Ian Krawitz - 10 THOUSAND FEET
The six areas reviewed in this article (whilst not exhaustive) have driven strong growth for many of our clients and will certainly provide some great ideas as to where to find the next 15 per cent increase in revenue your shareholders demand.
1) INCREASE EXISTING FRANCHISEES REVENUE (AND IN SO DOING, INCREASE ROYALTY FEES COLLECTED)
a. Increase customer count. This is straightforward enough, and there are many ways to do this, including investigating why non customers do not use you or why lapsed customers have stopped using you. Once you have your service or product right, the messaging that you use in your advertising and promotions can hit on key points to win back old customers and attract new customers.
b. Increase the number and range of products or services purchased per customer. Determine if you are leaving a share of the money that your customers spend in your category or adjacent categories on the table, and what products or services they would like to see that you do not offer now. Then, make appropriate changes in your product development or customer education.
c. Increase the frequency with which customers purchase your products or service. It sounds simple, but there could be a myriad of elements in your customer experience that could be improved to increase the frequency with which customers use your service. Look under the hood to understand what will drive increased frequency of purchase and then go to work in adjusting your experience and messaging to make this a
d. Increase or decrease the price at which your franchisees sell their products. Conduct your price point analysis first, and then determine at what levels you will get a better revenue and profit outcome.
e. Hone in on which customer segments have the highest revenue value and advertise to reach more of these types of customers. Review your sales data and apply research techniques to better understand who your best customers are and what communications and advertising media they consume, then go to work in attracting these customers to your business with effective messaging.
f. Have the systems in place to encourage sustainable multi-unit ownership from existing franchisees. Some franchisors have been burnt through multi-unit ownership in the past, so ensure you have the right processes in place to select which franchisees have the right characteristics (not just money or success in one location) to be successful and that you have your own internal support systems in place to help multi-unit owners achieve their goals.
g. Have the right messages and systems in place in order to increase franchisees efforts on revenue generating activities. Reaching sales targets is not just about monetary rewards but can be achieved through competitive benchmarking, access to exclusive high flyer clubs or simply through providing the right support that will free franchisees’ time up away from administrative tasks so that they can apply their time to growing the business.
2) GENERATE ROYALTY FEES FASTER FROM NEW FRANCHISEES
a. Build your network faster by increasing the number of leads and conversion rates on those leads. There is readily accessible information from industry publications (such as the 10 THOUSAND FEET Franchisor Expansion Study) as to which mediums and messages have the greatest impact in attracting new franchisees. Insight can also be gained by simply keeping a closer eye on what is working and isn’t. By tracking what is working resources and messages can be shifted into the right areas to grow faster.
b. Speed up your training and onboarding process so that new franchisees can begin operating faster and paying royalty fees faster. You might ask is it possible to condense a 12 week process into a six week process? You bet! In fact, if you really analyse where you can close the gap through better project management and human resources management, you can look at having your franchisees up and running much faster. Also consider whether you can support your franchisees with less pre training and more on the job training, whilst still keeping the customer service experience up to standards.
3) REVIEW ROYALTY FEES
a. Restructure royalty fees to create a sliding scale. Often franchisees that are successful get relatively comfortable
with what they are earning and take their foot off the pedal. Working on the 80/20 rule of getting more from your best franchisees, the sliding scale rewards higher revenues with a lower percentage royalty fee payment, and on the other end of the scale increases the percentage royalty fee required at lower revenue levels - acting in effect as a pull push system to creating higher revenues.
b. Increase your royalty fees or move from a flat royalty fee structure to a floating structure. Many franchisors when they are starting out, start out with lower royalty fees or flat fees to make the franchise more affordable or attractive. In order to support franchisees effectively, it is sometimes necessary to review the fee structure. If you go down this path, obtain clear evidence regarding royalty fees in the industry and get buy in from franchisees by clearly showing what you will do, in addition to what you are currently doing, in order to deliver value on the increased royalty fees.
