FRANCHISE: Managing a franchise system efficiently

Although it has barely taken root in East Africa, franchising, as a business model, is a world phenomenon. In some countries, such as America and Australia where a new franchise opens every eight minutes, franchising is so big that it is possible to be born and educated and to work and die in a franchise.

We continue discussing how franchisors and franchisees manage and contribute to the management of a franchise system.

Sixth, a comprehensive franchisee training programme. Besides the initial training that must be comprehensive there must also be ongoing training when necessary.

Initial fees charged on granting the franchise should include fees for the initial training programme. Any additional training required is chargeable to the franchisee.

Seventh, site selection is key for most businesses. A set of carefully developed site selection criteria and architectural standards are needed to assist franchisees in achieving success.

Eighth, a genuine understanding of the competition.

This includes both direct and indirect competitors that the franchisor and franchisees will face in marketing the brand.

While the franchisor should focus on understanding competition at the national level and the franchisee at the local-territory level, a point of intersection is needed for them to work as a team to ward off competition.

Ninth, external relationships. Good relationships are needed with suppliers, financial institutions, real estate developers, shopping centre management and key resources that will benefit the franchisee and the system that must be maintained.

Tenth, a franchisee profile and screening system. Just like in hiring own staff where getting the correct staff is a gamble, the recruitment of the right franchisee is vital for the system. A franchisee profile and screening system is needed in order to identify the minimum financial qualifications, attitude, business acumen and understanding of the industry that will be required to be a successful franchisee.

A carefully crafted and well-thought out franchisee recruitment plan is a prerequisite to successful franchising.

Eleventh, an effective reporting and record-keeping system. Management needs to be aware of the performance of the franchisee and ensure royalties (management services fees) and sales are reported accurately and paid promptly. A robust Information Management system is a prerequisite for success.

To understand how the franchise system is performing, the franchisor will need timely and detailed reports from each franchisee on the key performance indicators.

By analyzing these reports, market information can be deduced for possible improvements and/or changes to the system.

The reporting system is a vital administrative procedure for the franchisor for reasons already explained.

In addition, reporting also serves to determine whether franchisees are in compliance with their agreement, to control under-reporting of turnover (on which royalties are based), to review the purchase and use of unauthorized products and to gain insight into a franchisee’s marketing communications activity.

The writer is a Franchise Consultant helping indigenous East African brands to franchise, multinational franchise brands to settle in East Africa and governments to create a franchise-friendly business environment.

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