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FIVE REASONS WHY FRANCHISING WITHOUT A FRANCHISE CONSULTANT IS RECKLESS

by Dr Callum Floyd
 


Some companies elect to franchise their business without the expert input of a specialist franchise consultant. In most cases, the process involves a lawyer taking instruction from a company to produce a Franchise Agreement, without seeking the crucial input of franchising specialist services.

At Franchize Consultants we understand the impact not using a specialist franchise consultant can have. This is based on our success helping established franchised clients that did not seek such advice in the first instance.

In our experience, the following shortcomings are typical of companies short-cutting the franchising process:

1. The company doesn’t know if their franchise royalty, other income streams and fees (including local and national marketing) are structured appropriately, or even sufficient for their particular business model and situation. In many cases our assessment has identified they are not. This is fundamental, given even a 0.25% difference in royalty can be the difference between rich rewards and business failure. This puts the entire franchise system, including franchisor, and franchisees who have invested in the system, in jeopardy.

2. The company is likely to have problems with roles and responsibilities. In other words, what franchisees expect the company to do and what the company expects franchisees to do. Without conducting pre-franchising strategic planning, a company is unlikely to have developed a comprehensive and optimal view on role identification and allocation. This is a crucial phase, requiring business model development assessment coupled with franchising insight at both the franchisee and franchisor level. Common issues here include a) franchisees not being required to do what is needed to make their businesses successful, b) franchisees not recruited that are capable of doing what is required to be successful, c) franchisors not clear on what franchisees need to do to be successful, and d) dissatisfied franchisees seeking answers or expensive support from their franchisor.

3. The company has a Franchise Agreement that is not optimal for the particular business and situation. A comprehensive legal brief can only be developed following comprehensive franchise specific strategic planning (including a feasibility assessment) has been completed. No amount of legal experience can substitute for a comprehensive and staged strategic planning process assessing the market, business, objectives, franchising configuration, financial outcomes and implementation planning covering a multitude of areas (e.g. territories, control policies and restrictions, recruitment, field support and performance management processes, KPI and benchmarking planning, structure for marketing, etc). A by-product of this planning oversight is also a franchisor that doesn’t understand franchising and their particular franchise structural configuration, and the rationale and decision-making that sits behind it.

4. The company lacks a basic solid Franchise Manual, training systems and tools that help both franchisors and franchisees learn, understand and perform their roles – and protect the system that feeds them. This is a fundamental, yet typically lacking area of development that requires the input of a specialist franchising consultant.

5. The company does not know how to manage a high-performing franchise system. Typically we find franchise executives that do not understand many of the franchising basics relating to many areas, including planning, change management, manuals, field visits, benchmarking, performance management, marketing and, franchise recruitment and re-sales management. Individually each of these areas has the potential to impact outcomes for franchisors and franchisees alike. Furthermore, mismanagement can lead to considerable lost opportunity and legal liability.

A franchise consultant’s role addresses each of these areas. For companies considering franchising, upfront franchising strategic planning by specialist franchise consultant is absolutely crucial to a) ensure franchising is appropriate, and b) establish the optimal structural configuration for the franchising programme. Franchising is exciting, but it needs to be done right in order to to really maximise the potential of a company’s business opportunities.

 
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Dr Callum Floyd is owner and editor of both Franchise-Chat (www.franchise-chat.com) and Franchise Wire (www.franchisewire.com). He has a Masters and PhD researching franchising, and is Co-Owner of Franchize Consultants (www.franchize.co.nz), New Zealandís leading and award winning franchise development company.

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