4 Success Factors for Effective Franchisees

30 August, 2020

1. Financing – Planning of Funds

Because of the rush to get going (to fulfill their entrepreneurship dream), some prospective franchisees, in order to raise money to join the franchise, even resort to getting loans (other than banks) at all costs. Once the shop is opened, even if the business is operating relatively smoothly, the pressure concerning the debt can cause anxiety for the franchisee.

Franchisors must bear in mind that should their franchisee, because of the pressure to pay their creditors, might leave the front line frequently thereby affecting even their own store’s employees morale, resulting in the drop of the quality of service.

Customers are perceptive and can sense the difference and might eventually patronize other stores.

Therefore, franchisors (and ideally, third parties they use to recruit franchisees) must have a good financial model that the prospective franchisee can use so that they (the franchisees to be) have an accurate picture of the kind of cash-flow to expect on a daily basis, and to assess objectively whether their funding is sufficient. In other words, both the franchisor (and their sales representatives) and their prospective franchisees are clear of where the threshold lies. A good financial model will factor in all the relevant costs/expenditure so that the franchisee can see how his margin will be affected – e.g. labor costs, raw materials, utilities, lease of equipment, etc.

2. Management of Employees

In spite of the initial training provided by the franchise headquarters in the running of the business, it must be made clear that the franchisee is responsible for the daily running of his/her own business. (The Chinese saying “water far away is of no help to the firing raging in front of you” is very apt) Franchisees cannot be reliant on the franchisor who might be hundreds or thousands of kilometers away. They need to be able to resolve problems, especially in the area of managing their own staff.

First of all, franchisees need to fully understand their employees.  Human beings have different strengths and weaknesses, the franchisee needs to recognize in each of his/her employee their ability, character, attitude, knowledge, etc., and cultivate in them the right values (team-spirit, believe in the product/service, etc.), and as much as possible, passion for the business.

Communication (listening to the staff’s inner voices) will be a great skill to acquire. Great leaders know this is one of the most effective way to unite everyone’s heart, engendering strong enthusiasm within the whole organization. Franchisees must be prepared to allow employees to make mistakes. This will prevent the franchisee from unwittingly suppressing innovative ideas and improvements. He/She must also not be stingy in showering praises in real time so that the positive energy permeates the entire organization.

3. Build Good Customer Relationships

A grain of wheat has three fates: first, grinding into flour, being consumed by human beings, to realizing its own value being a staple food; second, become a multiplier, becoming a seed for the farmer so that more wheat can be harvested (well-managed, it creates value for mankind); third, becomes moldy and be discarded.

Customers are analogous to wheat in the sense that they can be your source of supply (money) and they can multiply. But if badly managed, they can become like the rotten apples that spoil the whole barrel of apples.

Therefore, it is clear that franchisees should learn to manage customers well. They must learn to cultivate new ones while retaining old customers. They should invest time to ensure that data of customers are managed systematically (most franchisors would have some sort of CRM platform for their franchisees to tap into). Careful analysis of customer profiles, finding out their preferences, purchasing power, frequency of purchase, etc. so that they can be more targeted (for franchisees to recommend goods, services to these end consumers) will generate more revenue.

4. Close Collaboration with Franchise Headquarters

The franchisee has a very delicate relationship with the franchise headquarters. Citing another Chinese saying: “how can the teeth not shiver when the lips are frozen’, both parties’ interests are intertwined. Yet, they of course also have their own axis of interests. Therefore, the franchisee and the franchisor (headquarters) will inevitably have some conflicts during the tenure of their business relationship.

Franchisees often complain about the existence of bureaucracy at headquarters. They perceive (rightly or wrongly) that headquarters often give instructions blindly — without real understanding of the actual situation on the ground. Conversely, headquarters often think that the franchisees are self-centered, and un-cooperative.

In conclusion, franchisees should not choose a franchisor that they have not spent time studying about (this is essential homework) — including talking to their existing franchisees. On the other hand, franchisors must also dig deeply into the character and background of the franchisees (financial standing, education, hobby, etc.)

Honestly, getting a good match should not be dependent just on good luck. Both parties must put in the hard work for an eventual long-term win-win result.

Written by: Albert Kong, CEO, Asiawide Franchise Consultants

Please Share Via

Share on linkedin
Share on twitter
Share on facebook
Share on whatsapp
Share on telegram
Share on email
Share on print

Recent Posts

Ads

Get Interesting Insights & Updates on Franchising
Other Articles that may Interest You
Open chat
Hi I'm Sophia! How may I help you today?