How Start-Up Franchises Can Avoid Systems That Crack Under Pressure

As businesses across virtually every industry are re-strategizing their models to prepare for an uncertain future, 1851 Franchise spoke with Shawn Spencer, CEO of Fransystems, to learn how franchise brands can build systems that are sustainable even in the worst of times.

Spencer says Fransystems provides franchises the “premium tools, manuals and systems protocols for sales, marketing, operations and compliance.” Since Spencer co-founded the company in Atlanta in 1994, he has advised and educated hundreds of startup franchise brands on navigating growth and management in various states of the U.S. economy. 

When a new startup enters the franchise market, Spencer says the brand’s ability to develop and expand its network relies heavily on social media impact and the success of its content. 

“The franchisor should have a very deep social media foundation and brand awareness prior to selling franchises,” he saidThey should have a strong stream of content that has made the brand successful and tested prior to launch and demonstrate the effectiveness to franchisees.”

To drive franchise sales during uncertain times, public relations offers the biggest advantage in moving a startup company forward. But it is just as crucial to have a network of teammates that see the power of local business leads, especially in an age when new business concepts are being induced into the franchise industry every day. 

“The brand itself should be in a position where people are attracted to the business model and inquire about franchising multiple times a week before considering franchising,” said Spencer.

For brands looking for a place to start over, or even begin on a fresh slate in the midst of the coronavirus pandemic, Spencer recommends preparing now for an influx of potential franchisee prospects.

“The opportunity here is that the franchise market could be explosive after things get on track, with individuals that want to leave their corporate positions and own their own destiny. This is why franchising is perfect to help those people. I expect to see many more one-to-three-unit deals with first time franchisees. Franchisors will have to be prepared for this, as first time franchisees require more time and effort to onboard and grow. “

Underlining how your  franchise model will align with and further the goals of your prospective franchisees will give your business the upper hand, especially in times of crises. Of course, it depends on how proactive your franchise is in demonstrating grit and perseverance at times of crisis.

Spencer offers the following advice every franchise system should embrace:

• In the sales process, franchisors need to raise net worth requirements and liquidity to attract a more sophisticated and qualified prospect. This also comes along with setting realistic development goals.
• Require a higher amount of ongoing working capital to 10–12 months of funds.  It is easier to sell a lower investment with lower financial requirements. 
• Cut cost on the sales budget and move that spending to the operations and marketing budget while bringing more functions in house. Franchisors should know how to sell their own business.
• If a young franchisor needs commissioned or outsourced sales then they should consider splitting the commission in half with payment when a deal closes and the second payment due when a franchisee opens their units, including multi-unit development deals over time.  This will help drive higher quality candidates and keep the sales person engaged with the prospect or provide a higher quality prospect with a lesser chance of failure. 
• Even though the franchisor has final approval on the deal, brokers are not going to act as a fiduciary when it comes to the prospect. It’s all about how many deals get done. This is why there are lawsuits starting to fly around against brokers, as reported by franchise media outlets.  Using a broker can be very helpful but the franchisor has to be very careful to maintain their culture with any vendor relationship that is outsourced.
• Learn how to grow your own multi-unit developers in your systems in addition to attracting larger developers.  
• Increase the weeks of training. Two weeks of training is not enough. Four to six weeks of training or more should become the norm. If a franchisor does not have the content to fill that time frame, then most likely they have not done their homework or have not prepared properly for the franchise. Many startups are not educated on how complicated it can be to franchise and focus too much on sales versus staff and procedures to support them. 
• Update or add a more robust crisis management section to the operations manual.