I don’t think it’s difficult for franchisors and franchisees to agree on growth as a long-term goal for any brand. Growth drives consumer awareness and engagement with the brand, provides increased marketing funds (thereby doubling down on consumer awareness and engagement), and ultimately delivers incremental revenue streams for both parties.
But all growth shouldn’t be considered equal and no growth should be rushed focusing on short-term goals. Growth of poorly built or operated units that damage consumer perception can reflect negatively on the entire system. Growth that’s not economically viable for the franchisees may increase your unit count in the short term but negatively impact the health of your franchisees and destroy long-term growth plans. If franchisees struggle financially with a new build, they will soon lose their ability and/or willingness to run, maintain and remodel their current units.
There’s an extremely important principle that can get lost in the drive for accelerated growth… it’s crucial to keep the franchisee’s return on investment as the cornerstone for all growth plans and expectations. As the franchisor, there is no doubt at some point you’ll want to ask your franchisees to invest more capital towards new equipment, remodels or new units. What we need to remember though is that there is a plethora of opportunities available in which they can invest their capital. To drive the growth of any brand, franchisees need to be financially satisfied with the investments they’ve already made. This is not to suggest every individual investment required of your franchisees should provide immediate high returns (every brand is reliant on continued development and maintenance of the current units for their long-term success), however, the size of the investment necessary to build new units will always require stronger returns.
There’s obviously no guarantee with any new build and as a franchisor you absolutely can’t guarantee success, but you can arm the franchisees with all the information and resources you have available. You can share with them your experiences and those of other franchisees and you can establish a build-out and operational platform focused on their economic returns (as well as the brand image and experience). Most importantly, based on everything you know, you can make sure your ask of your franchisees is something you’d be willing to do yourself and that you truly believe will be financially successful. Similarly, you can make them aware of any concerns you have about something they’re driven to do themselves. The communication needs to flow both ways and both encourage and discourage investments based on a full review of the opportunity.
If your franchisees are incredibly successful which is reflected in their lifestyles, this is to be celebrated and not resented; nor should it create a filter for future conversations or expectations. You have achieved your goal and the franchisee has achieved theirs. This is something to be built upon. Economically viable growth is a virtuous cycle - your franchisees will want to grow more, investors and banks will support the growth, and it’ll be easier to recruit new franchisees should you want to. A positive financial relationship for both franchisor and franchisee is essential for sustained long term growth.
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