Franchise Royalties don’t just grow on trees.
You have to be in a spirit of partnership with your franchisees to make your franchise brand as good as it can be.
No matter where you are in the life cycle of being a franchisor a few things always ring true. You are judged by the franchise royalties your network creates. For the purposes of this article let’s assume royalty includes whatever income a franchise network generates. This might be a percentage of turnover, product demand, affiliate income, commissions etc. It isn’t fixed fees obviously, because you’re going to get those whatever!
However, the spirit of this article is the same. As a result, it concentrates on what the best franchisors do to create the right environment for franchisees to make profits.
There are always a few caveats. We are assuming that your recruited franchisees are up to the job in the first place. If they’re not then you’re just leading a horse to water. Franchise royalties are always low in networks like this. We’re also assuming that demand for your product or service hasn’t just fallen off a cliff. If that’s the case then it’s probably best you diversify pronto. The same is true for you as a franchisor, however. Are you really doing what matters to assist your franchisees? No really, read the line again. Because I’ll bet my bottom dollar that there’s more you could be doing.
Lime Licensing Group is my 6th franchise brand
I started out in retail supply with 3 brands working with the family business, my Dad and Step Mum. The business was sold after 10 very successful years. Then a recruitment franchise with Franchise Pro (bought by Matchpoint Inc), then a company called Ambience Venue Styling which was a wedding company I sold back in 2011. Now it’s Lime Licensing itself which has a few franchised regional offices. Overall the companies I have owned or co-owned have had well over 200 franchisees and many millions in franchise royalties. The brands I have personally advised have recruited around 2000 franchisees between them over my 26 years in the industry. I haven’t a clue what the total valuation of those brands is but it is probably something over £100 million. So I know all about franchise royalties!
Know each franchisees P&L
I think all the best franchisors know every franchisees P&L. Doesn’t have to be exact but it does have to be ballpark. Most franchisors don’t do this but I think this is important. When all is said and done your franchisees are relying on you as a mentor and coach. What coach doesn’t know all the key details of whoever they are coaching?
When franchising, knowing your franchisees P&L also gives you the forecasting skills of Mystic Meg. What I mean by this is that you can see into the future and predict, for example, the exact month a struggling franchisee will run out of cash. What will that do to your franchise royalties? Because you are better informed you have time to do something about it. So too does your franchisee because it might be they’re not aware of the trouble they are in. I’ve known franchisees, and franchisors, not put money aside for obvious things like corporation tax and vat with an obvious resulting cash flow crisis down the line.
Knowing your franchisees P&L also allows you to calculate your market share and total network turnover. A vanity figure to some extent, but this matters in a fixed fee network. If they’ll let you in, then it’s good to know if they have significant personal expenses or time commitments that may pressurise the franchise. Do this through 2019 and you’ll have a more successful network, just because everyone’s focusing on it. You get results from what you focus on.
Share best practice (again)
Is Franchisee “A” getting a better price than Franchisee “B”? Why is that exactly? Find out and share the lessons learned with the rest of the network. Has one franchisee got more clients or made a profit in different sectors? Seek out what’s going on at a local level. If a franchisee has got the local Lord Mayor onboard you need to know. Same with a celebrity client or endorsement or review etc. Whatever it is your best franchisees are doing you need to find out share it. Optimising a franchise network matters greatly for your franchise royalties.
Bring best practice back to the front of every franchisees mind. Update your Ops Manual if needs be. Share a case study or two. Let them know how they can do the same in their own business.
I think a key factor amongst good franchisors is being available to assist and coach your franchisees. And not just over the phone either! Get out there on the frontline and feel what they are feeling. Go cold calling with them. Go networking with them. Work a day in their shop. Go see a hacked off client together. Share what worked and what didn’t as you go along so everyone learns from it. Is one franchisee working 10 hours a day and the others 6 – share it? Make 2019 the year you spread more tips and strategies.
Over-deliver to the network
The franchise agreement is everyone’s minimum commitment. I think the best franchisors see it as a minimum commitment. So, what can you do as a franchisor to over deliver? In the case of Lime Licensing, the key things for us are our availability to work face to face with our franchisees. That and our significant spend on internet marketing. This is a transparent investment so that our franchisees know we’re spending way more than their contributions. We have booked events like the International Franchise show at our expense. Not everything has to be costly to be valued. We printed some Lime Christmas Cards and gave our franchisees however many they wanted. They will have worked out by now that they won’t be getting an invoice for them. Treat them at Christmas.
None of this is in the franchise agreement.
If you are still running your own locations then they really should be stand out businesses. Amongst the best-run locations in the network. Could you invite the strugglers to work alongside your own staff in a great outlet? Offer it, don’t charge anything for it. Get external trainers involved to run a course on something appropriate. Yes, I know you can charge for this but try running a free one and see what happens to attendance then? You usually get your money back and more in higher franchise royalties.
Keep over-delivering to the network and set a great example of what they could be doing with their own clients too.
What do these 3 key elements have in common?
It’s all about knowing your franchisees situation. Working with them in a spirit of partnership. However, not everyone will want to share this info with you. That’s fair enough but document that for the future! Carry these things out face to face if you can. Use the opportunity to work with your franchisees for half a day, or a full day. Show them what they should be doing by example. Have your franchise manager show in person what excellence looks and sounds like. Be in meetings with them. Let them work off territory if there’s an opportunity to do so. Let them see what clothes you wear, how punctual you are etc etc.
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A lazy franchisee will never make money. Neither will a franchisee who doesn’t have the core skills required. Same too for a franchisor. If you’re a franchisor who doesn’t have a clue what your franchisees are actually doing every day then I suggest you get closer to them in 2019. I’ve had franchisees blame me for their underperformance only to find out they are still in bed at 9am and the nearest potential customer has never even heard of them. You can’t do it for everyone that’s for sure. But you’re in this together so you might as well do it together.
There’s an awful lot more to network management than this short post. An awful lot more!! But the best franchisors in my experience are able to optimise their own business and that of their franchise partners.
Book a session with a Lime expert today and we’ll share our unique blueprint based on what I have seen work and what the elite franchisors we have worked with have done. Many of our clients have become market-leading brands as a result of our franchise blueprint. Contact us or call us 01274 662001 and we’ll share our network optimisation blueprint to help you make 2019 your best year yet as a franchisor.