500 tips for franchising best practice

New Zealand’s most-awarded specialist franchise consultancy has launched a new series of tips about best practices in franchising. ‘We strongly believe that better knowledge and execution of best practices leads to bigger and more valuable franchisor and franchisee businesses,’ says Dr Callum Floyd, the company’s MD. ‘Franchize Consultants is in its 30th year and yet we continue to develop new franchising insights daily, so this is a way of sharing what we learn.

‘We have termed this new series the Best Practice 500, because there really are that many aspects involved in creating and managing a great franchise. There are best practices from a franchisor and franchisee point of view, and from a pre-entry to an operating standpoint. Some best practices are very specific (eg. have all franchisees operating to a common chart of accounts) while others are more conceptual (eg. demonstrate a leadership focus on improving franchisee profit). That’s the nature of franchising: by breaking all these elements down into a series of bite-size chunks, we hope to help everyone understand how to build stronger and more sustainable networks.’

The main focus of the Franchize Consultants Franchising Best Practice 500 will be to help franchisors understand what they could or should do better, and the intention is to offer mutual benefit to franchisees, too. ‘Franchisees who view this series will quickly see that we have a strong focus on franchisee returns, so the tips might even help some franchisees push their franchisors to improve a bit,’ suggests Callum. ‘Franchising is an area where you never stop learning.’

Best Practice #1 
Leadership Focus on Franchisee Profit and Returns

Franchisee profit is a principal focus in Franchize Consultants’ work with both would-be and established franchisors. The point is that a franchisor needs to understand and help drive franchisee performance in a total sense – not just sales performance, but also profit performance. 

It’s also important to consider profit in relation to each franchisee’s total investment. A franchisee invests a lot into their specific franchise business and it will typically represent a significant part of their investment profile. This means it is important to the franchisee (who has chosen to join the franchise system, remember), that the franchisor has a real focus on how the franchisee’s return is developing over time, and what they can do to improve it.

To do this, the franchisor needs to know how the franchisee is going in a financial sense, which means having systems in place to measure returns and an atmosphere of mutual trust that encourages the sharing of such data. 

‘That’s the starting point – in turn, there are other best practices which build on this to achieve a proper focus on franchisee profit and returns,’ says Callum. ‘In our series, we’ll develop these to show how best to use the franchisee chart of accounts; the collection of financials and non-financial performance information; benchmarking and reporting, etc. Go to the Franchising Best Practice 500 on our website to find out more.’

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