Identifying & Overcoming Barriers to Growth
Over 35 years in the franchise industry, watching many new and very experienced groups succeed and fail – my own among them – I’d say the commercial barriers to growth in a franchise network boil down to four things:
1) Your product over time
2) Your people and the money
3) Service first, always
4) Systemise and delegate
The franchise industry in Australia today gives us some of the best examples of business and, unfortunately, some of the worst. It is the worst examples which show us the barriers to franchise growth so clearly.
But first, remember that your great franchisees delivering a great service and bringing in the money are always the foundation of a great franchise. And they need to be heard and looked after. Of course, you set the rules. And of course there will be times when the rules need to be enforced one way or another. But mostly, it is your franchisees who will be able to tell you when things go off the rails – they have their ears to the ground.
So, how do you rate in the four key points I believe franchisors need to look out for when establishing and running a franchise group to ensure its growth in the long term?
1. The wrong product for the time
Know your customer and keep your brand aligned. Then keep an eye on your market in perpetuity so you stay relevant, contemporary and ahead of the competition. It’s easy to dismiss this as being obvious. This is Business 101 and you probably know your current business is working and your known target market is on board and loves your product.
But – is this enough?
Are the times changing, and are your franchisees making the change without you?
You are responsible for the brand and marketing for everyone’s business in your network, so you really need to know what is going on to keep the money rolling in. Hire A Hubby, winners of the 2018 Franchisor of the Year Award, have illustrated this point well.
By 2014, it was evident that franchisees were working on much larger jobs than a simple handyman could achieve, and the marketing was vastly underselling their abilities. It was also evident that the traditional marketing tools being used were woefully out of date. So, they made the decision to invest in going digital, with improved social media and online marketing. Put simply, Hire A Hubby totally restructured their business model, allowing them to scale up their customer product offering. While they consulted with their franchisees, some aspects were initially met with strong resistance, but within a year the results of this change were astounding and brought everyone on board with pride, increasing the value of everyone’s asset.
It was so successful that Hire A Hubby then launched it to the franchise community as Franchise Cloud Solutions. It filled a gap in the market and was an early success, and as a result Hire A Hubby was awarded the Franchise Council of Australia’s coveted Excellence in Marketing award in 2017.
The lesson here is know your KPIs. Know how your target market is changing and what your franchisees are actually doing matched against the market’s needs. Collect and understand data from your own digital sources and stories from your franchisees and change as required. Otherwise you will come up against barriers to growth.
2. Get the people/money balance right
It’s so sad to see giants in the industry, such as the once-mighty Retail Food Group, getting this one so terribly wrong. We all know Franchise 101: your franchisees give you money in return for the use of your intellectual property in the brand, and your systems and the support services you provide. We also all know there needs to be enough money so that both the franchisor and franchisees are happily profitable and can focus on delivering great service.
What this means is budgets and cashflows, with fees, royalties, expenses and profits for each tier to be worked out at the beginning in association with the demographics of your specific target market and territory size.
What’s often missed is that you also have to get the people/money balance right around the likely personality of your prospective franchisees.
As franchisors or successful business people, we tend to have an entrepreneurial personality, happy to pick up the phone to make that marketing call and keep an eye on cashflow and budgets. The trouble is, so many sectors of the franchise industry are asking franchisees to deliver a caring and supportive service – the health industry is a case in point – and people who will deliver your service with the care you want are so often really not able to look after their marketing or books. So, if the network is to be successful, you have to take on these tasks and adjust your budgets accordingly.
So, it’s not that simple. You need to understand personality to get the money right.
Especially as, in today’s rapidly changing world, the people/money balance needs to be watched and adjusted continually. Get it wrong and either your franchisees will not be profitable and happy, or you will not be able to fund the support they need in the long term – or both. No growth in these circumstances.
3. Provide your franchisees with brilliant service
The customer service industry has it right: great service is a foundation of growth, and I am sure you will be teaching your franchisees to give your customers great service.
The question is, do you in turn provide your customers – your franchisees – great service too?
Don’t let hubris get in the way. Listen to what is going on around you and make sure both you and your support team are able to hear and show you have heard. I agree you will be making decisions which will not always be liked by one or all of your franchisees. But you must make these decisions in an environment where you know what is going on and the impact you will have.
Without your great service your franchisees will not thrive, nor will your group grow. With profound impact on the value of everyone’s business!
4. The foundation of a great franchise is a great interrelated franchisor/franchisee system
Franchisor operations are rarely documented
I’m amazed even the biggest franchise brands initially take the greatest care in preparing the operations manuals for their franchisees, but completely forget to write their own. How, then, can their support staff know how to consistently deliver that brilliant customer service to your franchisees?
They can’t. Because, as your network grows and new support staff are introduced, the doctrine of Chinese Whispers will rule…
Your support staff won’t understand your values or the care you want them to give. They won’t know how to report to you about things going brilliantly right or not so well. You won’t know if your franchisees are making interesting changes or floundering with some of your more esoteric requirements.
To grow the network, you need to systemise your franchisor business too.
Getting franchisees to use the operations manuals is difficult
I am also amazed even the biggest brands tell me they simply cannot get their franchisees to use their operations manuals. The reason – manuals are difficult to use, not kept up to date, not relevant to the job being done on the floor… the list goes on.
The E-Myth tells us that to delegate successfully, so everything looks, feels and works the same, you need systems and procedures. Systems should be simple to put together and easy to use, and hyperlinked so that all modern business software is connected and it’s easy to travel to the right place for the answer to a question. This means your systems in today’s digital environment must be cloud-based across all media formats.
So, it makes sense that you need interlinked cloud-based systems, for both you as franchisor and for your franchisees.
To give your group a foundation for growth, your systems need to be relevant, secure and easy to use, and all your support, induction and training should be focused on heading here first.
- Structure your franchise right to meet the needs of your target market and the personality of your franchisees.
- Make sure your budgets and cashflows for every level work in the long term.
- Make sure systems are in place for both your franchisee businesses and your franchisor business so everything is fair to all, looks the same, feels the same and operates the same. And make sure this system is kept up to date as the market changes around you.
- Above all, give your franchisee customers the same brilliant service that you expect them to give their customers.
And if you don’t rate 10s in each case, you’ve urgent work to do – immediately.
You can learn more from our websites FranSystems.com.au and FranchiseSimply.com.au
Brian Keen is the founder and CEO of Franchise Simply, a disruptive consultancy to the franchise sector and the developer of FranSystems, franchising’s cloud-based operations manual solution. Brian works internationally and is available at: