The franchisors wheel of success

franchisor-wheel-success

Potential and existing Franchisors are often searching for the correct combination of elements to ensure their success.  In this article, Franchising Plus illustrates a “Wheel of Success” with descriptions to guide you in your franchise journey. The wheel has 7 segments, and the size of each segment relates to its importance.

Proven Concept – Importance 22%

If the business concept is not proven, successful, and sustainable you, as a Franchisor, will never have a satisfied and successful Franchise network.  Franchising is all about a WIN: WIN scenario.  Both the Franchisor and Franchisee needs to be successful, and both need to receive a good return on investment and effort.

A good franchise will enable the Franchisee to earn a market-related salary and get their initial investment back in approximately 3 years. In the current economic environment, we have experienced 3.5 to 4 years.
The upfront fee, royalty/management services fee, and marketing contribution must be a fair calculation for both parties.
A common mistake Franchisors make is to franchise before they are ready!

Franchise Package – Importance 12%

A Franchise needs a franchise package consisting of the following:

  • Operations and Procedures Manual,
  • Franchise Agreement,
  • Disclosure Document and
  • Recruitment and Selection Pack.

These documents must be compliant with relevant legislation and the actual business model.  The Operations Manual and Disclosure Document must be amended and updated continuously as the business develops and changes.

Franchisee Selection – Importance 14%

In our opinion, a franchise is never sold, it is awarded to a hands-on, owner-operator franchisee.  It is critical that every Franchisor has a clear franchisee profile and that all franchisees appointed must meet and or exceed the profile.  Franchising Plus offers a successful psychometric test to assist in determining if a person will be an ideal franchisee.

We suggest a franchisor conducts the necessary creditworthiness and reference checks before appointing a franchisee. It is important to understand that not everyone is suited to be a franchisee e.g., an out-and-out entrepreneur will not feel comfortable following rules strictly and conforming to the brand formula.

Marketing – Importance 10%

Franchisees contribute to a national marketing fund.  The Consumer Protection Act states that the fund needs to be used for brand building and awareness.  The franchisor needs to compile an annual marketing plan, including a communication strategy and media selection combining brand building and promotional advertisements.  The Franchisees have a right to receive a report detailing the flow of funds.

Franchisee support – Importance 15%

Franchisees need to be supported regularly. We call the person that supports them a “Field Service Consultant” and each consultant can be responsible for 10 to 15 franchisees.  The rationale behind the Franchisee to FSC ratio is that a support person can spend one day a month with each Franchisee and the remaining days with the Franchisees that are experiencing problems.  In the past, these representatives were like inspectors with a notebook only reviewing/confirming the quality.

This has evolved to FSC’s implementing “QUEST” which stands for “Quality evaluation and in-store training”
Most Field Consultants use the previous month’s financial results as the basis for their visit.  They have an agenda and compile minutes at the end of the visit.

Training – Importance 15%

Ongoing training to the Franchisee and their staff is critical for the success of the business and the brand. Training Manuals are developed from the Operations and Procedures Manual, i.e., we produce a Training Manual to be used with the Operations and Procedures Manual.

We also suggest you divide the year into 5 cycles and train throughout the year relative to that cycle/subject.  One cycle for example could be customer care and, in that cycle, it would be supported by merchandising material, badges for the staff etc. A mystery shopper could be used before and after the cycle to measure success.

Site Selection – Importance 12%

Site selection has become very scientific with the data, information, and technology available in the market. Each franchisor needs to develop a clear Country Development Plan with areas and locations that are viable for the brand and its offering.

A way of doing it would be to have clear/set criteria defining the ideal target market location, for example, Brand XYZ would need approximately 40 000 economically active people in an area to justify a franchise.  Economically active people would need a combined income of a minimum of R50 000.00 per month to be considered economically active.

Conclusion

We hope this wheel has helped you to plan how to be a successful Franchisor.  The article is brief, and we would welcome the opportunity to meet with you to explore and add to it in more detail.  Please contact us at info@franchisingplus.co.za for an obligation-free consultation.

FASA Franchise Association South Africa
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