Since the early beginnings of the franchise industry there have been certain constants that have never changed. I refer to these as the Principles of Franchising. They represent the foundation upon which every successful franchise system is built. If franchisors are guided by these principles they can be assured that their franchise system will grow and prosper. Although it may be challenging to always adhere to these principles, franchisors should make every effort to build and develop their franchise based upon these principles.
“The more I help others to succeed, the more I succeed.” Ray Kroc McDonald’s founder
If every franchisor follows these principles from the design and beginning of their franchise to its growth and development, their franchise will flourish.
- Disclose benefits of investing in the franchise without puffery
In the marketing and selling of franchises be honest and avoid creating false expectations. After 35 years in the franchise industry one of the most frequent mistakes I’ve seen franchisors make, is to imply that achieving franchise success is easier than it really is. It’s better to lose a candidate to a truthful representation or disclosure, than gain a new franchisee based upon unrealistic expectations.
- Properly train and prepare the new franchise
All new franchisees must be properly trained and fully prepared to take control of the new franchise. Some startup franchises cut corners on training, due to a lack of capital or to save money. If a franchisor can’t provide quality training to their new franchisees, then better to wait until they can. After training, the majority of new franchise owners are on their own.
- Franchisors can achieve a favorable ROI without having to deliver extraordinary performance
When building the elements of a new franchise, it must be structured so that the franchisee can make money. Companies that add royalty fees and other expenses onto a marginally profitable company operation, will doom many of their new franchisees to failure. The goal couldn’t be any clearer.
- Measure franchise performance
Evaluate franchise financial performance on a scheduled basis. Without knowing how franchisees are performing, it will be difficult if not impossible to know how well the overall franchise program is performing. Without this knowledge, a franchisor will lack the required information needed to make important strategic decisions.
- Think long term gain versus short term benefits
Before making an important decision that will impact franchisees, it’s important to accurately measure the impact that change will have on individual franchise owners and the overall network.
Franchising has remained a successful business model, whereby individuals can own and operate their own business with a recognized brand under the terms of a franchise agreement. Unfortunately, not every franchisee is able to achieve the same level of success and some fail. The reasons for failure are sometimes the responsibility of the individual franchisee while others are due to the shortcomings of the franchisor.
If franchisors strive to follow my Five Principles of Franchising then the opportunity for success for them and their franchisees will increase. By using these principles as a guide, they will establish a path for franchisors to follow.
“Give everyone a chance to have a piece of the pie. If the pie’s not big enough, make a bigger pie.”
Dave Thomas, founder Wendy’s