The current economic downturn will see many franchisors experiencing an increase in the number of franchisees who are profit–stricken. Franchisees that are struggling are certainly not good signs for a brand.
What can a franchisor do to help a struggling franchisee?
Firstly, as a franchisor, it is important to make an honest self–assessment of whether you have the business model and the required support structure in place to offer the best possible support to each franchisee. This means you need to review the following:
- A time–tested business model that is fit enough to be replicated
- An affordable, fair and balanced fee structure which makes the business viable for both a franchisee as well as franchisor
- A realistic cash flow projection to make sure any franchisee is sufficiently funded from the beginning
- Strong business procedure and process in place
- Sustainable development plan in place
- Proper selection of Location site and territory criteria
- An accessible, relevant and up–to–date franchise package in place including disclosure, operations & procedure manual and franchise agreement, etc.
- Detailed initial and ongoing franchisee training system and program set in place for franchisees
- Comprehensive franchisee profile having a strong selection and recruitment process
- Robust franchisee infrastructure and support culture
In spite of the above tools, not every franchise business can make the cut and that is the very nature of a franchise model.
There are several ways in which a franchisor can look to support a stressed franchisee by implementing ‘intensive care’ program. This would include:
Finding out if the franchisee is at business risk at an early stage by conducting regular field visit support and doing intensive business assessment such as benchmarking
Finding out where the problem is within the franchisee’s business. This is the most vital step of the process that can be accomplished by:
Finding out the level of involvement of the franchisee in day–to–day business operations
Conducting intensive financial analysis such as cash flow analysis, sales analysis, benchmarking, etc; Staff satisfaction & customer satisfaction surveys; Intensive operational analysis; assessing whether there is a change in the franchisee’s market or area, resulting in a reduced demands for the service or product offerings; coming out with recommendations by implementing corrective action and fixing issues where necessary with specialists, helping the franchisee revive its hopes and reviewing performance of corrective actions.
Here are a few don’ts when it comes to supporting a struggling franchisee:
Never allow a franchise a royalty break or holiday. If you were able to develop a sustainable franchise business model, it is most likely that the issue with the franchisee’s business isn’t the royalties they are paying the franchisor, but may be some other business related issue. Therefore, royalty break is definitely not the way to treat the problem – never go for quick–fix solutions.
Likewise, a struggling franchisee should never look back on marketing effort as expenses; again, it is not that the marketing expense that is the sole problem within a franchise problem, but furthermore. At Strategizer – The best Franchise Consultants in Chennai, we believe that marketing should be considered as an investment, the lifeline of business, and not an expense.
In conclusion, it can be rightly put that maintaining a healthy and strong relationship with the franchisees is the key to building a strong franchise business. Therefore, it becomes the responsibility of a franchisor to do his bit to support a struggling franchisee.