What can a franchisor do to assist a franchisee who is struggling?

In the current economic downturn, all franchisors are certainly going to experience an increase in franchisees who are struggling to make a profit. The way in which a franchisor can look to assist a struggling franchisee is to implement an “intensive care programme” to assist. This would include:

  1. Identifying at an early stage that the franchisee is at risk through regular field visit support and intensive business assessment including benchmarking.
  2. Identifying where the problem lies within the franchisee’s business, this is the most important step of the process and can be achieved by:
    • Determining how involved the franchisee is in the day to day operations of the business;
    • Intensive financial analysis (benchmarking, sales analysis, cash flow analysis etc.);
    • Intensive operational analysis;
    • Staff satisfaction surveys;
    • Customer satisfaction surveys; and
    • Assessment as to whether the franchisee’s area or market has changed, leading to a decline in demand for the product or service offering.
  3. Making recommendations for corrective measures to be implemented to resolve the problem in the business.
  4. Where necessary, assisting the franchisee to implement corrective measures with specialists.
  5. Review performance of corrective measures.

Some don’ts when looking to assist a struggling franchisee:

  • Never allow a franchisee a royalty holiday or break. If you have developed a sustainable franchise business model, it is likely that the problem in the franchisee’s business is not the royalties they are paying a franchisor, but rather some other issue within their business. Therefore, providing a royalty break is not treating the problem at hand and is a “quick-fix”.
  • Similarly, a struggling franchisee should never cut back on their marketing efforts as a way of reducing expenses, again it is likely that the marketing expense is not the sole problem within a business and furthermore, we believe marketing should be viewed as an investment, not an expense.

Strong franchisors are built on the basis of keeping strong, healthy relationships with franchisees, therefore it is in the best interest of the franchisor to do their utmost best to assist a franchisee that may be struggling.

Article courtesy of Franchising Plus