June 27, 2016

The 20 qualities of the best franchise systems

Having spent 30 years in the franchise industry, it is easy for me to separate the best franchise systems from the rest.

Here is my list of the 20 qualities reflected by the best franchisors:

  1. They sell products and services which the public wants.
  2. They have excelled at creating a value proposition for their consumers which their consumers have embraced.
  3. They are either market leaders in creating change or are market leaders in adapting to change. Even when their products and services have not changed, their branding changes to keep the products and services fresh.
  4. They have identified the segment of the market that is their core and they do not get side-tracked on chasing business outside of their core at the expense of their core.
  5. Their franchisees identify with, are proud of and support the brand, products and services as much as they do.
  6. As they appreciate that their franchisees interface most with the customers, they design and involve their franchisees in processes which allow them to stay close to the customers.
  7. They appreciate that they are creating one profit pool – sharing system designed to compensate the risks – one at the franchisor level and one at the franchisee level. They recognize that it is in the interests of both to continue to grow the overall pie while delivering a reasonable rate of return to the franchisee that operates within the system.
  8. They design a system that works at the unit level as well as the multi-unit level. They generate investment opportunity within the system so franchisees prefer to invest within their own franchise system than elsewhere as evidenced by multi-unit franchisees.
  9. They recognize the key attributes of successful franchisees and they seek out franchisees who either have those attributes or are trained to have those attributes.
  10. They ensure that franchisees understand what they are buying and what they are not buying.
  11. They have franchise agreements which permit them to exercise control over the overall system and the individual units but they exercise their rights and enforce their agreements fairly, with understanding and significant support befitting the investment and commitment made by the franchisee.
  12. They ensure that their franchisees understand and are comfortable with the differences over what aspects of the system are controlled by which party and how the allocation of these controls and the overall system works reasonably on behalf of both.
  13. They realize that franchisees will figure out how they could make more money if they were allowed to, usually at the expense of the franchisor. They are transparent as to what each side’s profit silos are and how they co-relate.
  14. They and their franchisees understand that they can make errors in the exercise of their business judgment and that it is their right to do so. Despite this right, they appreciate the impact of their bad decisions on the franchise system and they find ways to mitigate the impact upon the franchisees of poor decisions.
  15. They utilize compliance personnel and tools as a means of providing support and guidance. They “police” their systems to ensure compliance for the benefit of the system as a whole and not as a means to eliminate franchisees for purposes of churning.
  16. They expand internationally without stealing from the resources needed to establish, maintain and grow a solid domestic footprint.
  17. They understand and plan for the different stages of system growth as reflected by having longstanding franchisees.
  18. They have succession strategies both internally and for their franchisees.
  19. They are recognized experts not just in their core business but in franchising as well.
  20. They promote best practices in franchising so that prospective franchisees in the marketplace can readily tell the difference between good systems and ones that are to be avoided.

I am proud to be part of a law firm dedicated to assisting franchisors in the establishment and development of best practices which contribute to them being recognized for excellence in franchising.