Seven factors driving franchise growth

Currently there are in excess of 800 franchise systems operating within Australia, with speculation that this figure may exceed 1,200 systems.

Of these systems, over 75 percent have less than 15 franchisees. The greatest challenge facing these smaller franchisors is how to grow their franchise organisation on a sustainable basis to achieve a size where the organisation can operate at optimal efficiency and benefits flow through to both franchisor and franchisees.

The seven franchise performance drivers are:

1. Consumer Value Proposition

2. Consumer Brand

3. Franchise Model

4. Franchise System

5. Franchisees’ Performance

6. Franchisors’ Performance

7. Franchise Brand

Consumer Value Proposition

The key to success in any franchise system is, and always will be, the success of the franchisees. With that in mind, one of the most important things for a new or established franchisor to do is constantly strive to improve the value of the proposition at a consumer level.

The more the franchisor does to improve the core value proposition, the better each franchisee’s financial returns are likely to be.

The franchisor should strive to impress on franchisees the importance of high consumer satisfaction levels. Feel good statements will not be sufficient.

Validation through objective review directed through measurable outcomes is needed to lift the awareness of franchisees to the importance of a Consumer Value Proposition. Many franchise systems are now closely analysing their key performance indicators and directing these to measure consumer value with significant success.

Consumer Brand

The Consumer Brand is the basis of the relationship between the brand and its consumers.

Branding as a concept is often confused with aspects which make up the totality of branding. Franchisees need to be educated on the importance of focusing on branding as a continual reinforcement of the perception of the franchise system and its products.

It is often difficult to quantify or explain the branding of a particular franchise system and its products, due to the fact that each consumer will have a different interpretation of how the franchise affects that person. It is important that the franchise system clearly identify which group will represent their primary customers and which group of customers the franchise system wishes to target to expand its reach. The Consumer Brand will need to be accurately modelled on this target group.

Franchise Model

The Franchise Model encompasses all the elements that set a particular franchise apart from the generic business model utilised by its competitors. The Franchise Model must add significant value to every process and business activity, rather than following a template of assumptions.

In developing the Franchise Model, particular focus needs to be made of the goods or services marketed by the franchise system. Where these items are subject to change due to technology, competitive forces or government regulation, the Franchise Model will need to include contingency plans and anticipatory strategic programs to allow for this change.

Franchise System

The Franchise System includes not only franchisee and franchisor manuals, but systems, procedures, management tools and resources that combine to deliver industry-leading performance achievements in every aspect of the operation of the franchise. The procedures to be followed by franchisees on a day-to-day basis are a major interface between the franchisor and the franchisee.

Franchisees’ Performance

The franchisees’ performance relates not only to the usual financial performance criteria, but also to the way the franchisees commit to and consistently deliver the customer value proposition and consumer brand. Franchisees must be consumer brand champions.

Franchisors’ Performance

The franchisor’s performance encompasses not only the specific training and support functions that are carried out, but also as a brand guardian and as a caring, supporting franchise partner.

Franchise Brand

The franchise brand represents more than the procedures manuals and support service; it is the emotional bond between the franchisee and the franchisor. Unless the franchise brand engages the franchisees in a positive and natural dialogue, the full potential of the franchisees’ input will not be realised. The contribution of the franchisees to the success of the franchise can be cost-effectively harnessed by franchisors developing and nurturing the power of the internal franchise brand.

Franchisors should be realistic and understand that many franchisees are constantly approached by other franchise systems to move to greener pastures. If a franchisee does not have a close affinity to the Franchise Brand, these offers will be considered carefully. Franchisors who fail to guard against their loss of a franchisee do so at their peril.

There is much more informational available regarding Franchise Council of Australia is a not for profit membership organisation that is the peak body representing the franchising sector in Australia.