In Franchising Some Things Never Change
In my first book Franchising from The Inside Out, I presented The 10 Commandments of Franchising. Now twelve years later, I believe these remain as true today as they did then. I’ve edited them to highlight the most important ones.
- Franchisees Have More Power Than They Think.
Many franchisees believe that they don’t have the authority to speak up. Some may feel that the franchisor has them “under their thumb”. Obviously, there are franchisees that are an exception, especially those with multiple locations that are financially strong. Nevertheless, I believe that those franchisees that provide positive and reasonable criticism to the franchisor are usually well received, particularly if it is from franchisees that have been following the franchisor program. Most franchisors are willing to accept feedback and suggestions from their franchisees. For that reason, I would hope that as a franchisee, you recognize that you do have more power than you think and that you are not reluctant to speak up when necessary.
- Franchisees Should Try to Emulate Successful Franchisees.
I have always told my franchisees, “If you want to learn about how to be successful then listen to the successful franchisees. Don’t listen to the chronic complainers.”
- Franchisors Need a Strong Franchise Agreement to Protect the System.
This may seem like somewhat of an oxymoron for a franchisee, but over the years I’ve found that a strong franchise agreement protects the franchisee. This doesn’t mean that the agreement should be unfair but rather that it protects the franchisor and franchisees from those franchisees that don’t follow the system and fail to do what they are required. Can you imagine a weak non-compete provision in the franchise agreement? A franchisee could end up having one of their colleagues leave the system and open up a competing business.
- Franchisors Have a Vested Interest in The Financial Viability of Their Franchisees.
I’ve found that most franchisees recognize that their future success, opportunity for future growth, profits and a good return from the sale of their franchise will be a direct result of having a strong, financially viable franchisor. Conversely, franchisors must be diligent in monitoring and analyzing the financial performance of their franchisees. The profitability or lack thereof of franchisees can speak volumes about franchise system performance.
- The Most Successful Franchisees Follow the Program.
Throughout the various franchise systems, I’ve been involved with, the most profitable and successful franchisees were the ones who “followed the program”. I can’t recall one franchisee who strayed from following the program being successful. To the contrary, those who didn’t follow the franchise program were typically the ones who had problems. This does not mean that every franchisor has a formula for success since, it’s a given that over the course of time, they will always be some franchisees who for a variety of reasons will fail.
- Sustained Profitability Should Precede Franchisee Expansion.
During my career I have observed numerous examples of franchisees having an unquenchable thirst for territory. They will approach the franchisor, which in most cases is looking to sell more territory. The franchisor often agrees to give the franchisee more territory and the franchisee, does in fact, acquire it with plans to expand. If the franchisee does not have a strong, viable and profitable operation preceding this expansion, the chances are that franchisee is going to have problems. The reason for this is that it’s going to require capital to develop an additional location and its territory.
- Franchisees Should Select the Most Accomplished, Articulate and Reasonable Franchisees to Represent Them.
I have been responsible for establishing a number of Franchise Advisory Councils where the franchisees selected their representatives. It’s important that franchisees choose franchisee representatives who have been successful, articulate and reasonable, and avoid those franchisees who seek to use these associations as a pulpit to further their own agenda.
These items represent some of the enduring principles of franchising that have remained constant throughout the history of franchising.