How should franchisors spend to help franchises

A franchise network is dependent on its franchisees to grow business whatever the economic conditions and in return the franchisor needs to invest in support.

So where should franchisors be spending their money now to best help franchisees?

Maximising cost savings

Darryn McAuliffe, national manager, franchise banking, National Australia Bank

The current economic environment provides an excellent opportunity for franchisors to demonstrate both their capacity and willingness to provide strong and effective franchisor support. In the current market, the mantra has changed from cash is king to cash is like oxygen. Optimal cash flow management, of course, comes from maximising cash inflows and prudently controlling outflows.

In these times the importance of sustained marketing support from franchisors cannot be underestimated. Brand awareness and marketplace visibility helps the franchisee attract every discretionary consumer dollar on offer to maximise their revenue.

On the outflow side we are seeing some rare opportunities emerging to renegotiate key supplier agreements and terms.

Franchisors could greatly assist franchisees to achieve these cost savings through the facilitation of forums to review and help identify these items. In many cases this may extend to the engagement (and payment) of external consultants or professional advisors to help negotiate and complete fresh documentation where required.

Achieving results

Martin Rose, franchisor, Hydro Dog

Franchise organizations should measure their success by how effective they are at meeting and preferably exceeding the expectations of their key customers - the people who buy the products and services and most importantly their franchisees who deliver the business model.

We don't spend money on franchisees; we invest in them to ensure our joint future. We live in fast changing times where the value equation has altered and our role is to ensure our businesses and team understand how to best achieve results in this new dynamic.

An investment in education, goal setting and better business tools is equally as important as a new marketing program or new products and services. Create differentiated products and services to stand out from your competition and train your team to deliver them in an exceptional way. Ensure franchisees are empowered and equipped to achieve the greatest results.

Customers, training, product

John Bums, Lenard's franchise owner of the year

Franchisors should be spending their money in a few ways to help franchisees.

Firstly, they need to be developing strategies to help them break through to those shoppers that are feeling the pinch financially and to turn them into customers for the franchise.

Secondly a franchisor should give franchisees a boost with appropriate training. And then there is product development; franchisors need to look at ways to get cheaper products to market without sacrificing franchisee profitability.

Sales and marketing

Richard Thame, chief operating officer, Fastway Couriers Australia

Directing funds towards bolstering sales and marketing initiatives is the best way to help franchisees combat the economic downturn.

When business conditions get tough traditionally many organisations have elected to slash their investment in sales and marketing. Cutting back on these critical functions is potentially the biggest mistake a franchisor can make. Rather than reducing sales and marketing expenditure, a challenging climate should act as a trigger for franchisors to shore up their business development efforts and make them more robust than ever before.

While not immune to the effects of the downturn, top franchisors don't allow external factors to determine their success; instead they use these factors to drive their competitive advantage.

Lead generation and conversion

Caroline Jean-Baptiste, Mortgage Choice franchisee, Inner North Brisbane

In this current climate, lead generation and conversion activities can best help franchisees, as can making sure the brand is in the preferred set of brands for consumers looking for a particular product or service.

Mortgage-Choice has organised customer relationship and sales training for our network as well as improved IT systems for customer relationship management, payment and business reporting. These initiatives have enabled franchisees like me to best manage customer inquiries and build a solid, growing business, so I suggest this what franchisors should be spending their money on to help their franchisees.

With these strong foundations and ongoing support, the franchisor has equipped each franchisee with the tools to handle increased inquiry and convert more leads.

Regular communication in the form of emails, webcasts, podcasts, office visits, marketing cell meetings and state conferences are also of utmost importance to keep franchisees in the loop and feeling like they are working as part of a team towards a common goal.

Customers' emotional connections

Chris Caldwell, general manager, Bakers Delight

The Bakers Delight product offering is essentially a fresh and high quality household staple and as such is less susceptible to the peaks and troughs of the economic cycle.

We provide our franchisees with a support structure that enables them to focus on delivering product quality and service while we as the franchisor ensure the brand presence is maintained and confidence in the marketplace is not lost. As such, Bakers Delight has increased its media investment and focused its communications on relevant messages for this climate. For instance merchandising tactics that leverage the customers' emotional connection with a value proposition such as 'lunch for under a $1' and campaigns that specifically focus on entertaining and eating at home.

Strengthen the team

Denis McFadden, founder, Just Cuts Franchising

I call Just Cuts a recession-proof franchise, simply because Just Cuts has a flat fee for style cuts and franchise fees aren't based on the percentage of profits made each month. The majority of Just Cuts' franchisees are not found in their stores, nor are they hairdressers; you don't have to work directly in the business for it to be successful.

A critical success factor for Just Cuts is the franchise support team. It's important to spend on educating and strengthening your team so that they can pass these skills onto the franchisees. In doing this, we are able to give franchisees maximum impact where it genuinely counts most: on the shop floor and in their tills.

For instance, we complete state by state roadshows annually with business building and coaching sessions. We also hold an annual conference which is aimed at improving the continual development of franchisees and their teams.

As a flat-fee franchise, we've had to be smarter and creative with our budgets. In maintaining this flat fee, we believe that we're building on our valuable franchisee relationships. In an economic slowdown, it's essential that you invest in team training and up-skilling. Be innovative in your store design and look at reinforcing brand marketing, don't tighten the budget, invest in it.

Continuously spend effectively on these things and always try to move away from reactive management.

Communicate, communicate

Neil Gibbins, Hire A Hubby franchisee, Gladesville and Ryde, Sydney

Franchisors can best help their franchisees by investing in communication. Because Hire-A-Hubby franchisees have individual territories, they don't compete with each other but this model requires that effective communications must run in several directions.

First, franchisees benefit by horizontally sharing best practices among themselves. For example, a franchisee in one territory may discover a new supplier in the region that can help other franchisees. They need a way to spread the word without necessarily involving the head office.

Secondly, the head office may discover issues relevant to the whole network to ensure a consistency of procedure. For example, a change in the effectiveness of advertising might require the company to shift its advertising mix across various media. To do so, head office needs to inform franchisees and include them in developing solutions.

Franchisors can facilitate communication in all directions by investing in intranets and websites, newsletters, organising meetings and conferences.

Fast, easy communication ensures the organisation's long-term health amid ever changing market conditions.

It's all in the brand

Gary Diamond, Managing Director, Pets Paradise , Pet Goods Direct Superstores, Pets R Fun & Billy Baxters Coffee House

Franchisees buy into reputable brands. A brand that has an established position in the marketplace will always be a more attractive investment. To ensure this is the case, franchisors need to complement a solid business model with concise and relevant communication and brand growth strategy.

The brand is something that must develop and grow with the business. As our business world changes, we look to growing our brands through creative and effective communication methods. Currently, we undertake targeted catalogue distribution, online and digital communication, individual brand loyalty programs and region-specific television advertising. This ensures we stay front-of-mind with our consumers and maintain our position as a market leader, which assists our franchisees in their sales targets.

I believe that franchisors should be looking to invest in the longevity and growth of their franchised brand to continue to assist franchisees as well as attract new ones.

This article appears in the franchising articles section courtesy of Franchising Magazine