The franchisee derives many benefits from purchasing these rights:
The franchisee gains instant name recognition by using established trade names and trademarks.
They save resources on research and marketing since they buy the rights to tested products.
Businesses often do not have to re-design their physical locations as a building and décor framework already exists.
There are transferrable management and training procedures that will maximize efficiency in a shorter time.
The franchisee is entitled to advances in new products and helps promote existing ones.
Because of the proven management and operation system, the franchisee does not have to go through the trial-and-error mistakes many new business owners make.
Franchisees also enjoy low prices in buying materials and services from the franchisor, which provides them in bulk to their franchisees.
The franchisor also gains from expanding its revenue base and increasing exposure to its brand and products.
Franchising allows the franchisor to maximize earnings with minimal spending on acquisitions, repairs, and maintenance.
The franchisor accumulates a network of affiliated dealers that distribute their products.
Constant communication with franchisees allows the franchisor to troubleshoot problems and identify trends before other competitors in the industry.
Being a franchisor is also great for successful small businesses that do not yet have access to large amounts of capital but would like to expand.
Being a franchisee is suitable for business owners who want to run their business but do not want to start entirely from scratch.
Challenges Franchises Will Face With Marketing and Management
1. Demonstrating Effective Leadership
Franchisors should be in communication with their franchisees, showing empathy and encouraging open communication. In addition, franchisors should be transparent about concerns across their franchisees and promote collaboration.
Drawing insight from across the network of franchisees will be critical as businesses reopen and are ordered into lockdown again. In addition, franchisors can use advisory councils composed of franchisees to demonstrate leadership and receptiveness.
A failure to lead during this time could result in increasing challenges to earnings, a disjointed policy, and a disgruntled set of franchisees. Franchisees must also demonstrate leadership on the micro-level, encouraging employees to voice concerns. They can also share best practices with franchisors, allowing them to be applied franchise-wide.
2. Ensuring the Financial Viability of the Franchise
Any franchise operating in the current pandemic climate understands working in a reduced revenue environment. However, they must continue to assess how much earnings are needed to survive and how they will adapt financially as rules change.
For example, restaurant franchises in states that have reopened realize the importance of temporary investments in outdoor seating. Franchisees should be doing everything they can to cut costs and survive. Franchisors should understand the urgency on the bottom level and show flexibility with payment and opening deadlines.
3. Providing Relief to Franchisees
Franchisors may consider reducing the royalty rates to help franchisees in the current climate. However, they must also balance franchisee concerns with their concerns. Franchisors without significant cash reserves and less access to capital may not be as flexible with royalty abatements.
Franchisors and franchisees will face different financial goals. While franchises try to survive the pandemic’s expected endemic, franchisors seek to protect their brand and minimize widespread closures.
4. Ensuring Lines of Communication between Franchisors and Franchisees
A lack of an organized communication strategy can seriously harm hong kong gamblers phone number data the symbiotic relationship between franchisors and franchisees. In addition, a lack of practical guidance from the top can result in confusion and isolation on the part of the franchisee.
Additionally, if franchisees fail to communicate with franchise management, the franchisor will fail to recognize industry trends and miss opportunities to implement best practices. In the current pandemic, franchisors should have a carefully crafted message that acknowledges their responsibility to protect the safety of franchise owners and employees.
5. Clear Messaging to Franchise Customers
Another reason why communication between franchisors and franchisees is critical is that it impacts consumer perception about how the overall brand is doing. Customers value consistent messaging about how a franchisee plans to address an issue or problem.
Ensuring businesses can adapt their operations to the ongoing health situation will require them to convince their customers that their health and safety are protected. Doing this requires coordination between franchisees and franchisors. Collaborating to send a clear message will be essential to maintaining customer relationships that will survive the pandemic.
6. Increased Importance of Public Relations
While franchisors must be concerned with financial viability and maintaining cash flows, too much cost-cutting will risk long-run damage to the business’s reputation. Franchisors worried about their long-term reputation may consider offering their employees expanded benefits.
7. Building Franchisee and Employee Loyalty
For example, enabling workers to take paid sick leave for possible exposure and bumping up pay schedules are ways to demonstrate organizational empathy. Implementing increased employee benefits shows that the franchisor is committed to preserving the workforce.
It will also help build future loyalty not only from employees but also from the public. The public is watching how franchisees treat their employees during this expanded need, so businesses must weigh maintaining their image with financial concerns.
8. Maintaining an Adaptable Franchise Model
In the food services franchise industry, franchises have been forced to adapt to deliver their goods and services. When businesses began to shut down this past spring, many franchises proactively shifted to delivery-only and to-go business models.
Franchisors who tried to hold out faced public scrutiny in being perceived as putting the community and employees at risk even if legal requirements were being followed. Therefore, one challenge is anticipating changes and being among the first in the group to move.
In this age, it is better to err on the side of caution, even if that puts a more significant financial toll on the franchise. This makes it critical to have a flexible model and anticipate multiple operating environments.
Since the franchisor distributes operating models, they are responsible for adopting new models to reflect the new reality. Therefore, they must carefully communicate these changes and how customer interactions should look. For example, developing a uniform cleaning policy and a standard response to possible exposure requires effective communication.
9. Maintaining Sufficient Capital for New Franchises
In the first years of a franchise, the costs of supporting franchisees typically exceed revenue from royalties and fees. As a result, new franchises will face the challenge of building enough capital to cover the infrastructure needed to support their franchisees. This includes support for marketing, accounting, and operations.
Franchisors should know these costs and how many franchisee units can afford to operate at a loss or break even. Therefore, they should be cautious of expanding and consolidating franchisees if necessary. It is better to maintain the same level of support for fewer franchisees than to provide weak support for more franchisees.
10. Retaining and Recruiting the Right Franchisees
In building a franchise network, franchisors will develop strong relationships with some franchisees and weak connections. They must ensure that franchisees with whom they maintain strong relationships continue to be supported through the current health crisis.
Franchises should be wary of recruiting new franchisees to recoup losses quickly. Without proper due diligence, the franchisee may be poorly run, and it may divert support from successful franchisees. On the other hand, building a team of happy franchisees will provide invaluable feedback that is needed more than ever.
With the advent and maturation of the internet, brick-and-mortar retail operations seem to be fading in popularity as people order products and groceries online. Books are delivered via the mail or downloaded to a tablet, and eateries are shutting down in droves with the pandemic. Such things as digital consumption of delivery of goods and services and the growing need to maintain social distance can wreak havoc on established business models involving franchising. However, franchising itself is not a business. It is a type of business model. As such, franchising is alive and well, as they say, even if it is undergoing various transformations.
