Whether they are a sole-trader simply operating a single outlet or a corporate master franchisee running an entire country, franchisees sometimes run into trouble.
That’s not because they’re franchisees, it’s because they’re in business and business doesn’t always go according to plan.
The advantage for a franchisee is that they should have someone looking over their shoulder to make sure they’re doing ok.
If they’re not, then it’s the franchisor’s job to jump in and help
The best franchisees will recognise the challenge, own up and ask for assistance. Many will either not recognise it, or not ask.
The best franchisors will have systems to flag up some of the following signs.
Non-payment of fees
However a franchise is structured the franchisor will nearly always be a creditor of the franchisee.
Management services fees, marketing fees, payments for supplies, rent, even loan repayments may be due.
As soon as these payments are slow to arrive, and I’ve always believed the rule should be ‘little and often’ then that’s a red flag and immediate action is required.
There will be reasons for it, ranging from dissatisfaction to poor administration or lack of financial awareness, so find out the reason and do something about it.
I had a franchisee once who couldn’t pay us because their clients weren’t paying them. “Have you chased them for payment?” I asked. “We can’t, they’re very good clients for whom we do a lot of work” was the reply.
If nothing else, that highlighted a training need for the franchisee!
Failure to communicate
When franchisees get into trouble they generally have two ways of dealing with it. They either shout about it, blaming everyone else but themselves (more of which below) or they withdraw into themselves, put their head into the sand and pretend it’s not happening.
They don’t provide the necessary reports, they don’t respond to e-mails, they don’t take phone calls, they postpone field visits for spurious reasons and they certainly don’t turn up for conferences or events.
These things escalate so spot it early and do something about it. A franchisor I knew made a point of personally calling every one of the franchisees if nobody else in the business had contacted them within the previous month.
There was no real purpose for the call other than a friendly catch-up but he took the opportunity to listen, both to what the franchisee was and was not saying – listening ‘between the lines’ if you will.
It’s not always what’s happening in the business that’s causing the problem, it’s their marriage, their kids, their neighbours, their health, whatever.
Failure to maintain standards
There’s a reason for field visits and it isn’t just to catch franchisees doing something wrong and telling them to put it right.
There’s a reason why standards aren’t being maintained so find out what they are and do something about it. Is it because staff cannot be recruited?
Is it because the crew is improperly trained? Is it because there’s not enough money to pay enough people? Is it because the franchisee just doesn’t care any more?
Different causes of the same problem so different solutions are required but the franchisor should have the answers and be able to show the franchisee what they need to do.
It could be additional training for staff or the franchisee; it could be some on-site help from an operations specialist; it could be agreeing to start the resale process.
Whatever the solution is, it needs to be agreed; it needs to clear who is responsible for what happens next; and the process needs to be monitored.
Underperforming against KPIs
Every network has its unique measures of performance as well as the ones that are common to most businesses.
It could be number of enquiries generated; it could be speed of response to a sales enquiry; it could be the conversion rate of enquiries to sales; it could be the percentage cost of labour and materials versus sales.
Whatever the important measures are they need to be identified and reported on because only then can something be done about it.
What gets measured is what gets done but if it’s not being done properly then we need to find out why and then do something about it.
Complaining to franchisor staff and peers
The noisy ones can seem like more of a problem but at least everyone knows they’re struggling, though it will still take some work to find out why.
It could be any of the reasons mentioned above but they are often angry with themselves for getting into the situation. The only release is to blame it on everyone else, pointing the finger and complaining.
It rarely helps to suggest that they should look where the other three fingers are pointing but it does help to talk about it.
Franchisee support is one of the most complex roles in business and a mixture of skills is required to manage and support them.
These skills encompass everything from policeman to marriage guidance counsellor with coach, psychologist, psychiatrist and business analyst along the way.
However it’s no good having all these skills available if the systems aren’t in place to identify when things are going wrong.
Problems for individual franchisees rarely happen overnight or come as a big surprise.
Prevention is better than cure so initial and ongoing training is of paramount importance, backed up by whatever IT, HR and accounting systems are appropriate to the business.
As long as the systems are actually used and the information they produce is acted upon, early identification helps to avoid failure in all but the worst cases.
ABOUT THE AUTHOR
Brian Duckett is chairman of The Franchising Centre, Europe’s leading firm of franchise consultants. He has made his living from franchising since 1976, initially as a franchisee, then a franchisor and for the last 20 years as a consultant of potential and practising franchisors. His firm co-ordinates an informal network of franchise practitioners, which representation in more than 40 countries worldwide. www.thefranchisingcentre.com