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What Are The Keys To Franchise Success?

What Are The Keys To Franchise Success?

Making any business reach its full potential takes talent.  If you’ve selected your franchise well, your franchisor will be able to help you avoid many of the mistakes new, independent start-up businesses make.  Here are some keys for franchise success.  

Make sure you have enough money. 

  • Determine how much you have to invest, how much you’re willing to risk and how much you will need to live on for at least 12 months.  
  • Make sure you understand the initial investment required.  
  • Make a careful and rational decision about buying the franchise.  Listen to your attorney and accountant and do not be pressured by the franchise salesperson.  

Follow the system. 

  • Franchisees often get their business up and running and then begin to change, add or modify existing products, advertising, hours, services, and even the quality and consistency they are licensed to deliver.  This violates the franchise agreement and puts you in jeopardy of having your franchise terminated! 
  • By following the system, you:
    • preserve the brand
    • protect your investment and that of your fellow franchisees

     

Don’t neglect your family and friends.  

  • Be prepared to work long hours, but also make sure to budget time for your family and friends.  
  • Don’t forget to acknowledge the sacrifices your family makes.  
  • Allow your family and friends to share in your new life. 

Be an enthusiastic franchisee.

  • The success of any business is linked to the level of enthusiasm you bring to the job.  
  • Enthusiasm brings a level of excitement and energy to the operation that everyone can feel-including your customers and staff. 
  • Let your staff in on the fun.  Acknowledge their good work with recognition or a raise.  

Recruit the best and treat them with respect. 

  • Good help is hard to find-great help is essential.  
  • To keep the good staff you’ve hired: 
    • Rotate routine and boring jobs.  
    • Be fair. Don’t show favoritism.  
    • Work with your staff to develop the schedule. 
    • Treat your employees with respect.  Don’t allow employees to be disrespectful to any other employee.  
    • Keep employees informed of new marketing and other promotions.  
    • Remove hassles-ask employees which procedures are working and which aren’t.  
    • Make their workdays challenging.  
    • Provide timely performance reviews and wage salary increases.  

Teach your employees. 

  • In franchising, training should be continuous.  Employees are you front line.
  • Training classes are a good way to show your employees that they matter to you. 
  • Get all the training you can from the franchisor.  
  • regularly train and retrain all your employees.  
  • Hold refresher and advanced classes on a regular basis.  
  • Alert your franchisor when you need additional training. 
  • Take advantage of every training opportunity, whether it’s offered by the franchisor or by local schools, trade associations and other sources. 

Give customers great service. 

  • The most important thing you can do is to get everyone to smile! 
  • Let the customer know you’re happy they chose your business. 

Get involved with the community.  Customers like to shop in places that support them. 

  • sponsor Little League team
  • support a civic or youth group
  • give tours of your business for school groups
  • set up a kiosk at community events

Stay in touch with your franchisor and other franchisees: 

  • Stay in communication with the franchisor: Letters, newsletters, emails, phone calls, faxes, training classes, regional meetings, conferences and conventions. 
  • Communicate with other franchisees by participating in the franchise owners association. 

Watch the details. 

  • Success is in the pennies! If you watch your pennies, the dollars will take care of themselves. 
  • Minimize costs and maximize sales. 
  • Watch out for shrinkage (merchandise that is missing or unaccounted for). 
  • Work hard every day. Choose your time away from the franchise wisely.  

NEXT STEPS 

The International Franchise Association has over 1,400 franchisor members, representing 100 unique business categories, listed on our site.  If you are considering whether or not to go into business for yourself, but not by yourself, we are confident that you will find a number of franchise systems that might be a good fit for you.  To begin your search, visit our franchise opportunties section – click here 

For more information on the franchising business model, click here

5 Things That Make A Franchise Successful

5 Things That Make A Franchise Successful

Judging from the performance of Potbelly Corporation’s (NASDAQ:PBPB) IPO on Friday, the franchise remains a popular investment concept in Wall Street. The company operates and franchises Sandwich Works shops in the US.

But as is the case with other investment, not every franchise is successful. And even among successful franchise chains, some fare better than others. McDonald’s (NYSE:MCD) and Yum Brands (NYSE:YUM), for instance, have fared much better (in terms of equity performance) than Wendy’s (NASDAQ:WEN).

What makes the difference? Five factors:

1.The Right Business Model: The way the chain enhances customer value vis-à-vis the competition. Franchise pioneer McDonald’s, for instance, delivers customers a quick, convenient and inexpensive meal, vis-à-vis traditional restaurants.  KFC offers the same meal attributes but with a different menu—focusing on chicken rather than hamburgers—though both chains broadened their menu portfolio overtime, adjusting it to the local tastes.

Dunkin Donuts offers coffee and donuts (and in recent years ice-cream) to go at convenient locations.

2. Scale: The Cost savings associated with a larger production scale of a standardized menu–the bigger the production scale, the lower the cost per menu.  With 33,510 units around the world, for instance, McDonald’s has a scale advantage over Wendy’s, which has 9,792 stores.

CompanyRankWorldwide Sales ($M)Domestic UnitsInternationalUnitsTotalTOT -2.9%Units
McDonald’s185,94114,09819,41233,510
KFC (Yum Brands)321,3004,78012,62117,401
Pot Belly28612298
Pizza Hut (Yum Brands)612,6267,6006,14713,747
Wendy’s186,0046,7723,0209,792
Panera Bread333,4211,53831,541
Dunkin’ Donuts (Dunkin Brands)186,0046,7923,0209,792

Source: 2012 Franchise Times: Top 200 Franchise Systems

The scale advantage is reflected in the operating margins of the two companies. McDonald’s enjoys a hefty 30.12 percent operating margin, versus 7.38 percent of Wendy’s.

CompanyOperatingMargins (%)Return on Assets (%)Qtrly Revenue Growth (yoy)Qtrly Earnings Growth (yoy)
McDonald’s30.1315.420.900.30
Berger King31.956.17-42.50150.3
Wendy’s7.382.721.80-82.7
Dunkin Brands39.235.226.20-8.30
Panera Bread8.2215.6412.7016.80
Yum Brands15.0513.80-8.30-15.10

Source: Yahoo YHOO +0%.Finance.com

3. Scope: The cost savings associated with the offering for sale of different products by a single corporation rather than by different corporations. McDonald’s and Panera Bread, for instance, offer a variety of products for sale (McDonald’s has added Mccaffe in many locations), vis-a-vis Wendy’s and Dunkin Brands. That can explain the higher return on assets.

4. Location: The benefits associated with occupying primary location sites for franchise stores. In fact, location can support and re-enforce all these advantages. As an older franchise McDonald’s, for instance, had the opportunity to pick best locations. This further explains both the hefty operating margins and the high return on assets.

5. Market Saturation: The degree of market penetration. The lower the degree of penetration, the higher the room for the company to grow by opening new stores. Potbelly and Panera Bread, for instance, have more room to grow, vis-à-vis McDonald’s and Yum Brands.

The bottom line: Successful franchise chains begin with the right business model, and proceed with the amassing of the right scale and scope in the right locations, until they reach optimum market saturation.

Read the full article here.