweet and pithy. What to do? The answer came to us, as so many of them do, while we were shaving. It was brilliant in its simplicity – turn the decision over to our readers. Here are some of the other challenges we came up with:
What other franchise leadership challenge do you think deserves to be No. 7? Email Robin at firstname.lastname@example.org or fill in the box at right.
- How much involvement should franchisors have in their franchisees’ businesses?
- When franchisees’ performance is in your franchise network’s bottom 25%, how much time and effort should you spend in helping them turn their businesses around before you make the decision to pull the plug?
Article by Robin La Pere, No Ordinary Business and Franchise Consultants
Contact me at email@example.com.
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