4) CREATE A PREMIUM IN UPFRONT FRANCHISE FEES
a. Build the brand to the end customer, and in so doing create a premium for buying a franchise. The National
Marketing Fund, when spent on brand building over a period of time, can have this effect. This also benefits existing franchisees as it makes their franchise more saleable as well. Measuring your brand awareness and brand purchase intention are critical to showing the strength of your brand.
b. Simply sell your franchises at full price. Selling at full price may be a first step for many less established franchisors. Many franchisors choose to discount their franchise fee because they have not done a good enough job of presenting the value of the system, or have not generated enough leads in order to be confident enough to be firm and accept only full fee paying prospective franchisees. Look at your value proposition and build up your pipeline in order to keep your revenues high when you sell a franchise.
5) MANAGE YOUR SUPPLY CHAIN MORE EFFECTIVELY
a. Negotiate higher rebates from suppliers. Engage with suppliers in a win-win relationship, find out what thresholds of supply will allow for greater rebate’s and work towards hitting those targets!
b. Own the supply chain or parts of it that make sense to own. Consider which parts of the supply chain make sense to own and for which parts you can either easily buy in management expertise. Also consider which parts of the supply chain require little management time and resources to be a success.
c. Promote higher revenue earning products. If you own the supply chain, work on promoting products or services to your franchisees and the end customer that will produce higher revenue (and preferably offer higher gross profit margins).
d. Understand what is important to your franchisees and deliver consistently. If franchisees have a choice of where they get their products or service supplies from, it is even more important to invest time in understanding what is important to franchisees in the delivery of these products and services. Work hard on making sure the products and services provide value. Put the required effort into delivering on key aspects of the service and make sure any improvements are sustainable, remember, if you raise expectations but do not meet them, you will find yourself in a challenging position.
6) CONSIDER COMPANY OWNED OUTLETS
a. Build up company owned outlets. Revenue (if profitable) is much higher from a company owned outlet than a franchised outlet. Having company owned outlets also affords you the opportunity to sell the company owned outlet in times when you require a cash injection.
b. Raise cash quickly by selling company owned outlets. If you have company owned outlets that are performing well and have a proven track record, this can look very attractive to a bank and a prospective franchisee and can provide a good source of revenue income in times when you need to boost cash reserves.
c. Make the most of existing company owned outlets. Many franchisors, franchise, rather than operating company
owned outlets because they feel they cannot achieve the same level of commitment to customer service and hitting revenue targets from an employee. This need not be the case, putting in place the right bonuses or profit share plans for management in company owned outlets, if they hit certain revenue targets and customer service levels can have the desired effect.
If you are a franchisor and this article has sparked even one good idea, bring it up at your next team meeting and get started in your planning!
If you have decided on addressing one or more of the above areas, we have found that two elements consistently help our clients achieve their desired results. Firstly prepare, prepare and prepare. Whether it be through detailed market research or a well thought out consultative approach think methodically through the merits of where and how to direct resources to achieve your revenue targets. Secondly, apply the necessary resources to effectively
execute your strategy. This need not require additional expenditure, but can simply involve making your department or team aware of the key focus and running 90 day challenges to focus human resources on your initiatives, or when it comes to messaging, making sure that you are communicating the right message to drive
change with your end customers or franchisees.
Best of luck in your efforts!
Ian Krawitz is the founder and Head of Intelligence at market research house 10 THOUSAND FEET and the franchise
satisfaction rankings website topfranchise. com.au.
For the last nine years, 10 THOUSAND FEET have been assisting organisations across Australia to connect and influence their stakeholders through in-depth research. Their services include industry studies, customer
and franchisee satisfaction, ad hoc in-depth motivational research, segmentation and pricing analysis, brand tracking and message development. The 10 THOUSAND FEET client base includes organisations involved in retail,
food, finance, FMCG, sports, media, services and channel management.
Contact Ian at: