Not thoroughly vetting franchisee candidates and inconsistent communication throughout the franchise system can lead to long-term disaster, experts say.
Franchise operational blunders can have long-term effects on a business. Cutting corners and not being thorough will often spell disaster in the long run and can hurt sales and damage franchisee and franchisor relationships.
1851 Franchise spoke with two franchise experts — Jay Bandy, President of Goliath Consulting Group, a restaurant consulting business that has worked extensively with franchised restaurants, and Steve Raines, Founder and President of National Franchise Associates, a franchise development company. They both shared their thoughts on common operational blunders and how those blunders might be avoided.
1. Choosing the wrong person to be a franchisee.
Not thoroughly vetting a franchisee can spell disaster down the line.
Raines notes that if a franchisor does not take the time to get to know a prospect well and hurries through that process and does not do the things they should to make sure the person is qualified to be a franchisee, it’s a “huge mistake and will very likely come back and bite you in the rump.”
Franchisors need to make sure that prospective franchisees are aligned with the company’s mission and values.
“Make sure that you choose the best candidate possible and thoroughly vet them, and make sure that there’s good compatibility and that they meet your profile of a franchisee,” Raines said.
Franchisors need to think very carefully about the traits they want in franchisees and do a culture and compatibility check, otherwise, the franchisor might hire a franchisee who has different business interests. If that happens, all they’ll do is fight because they don’t have any common ground, Bandy said.
Franchisors should “map out those characteristics that you’re looking for,” Bandy said. Part of the planning process when building a company, he added, is verifying what the key attributes of the brand are. “Use that to build your franchisee questionnaire to make sure that when folks go through, they answer questions that align with your mission and values in these pillars of your brand. If they don’t, then that should be a red flag,” Bandy noted.
2. Awarding too much territory.
Allowing franchisees to take on too much new territory in the beginning can have an adverse impact on numbers.
“When you first start franchising, people will often come to you and say, ‘I want all of Michigan,’” Raines said. “Well, Michigan is too big. Do you want part of Detroit? Do you want part of Flint? Do you want Kalamazoo? Do you want Ann Arbor? Giving them too much territory is often the mistake that will slow down your growth and profitability.”
Raines advises franchisors to make sure the territories they sell are reasonable in size and provide enough room so the franchisee can make good money if they follow the system properly.
3. Not enough franchisee training.
Not investing enough time in training — and cutting corners in that area — can also spell disaster for a franchise system.
“Sometimes franchisors put together a short training program or [do] not give a substantial training program,” Raines said, adding that if a franchisor creates a training program that is not comprehensive “you run a major risk of them operating the business improperly.”
4. Not creating a thorough operations manual.
“The operations manual is part of the franchise agreement,” Raines said. “Every well-drafted franchise agreement makes a reference to the operations manual.”
The operations manual should be incorporated by reference, Raines said, so if someone violates the operating procedures. that gives franchisors the backup they need to legally go after an underperforming or noncompliant franchisee.
5. Unclear communications.
Thorough communication is key. Franchisors, franchisees, vendors and customers all need to be included in communication channels.
Bandy said, “What happens a lot [is that] folks don’t map this out. They don’t map out the messaging and how they consider all these different groups and making sure that everyone gets a message they can understand that is consistent across all levels.”
An example of a breakdown in communication is when a restaurant chain offers a promotion and does not communicate this deal properly to the franchisees. This particular issue, Bandy said, is “a pretty common occurrence in the franchise systems.”
“That’ll get pushed out to the consumers and sometimes the franchisees don’t get that information until a consumer brings it in because folks on the company side didn’t think it was necessary that the communication flowed through all channels,” he noted, adding that if “the franchisee doesn’t have a clear direction on what the brand is doing, then the consumer gets confused.”