There are a number of reasons for people to shy away from franchising. Is franchising a good idea? Firstly, most people have no idea what franchising really involves. They know that they need to work out fees and territories and that they need a legal agreement but that is about it.
Also, it is difficult to get impartial and experienced advice. Many professionals who work with business owners are often not any better informed than they are. Accountants tend to automatically advise against franchising because they do not actually understand the different discipline of franchise business accounting. Without franchise expertise, lawyers, bankers and other consultants are not much more help.
Unfortunately, this lack of understanding about franchising is fueled by the press commenting on a couple of the more blatant failures, which have recently hit the headlines. I do not support what has happened to the franchises, which have publicly struggled with a series of problems. In my view, in every case, the issue goes back to franchisor hubris and greed, resulting in the group being managed with completely the wrong balance. Franchisee support and looking after the profitability of the whole group is one of the fundamental responsibilities of a franchisor. Overlook it at your peril.
Which takes me to my next point.
When people start to become aware of their responsibilities as a franchisor, they often move away from it. A franchised business is actually made up of two business entities — a franchisee business supplying the product or service to the customer, and a franchisor business looking after franchisees and the group as a whole.
The transition from business owner to franchisor means that you will move from serving customers, cleaning and dealing with the day to day to looking after people. As Eagle Boys Pizza Founder Tom Potter said about his transition to franchising, “I have moved from the pizza business to the people business.”
This is a tricky relationship, franchisees are actually business partners, not employees or contractors, albeit operating within the framework of a legal agreement. They are the ones responsible for bringing in the money, paying you your share for the security of your brand and the services you provide them. They understandably get riled about not receiving the help they need or being put into a territory where they are on a highway to nothing when trying to make a profit.
The trick to getting it right is making sure you learn about what makes a franchise successful and then working with your franchisees to make it happen.
The absolute key is to get happy franchisees. As Greg Nathan from Franchise Relationships says, “Happy franchisees are profitable franchisees and profitable franchisees are happy franchisees.”