7 habits of highly effective franchisors

Is your franchise organization up to scratch? How to look for the signposts of a quality franchise system…

HABIT ONE: Very particular about franchisee selection

Quality franchisors understand that having franchisees with high standards is paramount to the success of the entire organization. An ‘A’ grade franchisee has a positive attitude, is committed to the business, delivers exceptional customer service, has a strong attention to detail, and shares the values of the Franchisor. Franchises that heavily screen and select incoming franchisees are growing or maintaining a very good network. As a potential franchisee, if you don’t feel that you are moving through a ‘selection’ process, the Franchisor is probably more interested in simply ‘selling’ a franchise to whoever wants to buy one. On the other hand, highly effective Franchisors understand the benefits of a solid match for both parties, and a long-term partnership thereafter.

HABIT TWO: Strong support structures in place

A professional franchise organization will have support structures in place – not dissimilar to any large corporate. You would expect an advertising and marketing department, a training division, administrative support, one-on-one coaching and mentoring, and possibly an I.T. department. Highly effective Franchisors understand that these support structures are crucial to allow the franchisee to focus the bulk of their efforts on following the system and delivering outstanding customer service.

HABIT THREE: Strong direction and can evolve with the marketplace

Most businesses attempt to satisfy too many markets. They try to be “all things to all people”. Highly effective Franchisors have a strong understanding of their ‘point of difference’ in the marketplace. They exploit it. The protect it. They educate their customers about it. They are also smart enough to know when it’s time to expand it – evolve with consumer demands. Quality Franchisors also have firm long-term goals and plans mapped out to achieve these goals.

HABIT FOUR: The leader at the top has a passion for the business

Some franchise organizations are led by the original founder. Others are corporate, and are led by a Managing Director or a CEO. A standout habit of highly effective Franchisors is that the person at the top has a strong passion for helping their franchisees grow. Most top Franchisors are hands-on in developing and growing the business – and they are not driven purely by the financial rewards – it’s mostly because they have a passion for helping other people be successful.

HABIT FIVE: Educate franchisees to continually improve their business

As a franchisee you would expect a certain level of support from your Franchisor. Highly effective Franchisors continually train their franchisees on how to run a better business. They teach their franchisees the importance of Key Performance Indicators (KPI’s) such as average sale, conversion rate, and sales opportunities. The franchise representative (usually Franchise Development Manager or alike) works closely with the franchisees on strategies to continually improve these three key statistics. Quality franchisors also coach their franchisees on hot topics such as staff selection and retention, managing gross profit, and rostering.

HABIT SIX: Ensure franchisees get value for service and advertising levies

Most franchises have a service fee (often referred to as a royalty) and an advertising and marketing levy. Highly effective franchisors strive to provide excellent value for money to the franchisee group.

HABIT SEVEN: Profitable business model that is proven across multiple locations

Highly effective franchisors have a profitable business model, that has proved to be successful across multiple locations and with multiple operators. It is not necessary to have 150 outstanding success stories – this is unrealistic. As a potential franchisee, look for an overwhelming majority of satisfied franchisees spread over a variety of locations. There may be ten outlets or stores. If seven to ten of the franchisees are more than happy and are performing well in a variety of sites and demographics – the Franchisor has a proven and profitable business model.

Steve Finn wrote this article. Steve is an advisor to Franchisors, Franchisees, and Potential Franchisees and the founder of Australia’s only national franchise broker network.

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