(2) maximizing relationships with franchisees (dh)

Maximizing Franchisee Relationships

Page 1

Information About the iFranchise Group Emerging Franchise Systems  Head office: Chicago  Established: 1997  Focus Areas     

Franchise strategy Operations Training Franchise relationships Franchise vendor programs

Page 2

Established Franchise Systems

Experience Building Relationships

 Founded:

1988

 Locations:

1,600

 Countries:

29

 Acquired by Focus Brands in 2010  Growth largely with existing franchise owners  Virtually no franchisee-initiated litigation in the company’s history

Page 3

Formula for Creating Great Franchisee Relations

Strong Business Model

Franchise Owner Engagement

Solid Franchisee Profile

Providing Quality Support

Franchise Owner Selection

Page 4

Strength of the Franchise Business Model

Page 5

Strength of the Franchise Business Model

Question: How do you maintain such good relationships with your franchisees?

Answer: We just make sure that they make a bit more money each year‌..

Page 6

Strength of the Franchise Business Model

The business model that is franchised should allow a franchisee to:  Replace their current income within a year or two of opening their franchise  Achieve revenue and profitability revenues that meet or exceed their expectations prior to joining the franchise program  Feel that their royalty payments and other fees are more than justified based on the value they receive from membership in the franchise system

Page 7

Strength of the Franchise Business Model

Factors influencing the strength of the franchisor’s business model:  Ease versus complexity of operation  Ramp up of revenues within the first 12-18 months  Revenue potential for the franchisee in their market  Gross margins on products sold or services offered  Uniqueness of the business model compared to competitors  Adaptability of the business model to different regions and urban/rural areas

Page 8

Strength of the Franchise Business Model Stronger business models attract better quality franchisees:

Page 9

Strength of the Franchise Business Model

Profitability Revenues

Expenses Franchise

Independent Start-up

Losses

Break-Even Point Page 10

Time Time

Establishing the Right Franchise Owner Profile

Page 11

Franchise Owner Profile Your owner profile will be guided, in part, by the types of franchises you award: Single Unit Single Store

AreaMulti-Store Development

Master Development

Franchisor

Franchisor

Franchisor

Single Unit Agreement

Area Development Agreement

Area Rep.

Store

Store 1

Store 2

Store 3

Page 12

Area Representative

Franchise Agreement

Franchise Agreement

Franchise Agreement

Store

Store

Store

Franchise Owner Profile

Your targeted profile should be weighted toward the factors you feel are most critical to the successful operation of a franchise location:

Page 13

Franchise Owner Profile

Why franchisees are most likely to fail:  Lack of capital needed to grow and sustain the business  Inability to attract, lead and keep good employees  Failure to follow the franchisor’s system and best practices  Lack of engagement with the franchise community  Lack of prior business experience

Page 14

Franchise Owner Profile

Good franchisors continually evaluate the refine their franchisee profile:

Refine Franchisee Profile

Recruit Franchisees

Benchmark Top Performers

Evaluate Franchisee Performance

Page 15

Franchise Owner Selection

Page 16

Franchise Owner Selection

You can have . . . .

The greatest concept in the world, and The strongest business model among your competitors, and The best intentions as a franchisor‌.but

If you award franchises to the wrong people, you will struggle to maintain positive franchisee relationships.

Page 17

Franchise Owner Selection

If you are thorough in your franchise sales approach and do all you can to adopt best practices in the award process, you’ll likely make good franchisee selection decisions about 85% of the time.

If you take shortcuts and award franchises to people you’re not sure about, you might make good decisions 50% of the time, or less...

Page 18

Franchise Owner Selection

It’s important to use a sales and qualification process that:  Begins with a marketing plan that will attract leads consistent with your desired candidate profile  Is planned out in advance, and is followed with every candidate  Ensures you take the time to carefully evaluate the candidate rather than rush to an award decision  Involves multiple people within your company  Emphasizes to the candidate the importance of hard work, their engagement as owners, and their willingness to follow your established systems

Page 19

Franchise Owner Selection

Typical Franchise Sales and Qualification Process:

Page 20

Franchise Owner Selection

Franchisee candidates most likely to form strong relationships with their franchisor demonstrate the following during the sales process:  They are attracted to, and are supportive of, the franchisor’s vision and culture  While money is always important, it’s not the key driver behind their desire to own the franchise  The candidate asks detailed questions about the operation and the complexity of running the business  The follow and respect the defined qualification process  The candidate plans to be personally involved in the franchised business  The candidate reaches out to many of the existing franchisees in the system to ask about their experience with the brand and franchisor

Page 21

The Importance of Quality Franchisee Support to the Development of Strong Franchisee Relations

Page 22

Franchisee Support

A strong franchisee support program will create franchisees that are more:  Profitable  Inclined to respect the franchisor and its support staff  Likely to be engaged with the franchisor and franchisee community  Motivated to follow the franchisor’s systems and uphold standards  Committed to reinvesting in their business  Likely to want to expand by opening more locations/territories

In short, effective support from the franchisor will foster stronger and more positive franchisee relationships.

Page 23

Franchisee Support

In order to provide effective support to your franchisees, you must:

Lead by Example in Your Own Operations

Be Clear in Terms of Your Support Policies/Practices

Hire Capable Support Staff

Hire Support Staff Ahead of Your Actual Need

Maintain a Realistic Ratio of Support Personnel to Franchisees

Be Transparent With Franchisees

Involve Franchisees in the Development of Your Support Programs

Ask Your Franchisees How You’re Doing

Page 24

Franchisee Support

Primary types of ongoing support franchisors should be providing:

Ongoing Training

Field Business Visits

KPI Analysis

Best Practice Sharing

Local Mkting.

Support

System Adv. Fund

Supply Chain Support

Brand Innovation

Page 25

Franchisee Support A few things that top performing franchisors do to maximize their franchisee relationships:  Continually seek input from their franchisees  Credit franchisees with enhancements made to the system  Recognize achievement within the franchisee community  Return calls and e-mails the same day they are received  Reach out to franchisees on a regular basis. Not just when something bad happens  Admit mistakes that are made, and then don’t make them over and over  Look for opportunities to exceed franchisees’ expectations of support  Build an internal culture within the support team that is always supportive of franchise owners

Page 26

The Importance of Franchise Owner Engagement

Page 27

Franchisee Engagement A high degree of owner engagement brings many benefits:

 Promotes increased trust between franchisees and their franchisor  Helps the franchisor prioritize investments that need to be made in the system  Franchisees will provide many of the best-practices the franchisor’s support program should incorporate  Increased acceptance and adoption rates of new initiatives that are introduced

Page 28

Franchisee Engagement

Effective ways to keep franchisees engaged with the system:  Frequent one-on-one communication with the support team  Franchisee advisory council  Franchise owner conventions  Regional training events  Web-based Intranet, benchmarking and e-learning platforms  Surveying the opinions of franchisees

Page 29

Questions

Page 30

www.ifranchisegroup.com 708‐957‐2300