How to Win as an Emerging Franchisor
Oct 01, 2024
When Frank Fiume first franchised his brand, i9 Sports -the nation’s first and leading franchisor of youth sports leagues and camps- he was very focused on training the franchisees on how to run the brand he had created. As a founder, he assumed the people who bought the franchise would know how to run a business. However, as it often happens to emerging franchisors, those single-unit franchisees had no previous experience owning a business.
“I had to backtrack and forget about training them on the brand. We had to teach them the basics of how to run a business. Once we figured that out, our business changed forever”, he shared during our interview for his podcast, Emerging Franchise Brands.
This misconception is understandable since new franchisors probably have enough on their plate and have to oversee multiple things… but ignoring this issue can be deathly for someone just starting their franchise journey, whether they are a franchisee or a franchisor.
Think about it! If people don’t know the basic principles of business ownership, such as doing a schedule, reading a profit and loss statement (PNLs), or how to break even, they won’t be able to manage the business properly and, as a consequence, the risk of failure increases.
I sure know that. Read my blog post about “Why my first business failed” here
“I think that’s part of the reason why emerging franchisors run into trouble and kind of dry up… They cannot meet their goals, become the brand they envisioned, or achieve the necessary milestones to stay open”, considered Frank.
This is more common than you think. It’s even one of the reasons we exist: to support franchisors, emerging and legacy ones, and train their franchisees on the business systems, knowledge, skills, and resources they need to be successful.
Thankfully, Frank turned things around. His company was named one of the fastest-growing private companies in America for seven years in a row (2010-2016) by Inc. Magazine and the #1 children’s fitness franchise by Entrepreneur Magazine, and he had a successful journey as a franchisor. Eventually, he sold i9 Sports.
Today, he’s a business mentor to aspiring franchisors, an industry speaker, and host of the Emerging Franchise Brands podcast. During our interview, we shared some of the best practices emerging franchisors must implement to win in this competitive industry. These are some of our thoughts and insights.
But first, please subscribe to our YouTube channel and Podcast, and follow us on all social platforms!
Select the right franchisee
The first step to winning as an emerging franchisor is having the right business partners in your network. Franchise owners must ensure that the franchisees they select have the business acumen to run the units profitably.
If they don’t have the business knowledge and skills to turn the revenue that comes from the proven brand into profit, you can always help them acquire that understanding by training them. However, the franchisee has to comprehend that they need to be part of the business and get the knowledge to move the numbers in their favor so that they can be successful.
“I don’t blame the franchisees. I blame the founders, myself included, because we don’t know there’s this lacking. But when you have that self-awareness, you must tap into your franchisees to see where the gap is and what they don’t understand. You have to pivot and make that the highest priority.”, shared Frank.
Monitor their financials
As Frank pointed out, some franchisors don’t ask their franchisees for their financials. This is a big mistake. “You’ve got to know how they’re measuring up to their fellow franchisees in the network so you can help grow their margins. Otherwise, you’re just throwing darts to the wall, hoping that they hit it right, and that’s no way to run a business”, he emphasized.
I would add that it is not just about asking for the financials but doing something with this information. I know of several emerging brands that ask for it, but then the franchisees don’t hear back from them.
If you’re not collecting their PNLs, start gathering them and let your franchisees know they will get the aggregate to have a prototype to compare their financial numbers against. I promise that most franchisees will be happy to do that if you share those numbers and feedback so they can assess where they are and work on the things they need.
Plus, it will be beneficial for the franchisor as well. Otherwise, how will the franchise owner make an intelligent decision for favorable unit economics if they don’t have this information?
Don’t miss: 6 Key Financial Insights for Multi-Unit Franchisees
Frank recognized how some franchisees are reluctant to share this critical information in a network scorecard. “But this is the right thing to do. Having all the franchisees share their numbers brings a lot of transparency. Plus, the bottom franchisees can see what their network peers are doing and validate that succeeding is truly possible. So this is a blessing in disguise”.
