5 Franchise Tips to Ease Friction
Franchise businesses account for a whopping 10.5% of all companies with paid employees. According to the U.S. Census Bureau, they account for $1.3 trillion in sales across various industries.
Franchising enables brands to grow and quickly open multiple locations. People who buy into franchises have the ability to fulfill their entrepreneurial dreams without shouldering the responsibility of creating their own brands. Close to 15K new franchised units are expected to open in 2023.
According to Shane Mericle, Founder and Board member of the Cell Phone Repair Independent Owners Association, who has worked with many franchised businesses, the following are some of the ways franchisors can ensure that their stores remain profitable and that their franchisees don’t lose their enthusiasm (and investment dollars).
- Open the communication channels. They should be frank and open two-way dialogues between franchisee and franchisor, and both need to listen to the other’s opinions and needs.
- Although many franchisees consider their businesses independent, it’s ultimately a joint ownership model. Franchisees must be aware that their actions ultimately impact the brand itself, and a certain level of respect for “corporate guidelines” needs to exist.
- That said, franchisors must offer their franchisees enough independence and tools to satisfy regional customers’ needs and respect ideas from the field.
- Focus on the net, not the gross. Unit-level profitability is critical to the model. Sadly, some franchise organizations don’t give their franchisees the skills and best practices to ensure their stores or other locations are profitable. Some franchise investors are first-time entrepreneurs and need help with the basics. They may not read their initial agreement thoroughly and, as a result, face unpleasant financial surprises down the road. Franchisees can also learn from each other, and national or regional gatherings are essential to sharing best practices and solving complex problems.
- Field support is critical. If franchisees are saddled with working with agencies and other cost-inefficient resources, they’ll ultimately suffer. A balance between bulk purchasing deals and local support must exist. For example, using a local printer or other service providers may build goodwill in a community. However, resentment, delays, and cost implications may be a reality if the franchisee works with a vendor nationwide. Balance the need for centralization with autonomy and local goodwill. Having a practical brand playbook and some level of central oversight helps ensure that individual operators don’t “go off the rails” and harm a brand image.
And, as in non-franchise businesses, effective leadership is critical for success. Managing franchises well and ethically can pay off in the long run. But questionable business practices can result in unhappy franchisees, brand deterioration, and even litigation.
Burgerim is now under scrutiny by the FTC for allegedly making false promises to franchisees, over-promising, and under-delivering. The Cell Phone Repair Independent Owners Association (CPRIOA) also recently announced that franchisees are filing arbitrations against their franchisor, Cell Phone Repair, and its owner Assurant (a Fortune 500 insurance company). The suit involves 20 franchisees, with 50 current or former stores, according to the CPRIOA media representative.
As franchise businesses grow and become a larger part of the MULO (multi-location) ecosystem, the brands that run them need to stay on the supportive side of their businesses and out of courtrooms!