Any growing business will face some major obstacles along the way and a franchise business is no different. Many franchise businesses experience a rapid initial period of growth – it could almost be described as a “honeymoon period” – when the concept is brand new and exciting, the franchisor is full of ideas and energy and new franchisees coming on board are equally enthused. However, a little further down the line it’s not uncommon for franchisors to hit a brick wall and experience difficulties in expanding their franchise network further. The reality of life as a franchisor managing the competing needs and demands of a number of franchisees kicks in, they discover a whole range of issues arising which they hadn’t foreseen and dealing with those needs and issues becomes such an onerous task that the franchisor then is left with no time to devote to further expansion.
Sadly it’s often at this point that both franchisor and franchisees become disillusioned and the business either fails to progress further or simply fails.
So what are the 5 most common hurdles facing franchisors at this particular point in their business journey – and how can emerging franchisors learn from these experiences and overcome the same obstacles themselves?
1. Insufficient capital
Franchising a business in the first place is an expensive business, likely to involve the hiring of a franchise consultant as well as lawyers, branding experts and more. It’s common for new franchisors to underestimate these costs and conversely to overestimate the fees that a potential new franchisee will be prepared to pay, especially in the initial stages of growth of the brand. It can take much longer than anticipated to recoup the initial costs outlaid in launching the franchise which means that the franchisor then has no funds to support the next stage of expansion. To avoid this, franchisors should ensure at the outset that they have access to sufficient capital to support the next stage of growth. Emerging franchisors should also be mindful to ensure that they have set aside an adequate budget for franchise recruitment – without a steady stream of enquiries and new franchisees coming on board, the business cannot grow.
2. Inadequate support structure
New franchisees require a significant amount of support yet many new franchisors neglect to fully put in place an adequate and growth-ready infrastructure for support systems, processes and procedures. This means that when the business experiences a sudden period of expansion with new franchisees coming on board, the franchisor is not equipped to cope. This can include anything from simple things like not having the website capacity to support an increase in traffic or technical support for franchisees, to failing to have proper systems in place for training and quality control. This in turn leads not only to dissatisfied franchisees, but can also impact on service delivery therefore causing damage to the brand. When working on their initial franchise model and developing their infrastructures and processes, franchisors should ensure that they will be able to cope at volume – and of course that, as at point 1 above, they have the finance in place to support it.
3. Recruiting (and retaining) the right people
The long term success of any franchise business of course rests on the quality of its franchisees. The franchise sector is an increasingly crowded marketplace and, at times when a franchise business can be under growing financial stress, a franchisor could easily be tempted to jump at the prospect of a potential franchisee who is offering money to buy into the franchise, without going down the appropriate due diligence route. Quality rather than quantity is the key to building a successful franchise brand – franchise recruitment mistakes can end up being very costly ones!
And once a franchisor has begun to build a franchise network, the important thing is to take the time to build strong and supportive relationships with the existing franchisees. A happy team of franchisees is the biggest asset of any franchise business! Without positive feedback and recommendation from existing franchisees, it’s an uphill challenge to recruit new any ones.
4. Adapting to the role as Franchisor
This sounds simple but it’s a difficult shift for any emerging franchisor – taking the necessary steps away from running the core business on a day to day basis and assuming the role and responsibilities of a franchisor. A franchisor must be a leader, able to inspire and motivate the team and to keep the brand moving forward – focusing on support, recruitment, innovation and strategic development. It’s all too easy to become drawn back into day to day operational issues but the successful franchisor will put strategies and personnel such as a dedicated management team in place to deal with those aspects of the business at an early stage. This frees the franchisor up to focus on leadership and expansion.
5. Enforcing the brand vision and consistency
As a franchise network begins to expand geographically, nationally or internationally, the franchisor faces perhaps their biggest challenge – how to ensure that those franchisees further afield are performing and delivering the service to the necessary brand standards and requirements. When a franchise business launches, it’s first franchisees are most likely to be relatively local to the franchisor and the original core business, meaning that on practical terms it’s feasible for the franchisor to be heavily involved in monitoring performance. As the franchise network expands in both volume and distance this is no longer likely to be feasible and so the franchisor must have strategies in place to ensure quality control remains a priority. This is why the points above in terms of recruitment and infrastructure are so very important – but equally crucial is that a franchisor ensures that all franchisees are fully engaged in the brand vision so that they feel pride and loyalty in it and become excellent brand ambassadors in this next stage of business growth!