Franchising for the future: The new focus for Franchisors

Wednesday 20 July 2016

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The $144 billion franchise sector continues to be a booming part of Australia’s economy. Despite receiving more than its fair share of media attention, the industry is still thriving through providing opportunities for everyday Australian’s to realise their entrepreneurial ambitions.

The greatest ongoing challenge for Franchisors, as continuously highlighted by Griffith University surveys, is identifying and qualifying the best franchisee candidates, and maximising their effectiveness in the franchise business. Finding the best people can be a herculean task, regardless if they are business owners or employees. It is made even tougher when there are so many franchises available in the market. In a hotly contested environment, how are franchisors competing and distinguishing themselves from other franchise brands?

We have made some observations over the past year and have identified three areas that higher performing franchise networks are sharpening their focus on:

  • Support and growth vs audit and compliance

Traditionally, the objective of franchise support staff has been to ensure franchisees were meeting compliance standards via the dreaded ‘site audit reports’. Even the very nature of this philosophy screams control versus collaboration, with the fear of a breach notice for a franchisee’s failed compliance. Consistency is still important for a franchise network to thrive, and monitoring the standards is critical for a franchise brand’s success. However, what has increased in priority is the ability to build a high performing franchisee culture through nurturing and growth. Retail Food Group elected to restructure its head office in March this year in order to ‘change its service model from operations and compliance to best support franchise partners, focusing on growing their business and enhancing their capability’.

If one of the biggest food franchise conglomerates thinks franchisee coaching and support is important, than that is a pretty good sign others should take note.

We have gradually observed a change in philosophy of the way franchisors are interacting with franchisees. One of the subtle, yet prominent terms bandied around more recently has been ‘franchise partners’, signifying a shift in the traditional franchisor control mentality to collaboration and teamwork. Perhaps this shift has been driven by the nature of younger franchise owners who typically do not respond well to controlling styles.  Regardless of the cause, the expectation is now that Franchisors will actively seek out opportunities to coach, support and help grow their franchisees. Having the systems in place to enable meaningful support to be provided leads us to our second key observation:

  • Data is the new oil

This is not a new revelation. Organisations have been analysing large and sometimes complex datasets to inform decision making for many years. Target was doing this in 2012 when it predicted that someone was pregnant before their father was even aware, solely based on purchasing behaviour:

How Target uses data

However, what was deemed ‘nice to have’ is now imperative for providing franchisees with the data to enable them to grow and improve their business. POS systems which communicate to the entire network are mandatory for creating timely and proactive insights. Key financial ratios, net promoter scores, benchmarks with other franchisees and the industry, foot traffic, online traffic and sales conversion rates are all important tools in the support manager’s kit-bag in order to have meaningful conversations with franchisees. Particularly as franchisees progress through their term, support mechanisms need to evolve to reiterate answers to the ever growing question - what am I getting for my royalty payment? Better provision of data insights can help increase franchisee profitability (which ultimately improves Franchisor profitability) and may even lead to an increase in the average franchise term.

  • Next level interaction

Are you still updating Operations Manuals and sending out the hard copy update? Don’t worry, you are not alone and it’s frightening to not only see how much this is still occurring, but how many Franchisors have neglected to keep their Operations Manuals up to date. There are some great cost effective systems in the market which take your Operations Manuals online and offer a truly interactive experience. Not only does this make for a more efficient process for updates and franchisee acknowledgement (with a digital signature), it enables the Franchisor to be proactive to address areas where a franchisee may not understand particular changes. Take a look at how many Franchisors are setting up a dynamic Operations Manuals to get franchisees and employees interacting with the business:

 Online Operations Manual         

For example, if your organisation introduces a new policy for handling customer payments, an online platform enables immediate release of video content and supporting text to show a franchisee how to implement the improvements. They can then be tested through an integrated learning management system and raise a query if there is something they do not understand. It can be a more efficient alternative than visiting all franchisees to train them in the new process.   

Training and staff development also benefits from a renewed sense of interaction. Dynamic training platforms for franchisees and employees (such as role play videos of various scenarios – like how to handle a customer complaint) are taking engagement levels up a notch. We are closing in on a ‘choose your own adventure’ style of induction to a franchise business. Franchisors are giving more consideration to first interactions with franchisees and their employees in order to embed the desired culture.  

Providing a turn-key franchise is built on the notion that the tools and system are inherited to increase the chances of operating a profitable business. A franchisee’s world is made a lot easier if you have a platform that also encourages staff engagement. More so, the younger generation expect this type of interaction. They want the option to undertake training whilst their ears are submersed in headphones during a morning commute on an over-crowded tram.

Can you expect to compete with these systems and grow the leadership of your franchisees from a one page recruitment guide that hasn’t been updated since 2006? The short answer is probably not, and it’s development of these interactive systems that underpin why many higher performing franchise networks continue to attract the best talented franchisees and employees.

Take some time to consider how you are matching up with the mindset of some higher performing franchise systems. Thinking and acting like a franchise of the future, and not a franchise of the now, is the first step in sharpening your focus for success.