6 smart ways to gain more franchisee interest

From tools to toys, fast food to footwear, franchises come in all types. Back in 2001, hundreds of thousands dotted the globe, totaling 767,483 establishments by the International Franchise Association's count. That total has since retreated some, but is poised to advance by around 2 percent by this year's end to reach an even 759,000.

Additionally, franchise business output is expected to pick up the pace, rising a predicted 6.2 percent to $757 billion, the IFA forecasted in January.

In short, franchises are doing quite well, all things considered. But when conditions are great, there's always a risk of resting on one's laurels, growing comfortable with the status quo.

How do you avoid this tendency and keep franchisees interested? Here are a few suggestions, most of them from Forbes contributor Ed Teixeira, chief operating officer of the consultancy Franchise Grade. 

1. Assess 'unit level' economics
Unit level economics refers to the revenues and costs that stem from a business model, specifically those that are direct as opposed to indirect. Determining this derives from reviewing financial reports, noted Teixeira.

"I'll often ask a franchisor the question, 'Are your franchisees making money?'" said Teixeira. "They respond 'yes,' but when I follow up and ask about average earnings or ROI pre-tax percent, they can't answer."

Understanding unit economics helps to create opportunities for more informed decision-making.

2. Stick to the basics
A house on a flimsy foundation won't last, and neither will a franchise that's not grounded in the essentials. Franchisees want to be assured that investing won't be a risk, but a reward. Making this as plain as day is key, provided you have the numbers to support your assertions.

"By adhering to basic franchise principles, it will be easier to recruit qualified candidates, enhance and maintain franchisee satisfaction levels and establish a quality franchise program," Teixeira advised.

3. Don't make promises you can't keep
When franchisers makes certain assurances, they have to come through every time. If you've made guarantees that led to fulfillment, make these examples known to the franchisees you're courting, Teixeira suggested.

"The franchisor delivers what's promised," he said. "Nothing more needs to be said regarding this subject."

4. Only act on surefire growth opportunities
You may receive requests from franchisees to expand to a particular location, but have limited data to suggest that doing so makes financial sense. An increased number of inquiries from investors may suggest that the location is worth considering, but market studies should be done first.

"Criteria should include brand building, competitive factors and the ability to provide franchisee support," Teixeira recommended.

5. Provide opportunities for community outreach
Franchisees, and people in general, crave meaning and wish to give back. This may explain why more franchises are getting involved in the community through various initiatives, according to Entrepreneur. From animal shelters to hurricane relief, taking advantage of opportunities for philanthropic work can give investors added incentive to join your team.

6. Strategize by location
It's unusual to build or fill a vacant building on a whim, deciding a random town might work and simply hope for the best. There should be some kind of strategy in place, Entrepreneur advised. As an example, if business has been good in one town, expanding to the next town over may be a safe risk thanks to word of mouth and the familiarity that comes with living in a region. In other words, build outwardly as opposed to on a piecemeal basis.

Whether you're a startup business or looking to branch out, Hudspeth Law Firm specializes in organizational engineering by developing a customized operational plan for your company. Given that we're located in over a dozen countries, we have a more intimate knowledge of what works and what doesn't depending on your location. Contact us today so we can help you take your business to the next stage of success.

Categorised in: Business Law, Starting a Business in Arizona

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