I agree. Collecting the financials of the entire network and doing something with this key information gives the franchisees a roadmap toward success. That is a huge, important best practice franchisors must implement to win in this industry.
Positive franchisor-franchisee relationship
Frank asked me how franchisors can nurture a healthy relationship with their network. I would say that they should build an advisory group in their organization so franchisees feel involved and heard, especially in terms of product development, customer service, and technology.
During my corporate years in the franchise industry, I got to be a part of the group that had a relationship with advisory boards at Domino’s and Popeyes, and the collaboration that happened between franchisors and franchisees was amazing.
- You cannot imagine the fantastic ideas that can come from your franchisees!
Of course, it must be clear that you, as the franchisor, will make the final decision.
I also advise that franchisors do annual meetings, at a minimum, where they invite their franchisees to connect and share information on the company’s performance and talk about the future and what’s coming to get people excited. These gatherings also build culture and networks between the franchisees. The duration and frequency of such events depend on the size of the emerging brand.
Franchise owners must also develop a Franchise Business Consultant (FBC) to represent the brand and support the franchisees. They are responsible for building a relationship of trust and a safe space where franchisees can honestly share where they are and what they need help with.
Remember: the franchisees won’t tell you this vital information if you don’t create that culture and positive relationships. And it may be too late by the time you find out, especially if you’re not collecting PNLs.
“Another thing I highly recommend to franchise owners”, said Frank, “is not to have an operations manual just in a binder. When you have a problem, you don’t look for a binder; you want an answer. If you want to take a step further, integrate your operations manual into your franchisee portal. Right where the problem lies, you want to have the answers, not in the binder on a credenza that nobody will read”.
I couldn’t agree more. Many years ago, I learned from Domino’s Pizza CEO that “the answer must always be on the wall”, meaning that any question any employee had about anything should be within a hand’s reach, either on a poster on the wall or hanging right by the station where it was needed. I remember that employees really appreciated that.
Fast forward to today, where there are screens everywhere, franchisors can share quick and detailed information with the employees, as well as provide the franchisees with easy training and straightforward references to protect and grow the brand.
Provide practical resources
Another way to maintain this positive relationship is by giving your franchisees all the resources and structures they need. For example, if they have a high turnover, facilitate tools to train the new people coming in as efficiently as possible so they don’t waste labor.
Also, provide clarity on the financial model. Don’t just share the average PNL, but what it means and how they can get to those numbers. Share how many people they should hire. Let them know what is the ideal cost of goods for their business. That way, they’ll know what they’re implementing and do a follow-up.
- The emerging franchisors that are more successful are the ones that have taken the time to give these resources to their franchisees.
In case you missed it: The Pros and Cons of Inventory-Based COGs Management
Lean on strategic allies
There are two reasons franchisors don’t provide their franchisees with business knowledge and training. The first one is because they lack the resources. They work hard to create and support a proven, successful brand. If they were to give you a business degree in management, they would need additional resources and charge you a lot more.
The second reason is that the joint employer prevents franchisors from handling anything related to the people and the leadership. Because of the liability, they cannot do it, even if they want to.
That’s where the American Franchise Academy comes in: to help franchisors who want to train their franchisees and their leadership teams so they can all succeed at their roles and achieve the expected financial results.
To put it in Frank’s own words: “As the franchisor, there’s so many things and skills that I want my franchisees to have, but I’m limited. By having my franchisees go through the programs that the American Franchise Academy offers, they’ll be able to get trained on those skills without me being involved. That’s amazing!”.
That is exactly right. We are giving our students my 37 years of career and experience in the franchise industry and my love of systems, policies, and procedures. Moreover, our three programs -COMMAND, LEAD, and MANAGE- are not fluff. Everything we teach and share is tactical-practical knowledge, tools, processes, and resources so franchise leaders can successfully grow their businesses and change their lives.
- If you want to learn more about these elite training programs, go to www.americanfranchiseacademy.com/programs
WATCH THIS PODAST INTERVIEW on YOUTUBE HERE.
