The 4 Key Elements of Franchisee Success

The franchising world is highly competitive, with over 3,500 franchise brands in the United States alone. Many have gone from one to two stores to hundreds of thousands of units worldwide. The industry keeps growing, and more and more franchises are opening and growing every year in the country. 

The secret of that explosive growth is due to what we call the franchise systems, which are all the processes, procedures, and policies that the franchisors and brand founders have created and implemented systematically in each of the units. When those systems are duplicated and followed, brands can systematically grow hundreds and thousands of units. 

• However, to be a successful franchisee, two specific franchise systems are required. 

First is the brand systems. These are created by the franchisor and developed as a proven brand. And, just to be clear, a proven brand is a brand that has a profitable financial model that can successfully duplicate itself in several locations. The franchisee also needs the management systems to be successful. The creation and development of these are the responsibility of the operator. 

When these two systems merge, the franchise magic happens. That’s what I presented in a recent webinar for GAF, the Argentine Franchise Guide, from FranquiciasTV. The video has been one of the most viewed on the AFA YouTube channel, so I wanted to share those powerful insights with you as well, written in this blog post.

But first, please subscribe to our YouTube channel and Podcast, and follow us on all social platforms!

The Brand Systems

These are the ones created from scratch and developed by the franchisor and involve everything that makes the promise of brand consistency across units. There are four of them:

Product systems

• How that product or service is produced. 
• The training guides and necessary procedures.
• All the information required to allow the product to be duplicated consistently from unit to unit.  

Service systems

• How that product or service is provided to customers.
• What’s the customer experience like when they arrive at a unit.
• How they are received.
• How the product or service is offered to them.

Image systems

• Everything that is visible and touchable and that the customer experiences. For example, the logo, the lobby, the uniforms, the furniture, the menus, and even the car aesthetics (if they have special delivery vehicles).

Marketing systems

• How the brand is presented to the customers.
• How they ensure that people recognize the brand when they look, hear, or see something related to it. 

Those four systems build the consumer experience! And that’s what the franchisor sells to the franchisees when they acquire the right to franchise: a proven brand with a product, service, image, and marketing systems. 

• Together, the brand systems produce sales, and, as we know, sales are the oxygen to the business.

But that's only half the story of what a franchisee needs to be successful. The other half, as I shared before, are the management systems.

The Management Systems

These are the ones that the franchisee must develop and execute with a high level of excellence to be successful. There are four of them: Team, Income, Profit & Scale.

Team systems

• Procedures to find, select, hire, train, and retain the best possible team. 
• What it means to be a great leader and how to motivate your leaders to become one.
• Strategies to inspire and motivate the employees to do their best and give their extra effort.
• How to reduce turnover, the highest hidden cost in the franchise business.
• How to increase the team’s commitment and loyalty.
• What unnecessary personnel expenses to avoid.

It's vital to take all of these aspects seriously. Having team systems in place will bring consistency to your operations, which is crucial, especially if you want to go multi-unit, as you can't be present in every hire.

Don’t miss: Winning Strategies for Staffing and Talent Acquisition

Sales systems 

• How to increase the number of customers and transaction tickets.
• Analyze and understand your different sales channels.
• Security best practices and custody of cash to ensure that the sales actually make it to the bank.
• Tactics to increase sales year over year.
• Create a local marketing plan with systematic offers and actions that produce predictable results.

Although the franchisor provides marketing, those strategies focus on regional and national marketing, with brand exposure as their goal. It is up to you to figure out how to increase sales in the community surrounding your unit.

Control systems

• Understand the key business indicators to make better decisions day after day.
• Read and interpret a profit and loss statement. 
• Manage the labor cost, the product cost, and the cost of training.
• Policies to reduce waste.
• What it means to have a culture of metrics.
• Tactics to have the best possible profit in the business. 

These are critical systems for the franchisee's success because, with them, they can turn sales into profitability. And yet, the franchisor does not provide these procedures, processes, and policies.

As a franchisee, you have to create and develop them and make sure your team members understand them so they can push for positive results.

Remember: you move what you measure. So start by monitoring those key metrics to improve the business.

Most watch: 6 Financial Insights for Multi-Unit Franchisees

Scale systems

• Understand the infrastructure you need to be able to grow.
• The internal and external support teams and at what point you have to bring them into the organization.
• The opening procedures, whether it is building the team, the rental negotiation, etc.
• How to perform a unit supervision.
• The procedures to achieve consistency and positive results across a district.
• When you should add a District Manager and their critical responsibilities.

Owning a franchise is having a job, but owning several franchises is having a company. Especially in recent years, US franchisors have focused on promoting multi-unit growth, but that requires business systems that the franchisor does not provide.

Those are the four critical elements that a franchisee must have. As you can see, having a proven brand thriving in other places is not enough. If franchisees don’t know how to manage a business and how to make a profit, they won’t be successful. 

Even Domino’s, Popeyes, and McDonald's units can fail. Why do they fail if it's a proven brand? The franchisee buys the brand, not the success. And if they can’t manage a business, they are in danger of failure.

Not only are those four systems critical to the franchisee's success; it is imperative to achieve consistency in them. You must be disciplined to reproduce those business management systems throughout your units, just as the franchisor has done with the brand systems. The process to achieve that is as follows:

1. You must clearly define the systems, procedures, processes, and policies of your franchise business.
2. Document them on paper or video.
3. Train your employees so they know how to do each process exactly how you want them to.
4. Delegate tasks to the leaders so you can focus on growing your company.
5. Hire a District Manager to oversee the units and ensure that the brand and management systems are executed as they should. If you don’t hire this multi-unit leader, you’ll have to supervise all the units yourself. 

If you need assistance defining, creating, developing, documenting, and implementing the business management systems that will make you excel as a franchisee, the American Franchise Academy is your ally! 

Our COMMAND program is designed to help you run a profitable, successful enterprise without burnout. In this 12-month intensive training and group coaching, we provide step-by-step management systems to take control of your franchise so you can delegate operations, spend less time working, and scale your profit with confidence. 

• Explore more about the COMMAND program here

WATCH THIS VIDEO CONFERENCE on YOUTUBE HERE (The audio is only in Spanish, but you can add English subtitles)