5 Steps to Boost the Performance of Your Franchise Company
Getting into the franchise business is not easy as it seems. Being a franchisor can be lucrative, but only when you do things right from the very beginning. Just like the relationships we have in our lives, a close and honest relationship within your franchisees is the key to having a healthy and successful franchise business. Here are some tips on how to build a culture of trust, transparency, and healthy competition to boost franchise performance.
1. Communicate Realistic Expectations
From the very beginning, it is very important to communicate realistic financial expectations to potential franchisees rather than creating idealised scenarios for false hopes. Profits of a franchise business will vary and it is best if your salespeople present candidates with the average franchisee performance.To do this, your disclosure document (as mandated by Australia’s Franchising Code of Conduct) should contain copies of the profit and loss statements and balance sheets for the last two financial years of the franchisor, clearly showing gross and net figures. This, however, should only be included in the absence of an independent audit report regarding the financial competence of the franchisor.
2. Ask Your Franchisees for a 10-year Perspective
Being a Franchisor means that you are a mentor, and your franchisees are your students. Coaching your franchisees is essential for their own success which will cascade to your own success. To understand the personal goals and motivations of your franchisees, ask them to develop a 10-year vision plan which includes short-term and long-term personal and business goals. Along with that, they should also be able to determine qualitative and quantitative factors, as well as actions needed to help them achieve these goals. Make them understand their financials such as income, business value, debts, debt repayment, and all other critical elements to monitor their KPIs.
3. Develop a Strategic Action Plan
Ask your franchisees to create an action plan which contains their own mission statement, the vision that they created to serve as their ‘driving force’, and the values they need to achieve their goals. Ask them to write clear, concise goals and a step-by-step plan on how to accomplish them. This detailed plan will shed light on the key priorities of the business.
4. Financial Benchmarking
One of the top franchise business solutions for identifying the best and poor performers among your franchisee network is through financial benchmarking. This gives you complete visibility of franchise performance, making it easier for you to compare franchisees and support those who are not doing well. This starts with a standard chart of accounts, which apparently, not all franchisors are implementing. Next is to collect comprehensive financial data, beyond the revenues from royalty. Full P&Ls and balance sheets must be collected on a monthly basis from each franchisee. Create a ‘committee’ among your franchisees to help you determine priorities and set KPIs which include both financial and non-financial metrics.
5. Form Peer Groups Among Your Franchisees
There are two advantages to having your franchisees work together in a peer performance group: 1.) They are more likely to follow the advice of their fellow franchisees, and 2.) Their naturally competitive nature with each other will push them to perform better than their peers. Ideally, you can set up 6 to 8 people in a group (those with the same characteristics such as location, revenue, and tenure) and have them meet on a monthly basis to review financial statements, KPIs, and collaborate to solve current challenges that they may be facing.
Ready to boost the success of your franchise business? We can help! Learn more about our Specialised Finance & Accounting Solutions for Franchise Owners by getting in touch with us now!