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INCREASING FRANCHISE SUSTAINABILITY AND VALUE
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Staying ahead requires regular reviews, says Franchize Consultants
A business needs to adapt and change constantly in order to remain sustainable and flourish. That applies to franchises, too, so every franchisor has a critical responsibility to take an active approach to strategy for their total business model, for the benefit of franchisor shareholders, franchisees, suppliers and customers alike.
‘Yet many franchise companies haven’t adjusted their original formula in the past 5 or even 10 years,’ says Dr Callum Floyd of Franchize Consultants. ‘The result can be a business model that is outdated, under-performing, vulnerable and even, if laws have changed, potentially illegal. In today’s changing and challenging environment, regular reviews are needed if the franchise is to survive.’
Callum says that there are numerous reasons for franchisors to review and improve their network’s structure, management and performance. These include:
Technology and other changes. Whether you’re a café, building or lawnmowing franchise, changes in technology (eg. e-commerce, cloud-based apps and automation), the labour market (eg. finding suitable staff and franchisees), the economy, demographics and competition constantly provide new opportunities and challenges.
Current performance. Performance in financial, sales, processes, customer and other areas may be less than optimal or inconsistent for franchisors and franchisees. Franchisees may be dissatisfied with returns.
Franchisee execution & change. In any franchise, a number of franchisees don’t reach the full potential of their businesses. This can frustrate franchisors and leave the market open to competitors. Furthermore, certain franchisees may resist changes necessary for their own benefit, as well as that of the brand.
Not all franchises were created equal. While some systems may have franchised from a solid basis with good specialist advice, others franchise with little or no quality guidance. Even well-prepared franchise systems need upgrading with time, while DIY systems need early and regular reviews to ensure they are effective and sustainable.
Gaps or weaknesses in current system. There are at least ten key structural dimensions to a franchise system, with hundreds of elements to each. These include the unit-business model; manuals and training systems; the franchise agreement; franchise support office; structure; economic model and many more. Invariably, there are numerous areas which are either missing or require substantive improvements.
Best practice evolves. Franchising research and knowledge development is constantly updating best practice methods. This means that even comprehensively-developed franchise systems benefit from a regular review of their structure and practices.
‘The final outcome of a comprehensive franchise review and improvement programme always depends upon the specific needs and situation of the company involved,’ says Callum. ‘But we’ve consistently found that even small improvements can make a huge difference to franchisor and franchisee returns. In most companies, including some well-known names, we can identify hundreds of possible improvements. Franchize Consultants can help do that for you – contact us and find out more.’.
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