• Jamie Skinner

Franchising: Setting Your Franchisees Up for Success

If you’ve successfully started and grown your business, you may be thinking about franchising your business. It seems like easy money, right? Find interested entrepreneurs, get them to pay you a fat up-front fee, then sit back and let the royalties roll in!

WRONG! Franchising is not as easy as you may think, if you want to be reputable and grow.

Their Success is Your Success

Franchise development consultants, Make Better Business Management, warn against charging a high initial franchise fee as you may be tempted to sign on franchisees who will not do well. Prospective franchisees will want to see that they are investing into a successful franchise and that they will be provided the right training and support, both up-front and on-going. If recruiting plummets, so will your profits!

It’s more effective to focus on royalty fees – a percentage of the franchisee’s gross sales – since this will boost a franchisor’s motivation to support franchisees. Their increased profit equates to your increased profit and improves investment potential.

What Makes a Great Franchisor

According to Forbes, there are 10 Characteristics of a Great Franchisor:

  1. Passion

  2. Supportive

  3. Communication

  4. Honesty

  5. Listening

  6. Adaptability

  7. Valuing the Team

  8. Leadership

  9. Maintaining Personal Touch

  10. Collaborative

The common denominator here is having a symbiotic relationship that is on-going, not a one-sided motive that cuts off the relationship as soon as the franchisee has fully jumped on board.

Accounting Support: The Too-Often Missing Piece

What type of support would you expect to receive as a new franchisee? Does this match up with what you have offered, or are planning to offer, as a franchisor? Typical responsibilities of a franchisor may often overlook a very critical component of financial success: accounting!

You may line up support that cover sales, POS systems, purchasing, operations training, product development, marketing, and promotions. You also expect to receive timely, accurate monthly financial reports which you will base your royalty fee on. Why then, do so many franchisors fail to incorporate accounting into their support? There are numerous pitfalls to this oversight:

  • They are not accountants: Franchisees may feel overwhelmed with the task of managing their books and in-turn put it on the backburner. This can lead to increased stress and resentment due to lack of support.

  • Inconsistent reporting among franchisees: Are some on a cash-basis while others are on accrual basis? Many factors may skew comparative figures between franchisees, making it difficult to understand true profitability and what affects it.

  • Inaccurate reporting by franchisees: Are some recording funds received as gross sales when they should be breaking out things such as merchant fees, thereby understating sales that royalties are calculated on and decreasing your profits? Are accounts being reconciled to ensure that reportable items are not lost on the balance sheet?

What You Can Do to Help

Most franchisees are willing and eager to get their books into top-notch shape but may not even know where to start. By providing stream-lined processes related to accounting, reporting, documentation, etc., you are helping to set them up for success, which sets you up for success!

Does this aspect of support intimidate you as well? Fear not! There are people out there – like me – who love accounting. I also happen to be an expert on process improvement and standardization. Here is my suggestion for incorporating accounting support into your franchise offering:

Phases for Franchise Support

  • Initial setup of process standardization: I come in and do my due diligence. I see what processes you currently have in place, evaluate how they can be improved, figure out what processes are missing, and come up with a recommendation for an over-all standardization process, including software platforms. From there I can develop an electronic process manual, create templates, and establish best practices for training.

  • On-boarding each new franchise: I will be part of your on-boarding team, offering training to each franchise owner on my newly developed standard processes, plus training for staff if needed. I will ensure that the processes are understood so they can be executed effectively.

  • Retainer services for subsequent support: I will stay on retainer with you, the Franchisor, so that I can be readily available to answer questions that you or your franchisees have. If a new hurdle is identified I will create a process for it that can be rolled-out to all franchises.

Don’t wait until profits are suffering to incorporate accounting support into your franchise offering. Start off with all the right processes in place so that you can set your franchisees up for success! Contact me for a FREE 15-minute consultation, or check out my website for more details.

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