Franchise success: engagement is key

26th July 2022

Franchisors are keen to make up for lost time by getting their franchisees back on track to strong performance in these post-pandemic times. Resilient and successful franchise businesses are important, and the success of a franchise can be attributed to two key elements: an invested franchisor and an engaged franchisee network. However, franchisors often find the latter difficult to foster and maintain in the longer term. In this article we will consider some methods a franchisor may use to develop a healthy franchise network that furthers the goodwill in its brand.

Visibility: League Tables

Most franchisors will have included minimum performance requirements in their wider franchise agreement. However, these criteria are often viewed as key performance indicators providing an escape route to terminate should a franchisee underperform.

On the opposite side of the same scale, the introduction of performance tables can help nurture healthy competition and drive brand recognition. By releasing league tables on a regular basis, franchisees gain visibility of the movement of the network as a whole. This provides perhaps the most accurate gauge against which a franchisee can measure the success of its business against others operating under the same structure and system.

Providing franchisees with such data, and then fostering a collaborative environment whereby the top quartile are encouraged to share best practise, can help franchisees with goalsetting and target motivation and boost the franchisor’s brand and business. Many franchisors have found that releasing this information helps facilitate active mentorship between successful operators and new or underperforming businesses.

Incentivisation: Fee Structures

Generating franchisee interest in ongoing growth and development can be difficult where franchisees are not the main family income earner, and incentivisation is often required to spark participation and incite action. However, franchisors often feel limited in this regard given the typically rigid fee structures contained in their franchise agreement.

To drive performance many franchisors have instead introduced scaled fees. Stepping away from fees of a set percentage of gross revenue, which usually apply equally across all businesses, scaled structures reduce the percentage fee payable to the franchisor upon the achievement of specified financial targets. By way of example, the benchmark management service fee may be 8% of gross revenue up to £500,000, following which it reduces to 6.5% should the franchisee’s revenue exceed this amount.

The submission of a franchisee’s annual business plan is a useful time for a franchisor to sit down and discuss such targets. For those that do have a set fee structure, the terms of an existing franchise agreement may be amended by way of a legal side letter. We strongly recommend that any change to a franchise agreement is made in consultation with a legal professional.

Acknowledgment: Employees

The wider franchise community should not be overlooked. While the relationship between the franchisor and its franchisee is understandably the focus, each individual business relies heavily on the commitment and hard work of its employees on the ground.

Franchisors should recognise the contributions of employees who represent the public face of its brand, especially in franchise business models that include a service element. Importantly, while employee management should remain with the franchisee, the introduction of milestone and excellence awards by the franchisor can boost morale and cultivate a strong work ethic. Equally, recognising achievements of individual franchise employees often creates wider positive branding opportunities.

Communication: Being present

No commercial relationship is likely to succeed without clear communication between the parties. While focussing on the health of the wider network might at times, through necessity, take a backseat in certain circumstances, such as the paring back on investment during the Covid pandemic, franchisors should prioritise regular check-ins with their franchisees. Although in-person meetings are important for compliance and audit purposes, more informal support visitations will help foster an open and honest dialogue and encourage an environment to achieve great success.

Franchisors should also seek to build a sense of community through other less labour intensive means. Some franchisors find it beneficial to arrange annual events, conferences, and training, although less costly measures such as the introduction of a newsletter can have a similar impact.

Positive communication is of course important, but affirmative action in the event of an issue is equally if not more crucial. By maintaining open and regular communications in times of distress, a franchisor will help to cultivate a relationship of trust within its network.

Conclusion: franchise success

To conclude, the right type of targeted franchisee engagement will help boost a franchisor’s brand and commercial reach; and such structures will help make businesses more resilient – a matter not far from the thoughts of all franchisors in our post-pandemic world. Franchisors willing to invest time in facilitating and maintaining a collaborative and progressive franchise network will benefit from the positive impact on its culture and help drive wider franchise success.

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