Three Tips for Franchising Success

Earlier this month, we had the pleasure of attending and sponsoring the annual FaegreBD Franchising Summit. While slowed consumer spending and a lively national debate around minimum wage rates and unionization have made for a challenging climate, franchising leaders are resilient and committed to the business model.

A key theme of the summit was best practices for building successful franchise relationships and powerhouse franchise brands. Here are a few of our top takeaways:
  • Don’t overlook unit level profitability. Too often, companies or leaders focus on pure revenue as a means of success without unpacking what’s behind it. According to Troy Bader, the COO of International Dairy Queen, it’s crucial for franchisors to look at important unit level metrics at the franchisee level to really understand profitability and cost management. Franchisees that are profitable at the unit level are the best candidates for brand expansion, so franchisors should make sure to ID and recognize them.
  • Transparency is key. The relationship between franchisees and franchisors should not be adversarial. It’s truly a partnership, and strong relationships, open communication and collaboration will allow for more effective leadership at the franchisee level, more brand loyalty, and ultimately, more profitable partnerships.
  • Multi-unit owners are on the rise. As Aziz Hashim, multi-unit franchisee and future International Franchise Association chairman, told Entrepreneur, the recession really changed the outlook toward multi-unit franchising. Franchisors realized that multi-unit owners had more flexibility and were better positioned to survive a downturn. According to Hashim, “every brand…is interested in soliciting multi-unit franchisees.” This trend was certainly reinforced at the summit, as franchisors are eager to capitalize on a winning formula once it’s been identified. Still, as noted by Greg Nathan, founder of Franchise Relationships Institute, these multi-unit owners will be more seasoned professionals with better business acumen and will expect high caliber leadership and support from the franchisor.

Tell us your thoughts. What other best practices will position franchisees and franchisors for success?