5 Key Markers to Test the Fitness of your Franchise
When did you last have time to really think about your business? Not the day to day planning and decisions but the big picture - what you are looking to achieve, your goals, your dreams and how that might have changed in the passing years. Consider too how your customers and their needs have changed with new trends, technologies, markets, competitors and the growing need to be readily responsive to those challenges and opportunities. Franchises are like any business in their need to innovate and consolidate consistently to stay ahead of their competitors and retain their customers’ loyalty so here’s a broad overview.
Values, Vision, Culture and Leadership
“Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.” - Jack Welch
The culture of any organisation is founded on the shared values and practices of the members which informs their vision, gives clarity to their mission and ultimately leads them to outperform their competitors. Cultural allegiance – genuine belief in your mission - is the primary driver of high performing networks.
You’ve got a mission statement but culture is constantly evolving so taking some time to evaluate who you are and what you believe is a sound investment in your franchisees and your customers. Documenting your values, your vision, how you perceive your culture and how you drive performance is critical to your strategic direction. It underpins your brand positioning, your marketing, your organisational structure and operations. It defines your franchisee profiling, your recruitment strategy and process and drives your implementation. This is not a HR intangible.
Vision based cultures have statistically higher levels of profitability, better financial growth with greater franchisee commitment and better compliance and retention. Inspiring franchise leadership grows out of well-defined and articulated values, your vision for your network and it is enforced by the way you live your mission every day.
Operational Consistency, Compliance and New Business Technologies
“No institution can possibly survive if it needs geniuses or supermen to manage it. It must be organized in such a way as to be able to get along under a leadership composed of average human beings.” - Peter Drucker
Operational consistency and compliance are the foundation of successful franchise networks and are reflected in higher levels of profitability, greater customer loyalty, better franchisee retention and ultimately the scalability of the network, its ability to capture market share, create brand penetration and the eventual enterprise value on exit.
Franchise networks particularly in food services, have been challenged by Fair Work compliance with a lot of recent negative media attention on franchisee infractions and the impact this is having on franchisors. Whilst legal solutions such as Proactive Compliance Deeds and Enterprise Bargaining can provide solutions there are also technology solutions that can ensure franchisees' compliance whilst mitigating franchisor risk.
Business technology today needs to deliver integrated systems that ensure effective communication, operational conformity, regulatory compliance and brand consistency. This allows you to manage and scale your network cost effectively with the transparency and data you need to evaluate ROI and respond quickly with the right business decisions. We are rolling out some integrated payroll systems with networks to ensure franchisees meet a range of complex awards thereby reducing your liability. This together with specific employment law strategies can de-risk and protect franchisors, many of whom incorrectly believe they are indemnified against infringements by their franchisees.
“If you think it's expensive to hire a professional to do the job, wait until you hire an amateur”. - Red Adair
Whilst most franchisors will have engaged a law firm initially to draft their franchise documents, many now prepare and arrange for signing themselves as they continue to grant franchises, sign leases, issue licenses to occupy or breach notices. When errors occur in a lease they will generally be picked up by the registration authority and the documents returned for re-execution. But where there is no external review such as with franchise agreements and licenses to occupy, the chances of errors being undetected and corrected are very high. Signatory errors by guarantors, franchisors or franchisees can compromise (sometimes fatally) the ability to recover monies and/or enforce the agreement in Court.
Franchisors often seek professional advice when the Franchising Code of Conduct is updated as it was in January 2015 and with up to $58,000 in pecuniary penalties the requirement to update franchise agreements and disclosure documents is imperative. But changes to other legislation (such as the Privacy Act, or the Personal Property Securities Act) can also have a significant effect on the franchise business and must be reflected in updates to your legal documentation.
The relatively small cost (often to the franchisee) of engaging franchise lawyers for the issuance and execution of your legal documents makes commercial sense as they have the professional expertise to ensure they are correctly executed and enforceable. They also have professional indemnity insurance creating a cost-effective risk mitigation policy which is certainly cheaper than later remedial work or litigation. Legally compliant agreements are critical to the successful growth of your business, protecting the enterprise value you are building, now and at some future exit point.
Lead Generation and Recruitment
One of the greatest global challenges facing all businesses today is finding, engaging and retaining dedicated ambassadors for their brand.
It’s not just luck that some networks expand consistently with good people and many simply stagnate, so with 1400 franchise systems to choose from, how do you find the committed franchisees you need to thrive?
It’s a two part exercise:
Lead generation - who are they, where are they, how do you reach them cost effectively? Understand the characteristics of your perfect franchisee based on your brand, your product, sales and service culture, your market, your business model, your point of difference. Then work out where those people are and present your offer. With a targeted strategy and committed marketing spend it is possible to find quality candidates on a budget.
Screening and selection process - establish the recruitment criteria and process that will result in on-boarding and retaining successful, profitable happy franchisees considers their financial capacity, their skills and experience, their psychological profile and the cultural/brand fit.
And whether you out-source or recruit internally, the quality of the franchisees will never eclipse the calibre of the recruiter, so it’s essential they are well trained, presented and experienced so you can be confident they will excellent representatives of your values and your culture.
“Innovation defines entrepreneur and entrepreneurship - the entrepreneur always searches for change, responds to it, and exploits it as an opportunity.” - Peter Drucker
Innovation keeps the best franchises ahead of their competitors because they know they will eventually be copied, and customers too may become jaded without change. Market leaders understand the values of their brand and the behaviours that motivate their customers ensuring their differentiation in every aspect of their business.
Ongoing innovation may be seen by customers and competitors in new products, services, advertising and design. But it’s the often invisible innovation related to training, motivation and incentives that uplift customer service and staff retention. It can involve leading edge technologies that create integrated systems for POS, rostering, inventory, stock control, financial management, reporting and compliance. Innovation may drive better customer communication via social media, email and performance tracking to gauge conversion rates on your website. Or it may provide better tools to capture customer data and increase your database, improve your CRM and engage in a range of off and online marketing.
Companies with a flexible, adaptive culture aligned to their business goals have a great ability to respond to the changing nature of business, to anticipate customer trends and track their performance. Effective innovation leads to more correct decisions being made earlier, edging better franchisors even further ahead of competitors.
By Suzanne Jarzabkowska | CEO DC Strategy