21 August 2023

    Are you a competent franchisor? Do you have the “secret sauce” for growth? (Part 1 of 3)

    First things first

    The success of a franchise network relies on various factors, but foremost, it stems from the competence of the franchisor in franchising. But what does it really mean to be a competent franchisor?

    Competence is built upon three fundamental pillars: mastering growth, cultivating a culture of excellence, and obsessing over the franchisee’s Return on Investment (ROI).

    Today, let’s dig into the details of mastering growth.

    Franchising is designed to be a growth powerhouse. It’s one of the most effective strategies to rapidly expand your brand across diverse markets. However, the numbers remind us of a disconcerting reality.

    According to data from Franchise 101: A typical Canadian franchisor, after 17 years in operation, possesses 12 corporate units and 63 franchised units, totaling 75 units. Their annual growth averages about 4.4 units per year, merely 5%. In the US, as per FranData, only 16% of franchisors own more than 100 units.

    These figures unveil a disappointing growth rate, which, among other things, arises from the lack of skill among franchise leaders.

    The million-dollar question: 

    Why do so few franchisors manage significant growth?

    In my opinion, the answer lies in their failure to master the “secret sauce” of network growth.

    So, what are the ingredients of this “secret sauce”?

    First: An Exceptionally Performance-Driven Business Model

    Above all else, a successful franchise business model hinges on the franchisee’s ability to generate profits notably higher than the industry average and recoup their investment within 3 to 5 years. The consequences of underperformance are multifaceted and occasionally catastrophic.

    Second: An Extremely Effective Recruitment and Selection System

    Let’s face it, this is often the Achilles’ heel of franchise systems in development. Many don’t allocate sufficient time or resources to franchisee recruitment and selection. In the absence of an intelligent system and proper investments, these franchisors usher in unsuitable partners, generating turbulence that slows down, or even halts, growth. Repeated mistakes act as a significant hindrance, not to mention the fortune it costs the franchisor.

    Third: A New Franchisee Integration Process Fostering Autonomy

    In the world of franchising, numerous franchisors underestimate the importance of properly integrating new franchisees. Often, training is limited to basic operational aspects, lacking a structured program. Franchisees are left to their own devices without the necessary skills to face the realities of the field. Mistakes accumulate, compromising franchisees’ profitability and the brand’s reputation.

    Fourth: Championing “Start-ups”

    With a significant number of new franchises launching, the franchisor must guarantee the success of each, lest the dance of two steps forward, one step back begins. Swiftly reaching profitability must be the top priority, ensuring seamless and continuous growth. Rapid profitability generates substantial benefits.

    Fifth: A CEO Skill Development System for Franchisees

    One of the drivers of rapid organic growth lies in developing CEO-level skills among franchisees. This entails creating a development system that goes beyond daily operations.

    Mastery of this competence marks the first step towards sustained and rapid growth of a franchise network. Ignoring this reality is akin to accelerating one’s own downfall and heading towards catastrophe.

    In the second part of this series, we will delve into the second pillar: fostering a culture of excellence within a competent franchise network. Stay tuned to discover how this culture can propel your network to new heights.

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