What’s Keeping Emerging Franchisors up at Night – and How to Fix It

The difficult journey of evolving an emerging franchise brand into a scalable and healthy organization can feel like being on a rocky-road of uncertainty. Navigating around lean budgets, small staff and limited time creates daunting challenges, particularly when your goals — such as boosting franchisee engagement and driving unit-level profitability — are nowhere near small or limited.

Looking at current franchise development data, such as FranConnect’s recent 2021 Franchise Sales Index Report, all signs point to an economic burst this year. Many emerging brands continued their recruitment efforts to some extent throughout the pandemic and reported strong results. The ratio of sales leads to deals closing is improving, indicating that there has been pent-up demand and a significant rebound is on the horizon.

So, yes, emerging brands should absolutely be investing in growth. Franchise sales teams should be prepared for an influx of leads and focus on speed-to-the-lead and tracking of critical metrics such as the booking and keeping of prospect appointments to ensure they don’t lose great, qualified candidates. It’s a good time to move quickly — but carefully. All growth must be smart growth and measured while balancing between the drive for healthy lead generation and controlled spending.

But how do you do that with limited resources? Let’s take a look at four common roadblocks among emerging franchise businesses and, most importantly, how to fix them.

To reach royalty self-sufficiency, be fastidious about your unit growth

Royalty self-sufficiency is the point at which all overhead costs are covered by royalties and there is no longer pressure to earn initial franchise fees. This is the name of the game and something that keeps every emerging franchisor up at night until they achieve it. Typically, emerging franchisors must have 50-75 units open to reach royalty self-sufficiency, but the focus must be on rapid, controlled growth. This is not the time to throw spaghetti at the wall. Spending on lead generation and brand awareness must be strategic. Reaching those magic numbers means being smart about how and where you go to market. Emerging franchisors should develop a very specific franchisee profile and list of target markets and not stray from your plan no matter how tempting it may be.

The road to growth is paved with franchisee validations

Particularly in these early stages, franchisors must ensure franchisee profitability and manage franchisee satisfaction. Validation for investing in your business will come from the mouths of your franchisees, so you must invest in their good experience. Franchise field operations teams should be focused on driving results, not simply “checking boxes.” They are consultants, not compliance managers. They should be focused on making sure your early adopters are doing well. This is an area where technology can assist, providing a system of business intelligence to track performance metrics.

Leverage technology to enable remote evaluation by providing a system that both the field manager and the franchisee can see and update. This provides more accountability and transparency, while providing the opportunity to cut down on unnecessary field visits, which can be costly and inefficient. If you can offer self-auditing with a field operations tool, your field consultant-to-unit ratios can go up. Field operations information should be easily accessible, trackable, and understandable from a dashboard that provides real-time data. A business intelligence tool can tie your field operations tool with every other aspect of your business allowing for you to correlate items such as your quality assurance or net promoter scores to revenue impact.

Data without action is a fool’s folly

In the words of Tropical Smoothie Cafe’s Chief Operating Officer, “It is next to impossible to drive results without having the numbers at your fingertips. Everyone needs to be in touch with the numbers and facts constantly.” What really makes the data sing is when you can tie insights into actionable playbooks that are built upon your organization’s best practices. Thinking back to the example above where you can see a direct correlation between the failure to deliver an exceptional customer experience to declining revenues, you need to ensure that you have defined playbooks readily available that tell you the precise actions that a franchisee should take to address this specific performance shortfall. And, better yet, your operations technology should have a workflow that allows you to assign the playbook whenever the standards have failed to be achieved. The playbook allows the franchisee to report back on the completion status and allows the franchise business consultant to monitor progress. A great feature to look for is the ability to upload photographs and videos of the standards being met and achieved.

Improve franchisee relations by getting them actively engaged with your brand and with each other

The franchisors that report the highest franchisee satisfaction offer a central space online for franchisees to share, learn, and grow together. I always recommend brands give their most engaging content a single home, rather than rely on franchisees to refer to a collection of PDFs, spreadsheets, videos, Google Drive documents, and digital operations manuals spread across multiple shared drive folders and intranets. A best practice I’ve found works very well for our customers is to create a digital library that can be set up so that members of the team are only seeing what they are permissioned to see with administrative controls based on roles and personas. Even those franchisees that have responsibility for representing the other franchisees in their regions as elected members of the Franchise Advisory Council are often frustrated by the challenges in gathering feedback and recommendations from their franchise constituents. Having an engagement tool that gives an internal chat channel that is only visible to members of the region and their assigned franchise consultants helps to centralize those communications and to create a sense of community.

To become a brand customers love and trust, be hyper-focused on and vigilant about brand standards and operational excellence

Isn’t it the dream of every emerging franchisor to become a brand that’s loved and trusted by many? To achieve this, the customer must know what their experience will be and count on having that experience every time. Therefore, it is incumbent upon you to put systems and people in place to monitor brand standards throughout your system. This can be accomplished by Franchise Business Consultants conducting onsite visitations; by franchisees that conduct regular self-assessments or reviews on their team members; franchisee pacts where neighboring operators shop each other’s franchises; and those franchises particularly in industries where you need stricter controls, such as in foodservice, can rely on tried-and-true mystery shopper programs.

Additionally, preparing for and conducting field visits can take an inordinate amount of time. Technology is available to quickly spot trends, challenges, and areas for improvement and create programs to address areas of non-compliance. There are business assessment protocols to score themselves and share with franchisor.

Final thoughts:

    • Scale lean now for faster profitability; the longer you wait the harder it is.
    • Grow smart. It’s about quality over quantity.
    • Invest in infrastructure to allow you to expand while increasing unit-level profitability.
    • Don’t wait to get ahead — make investments that support your business at scale, not to solve problems in the short-term.

Keith has over 45 years of executive-level expertise creating and building leading franchise systems. A highly respected thought leader, Keith works closely with many of FranConnect’s Customers’ Executive Teams. His books, webinars and keynote addresses have created a large following. His latest book, The Franchise Book of Mentors, was released in September 2019.

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