How do you build a successful business and keep your franchisees? Like this, says Gemma Tumelty, managing director of The HR Dept
First and foremost, the franchisee is the franchisor’s customer, not employees or a satellite office but independent business owners. They have invested heavily in your brand, your heart and soul – forget that at your peril. They are also your business partners, who invest in your IP and resources to lead to a mutually profitable, successful future.
It’s a complex relationship. Success brings rewards for you both but failure or dispute is in no one’s interests – damaging your brand and other franchisees’ businesses and draining energy and resources. So it is important to discover their personalities and understand their ambitions, to help establish and maintain that relationship through good times and difficult ones. We try to acknowledge their contributions and we show our appreciation of their successes and loyalty through favourable renewal terms, profile building and perks.
Different strokes for different folks
Longstanding franchisees need to know you remain valuable and relevant to their operations – otherwise you risk a drop-off in satisfaction rates and renewals, especially if like most franchise companies the contribution to your coffers grows as their business develops without any extra effort from you. That’s part of the reason we take a flat rate management service fee, rather than a percentage of profit, as it creates a trusting relationship with no disincentive for growth. Equally your new franchisees are buying a model and the experiences that have gone before them as a quick route to business success.
For both groups, the best thing we ever did was introduce Licensee led panels and talks at our conference. They don’t actually want to hear from us, but from each other. As opposed to sourcing external speakers, it’s free! And it results in great conversations whereby established franchisees feel good about imparting their wisdom to the newer ones.
Lance the boil
It’s important to deal with unsatisfactory or unsatisfied franchisees early on. But if you’ve tried and failed to get anywhere, have the honest conversation and call time. It’s easy for the bottom 20% to use up 80% of your time – time which could be spent on the rest of the network. Legal action against franchisees damages your brand and is a waste of time, energy and money. But if you have to use it as a last resort, be bold and then let your network know. It can actually be a positive thing for the network to know you will defend their businesses against damage by current or ex-franchisees.
Communication is key
Communication – internally or via a stakeholder management strategy – is always vital. But it should go both ways, so listen to positive and negative criticism with an open and empathetic mind that is open to ideas. It’s hard to stay in touch with your whole network but having a plan and recording interactions will help you spot disengagement early on and will help staff pick up relationships seamlessly.
Be ambitious with your brand
You should take your franchisees with you, involving them on the exciting journey you plan for your brand and showing how it will benefit you all. As we were expanding internationally, we demonstrated the value this could add to their offering. Our new office staff proved that our service to them wouldn’t drop.
Our Licensees become ambassadors for our projects through informal and formal sounding boards. They take responsibility for running key accounts, they lead on projects, create national media opportunities and exhibit at major events. This ownership and buy-in can lead to us becoming more profitable together.
Case Study 1
Many small business franchisees look for enough work to keep them and perhaps an administrator busy. Fintan O’Toole always had bigger plans. Coming into The HR Dept as a legally qualified employment specialist with a strong background in sales and marketing, the initial aims were to earn a reasonable living then sell on or draw dividends from the business. A decade later The HR Dept South London covers an area several times more populous than the company’s average-sized territory and employs eight staff full time in order to serve its clients.
Setting up a franchise made more sense than trying to establish his own brand, he said: “It was clear that becoming a licensee enabled me to achieve things more quickly and cost effectively and the cost of building a business within the franchise network has been much less than the cost of going it alone. “The company puts out great marketing materials, including a newsletter which is distributed to all licensees in the network. That support, as well as the other measures we’ve all worked on together as the original licensees, has helped me to get the business to where it is today.”
Case Study 2
Around half of start-ups fail within their first year but the risk is dramatically reduced by joining a franchise. Managing expectations is often crucial, and it helps to work with an organisation whose franchisees have faced a spectrum of early difficulties and which has created standard practices to overcome these. Like all Licensees at The HR Dept, Serena May was encouraged to take an active part in local business community, in her home patch of East Sussex, and use the whole marketing mix provided by central office. It’s proved a vital ingredient in providing introductions to the larger businesses she sought, alongside her early microbusiness clients.
Business picked up dramatically in her third year since and, recognising an opportunity to develop things further, she has since hired an employment lawyer and more recently an HR trainee adviser to help her grow. While renewing she bought another licence, expanding from Eastbourne, Lewes and Newhaven to Brighton and Hove as well.
“Anyone who takes on a franchise, especially in professional services, should where possible get out and become visible as soon as they possibly can, proving their credentials and expertise,” she said. “Don’t expect too much in the first year and understand that it’s going be tough.”
ABOUT THE AUTHOR
The HR Dept is a franchise business with a network of Licensees around the UK, Ireland and Australia providing high quality HR advice and support to SMEs in their area. Established in Bristol in 2003 by Sue Tumelty, its network of experts now caters for more than 6,000 SMEs. www.hrdept.co.uk.