Successful entrepreneurs are self-starters, problem solvers, know the importance of strong teams (staff, professionals, suppliers, consultants, mentors, etc.), are self-aware and committed to continuous learning. Enabling entrepreneurs seeking to build profitable businesses as part of a franchise system is role of franchisors. Successful franchisors hone their proven business model by pressure-testing every element (brand, systems, tools, training, resources, on-going support, etc.), listening to their franchisees, continuously improving the franchise system, and carefully selecting like-minded franchisees to join the franchisor’s “family”.
Over the course of several decades in franchising, serving walking in the shoes of every function, for multiple brands, as a franchisor and franchisee, I understand what the DNA of successful franchise systems looks like. Feel free to use each heading below as a criteria in your own franchise validation checklist, when investigating potential franchise systems for yourself.
- Culture – IMO, the single most important factor in the long-term success of any business. Quality talent are drawn to (and stays with) companies that have great culture because it inspires, attracts, strengthens ties to customers & suppliers. Before you sign-on with a franchise system, carefully examine and assess whether you align with their culture.
- Core Values – clearly defined, evident to you in every interaction, consistently demonstrated in-person, on the phone, online, and when speaking with franchisees, with whom you should validate everything.
- Leadership – franchisors have leaders and team members you respect, whose actions & words align. Each senior leader should inspire confidence that they’re genuinely committed to your success.
- Realistic ROI – “unit economics” are strong, proven to be sustainable. Performance must be validated when interacting with existing franchisees
- Performance Metrics – well defined KPIs (finance, ops, mktg, cx); reports furnished regularly, accessible online. Validate use of franchisor cited KPIs with franchisees and understand how the KPIs are used to evaluate/improve unit performance.
- Reputation – Any system you consider joining should have a strong, positive reputation. This should be evident online, in social media. Because problems are inevitable, the franchisor should have a crisis management plan, and share the elements, resources.
- Brand Consistency – robust QA programs are imperative to help “police” the product; the franchisor must be clear about if and how franchisees may “localize” their business
- Skin-in-the-Game – when a franchisor operates company unit(s) they’re better grounded in reality, can test and assess the impact of changes on staff, customers, owners, etc.
- Training – well-defined curriculum, logical schedule, hybrid delivery (classroom, online, practical/OJT). Franchisor should also offer on-going training post-opening on relevant topics. Inquire with existing franchisees for insight on training value and effectiveness.
- Quality Franchisees – Franchisee selection should be appropriately rigorous – you’ll experience this firsthand. If it’s as simple as “sign here”, run for the hills! Speak with a cross-section of franchisees (both those suggested by the franchisor as well as your own selections from the master list in the FDD). Ideally, you’ll find franchisees to be successful, authentically living the core values, and willing to share ways they hope to see the franchise system improve. Remember, none of us are perfect and everyone has room for improvement, including the franchise system.
- Franchise Advisory Council (FAC) – mature franchise systems should have an FAC. Membership should be diverse (i.e. recent additions, veterans, single unit, multi-unit, varying markets), who are committed to serving in this capacity. Be sure to speak to an FAC members, and ask what important issues they’ve addressed at FAC meetings.
- Standards – ensure that they are thorough, clearly written, ask how frequently they’re updated, who ensures franchisee compliance, and if you can access them online. Look for absolute requirements (versus recommendations) and ask questions if you’re unclear.
- Marketing Effectiveness – franchise systems offer template calendars for local marketing expenditures – review them carefully to understand required versus optional programs. For optional programs, inquire about system-wide participation rates. For required programs, request data on their performance/effectiveness in driving new business. You should carefully examine the franchise system’s lead generation programs, and ask what training is provided to help franchisees convert leads to customers. As the franchisor is the steward of the brand, inquire as to what advertising, PR will be done in your market to raise brand awareness. Validate marketing effectiveness by speaking with owners open <1 year, as well as those open >24 months.
- Customer Experience – your business’ reputation, revenue growth, profitability, share vs. competitors is driven by the outcome of customer interactions. The franchisor should gather/share customer feedback, monitor complaint resolution, have a customer experience measurement tool (i.e. NPS or similar), and have defined standards. Ask what resources are offered to help franchisees improve customer experience.
- Initial Training & Start-up Support – the effectiveness of the on-boarding process, initial training and all pre-opening activity, will substantially affect the growth trajectory of your business. Look for documented process, with timing and key activity milestones, as well as a robust training curriculum, with dedicated pre-opening resources. Validate the effectiveness of on-boarding program/resources by speaking with recently opened franchisees.
- On-going Support – once you’re open for business, the support provided by the franchise system will change. Seek to understand and assess the resources that will be available to “coach” you to success. Inquire as to what expert resources (on-site, online, phone) will be provided, and on what frequency you can expect on-site support from the franchisor.
- Technology – systems are typically specified and providers often mandated. All technology should simplify/streamline the administrative requirements of operating the business. Ideally the technology will also serve as a competitive advantage, if not directly in the eyes of customers, then it should enable you to spend more time with the customer vs. doing paperwork. Seek to understand and validate the reliability, cost-effectiveness, and ease-of-use of all required systems. The best insights will be gained by inquiring with existing franchisees.
- Suppliers – expect that “required” product/services will be mandated by the franchisor, without exception. Generic components may be available via “approved” suppliers, and/or you will be given very detailed specs. If you’re a consumer-facing retail business, please understand that consumers want the same exact product/service at all locations, so don’t expect the franchisor to be flexible on product/ingredient specs. In speaking with franchisees, seek validation that suppliers are highly responsive, products are effective, quality consistent and pricing is competitive. For franchise system that are highly dependent upon the supply chain (i.e. food outlets), be sure to inquire about what contingencies exist should the supplier be unable to perform for any reason.
About the Author:
Phil Harvey, franchise consultant and founder of Prosperity Services, is an accomplished franchise industry veteran and trusted franchise advisor. He consults with first-time and serial entrepreneurs alike, helping them find, evaluate and select the right franchise to achieve their goals. To learn more about Prosperity Services or Phil, visit his LinkedIn profile.