Advisory Aug, 26 2011

Franchisors innovate; but strategically

Change and innovations always lead to a successful business venture. However in franchising, modification from time to time can be problematic for the franchisees creating differences among franchisor and franchisees. Read on to know more

By Abha Garyali
Sub Editor
Franchisors innovate; but strategically

If creating and establishing a brand is complex than operating it and growing it stably is even more difficult. There has been a constant evolution of thoughts among the clients/customers and their needs. Businesses today face the challenge of keeping up with new technology, greater competition from globalisation and more knowledgeable customers who wants things faster, better and cheaper. Therefore to reach maximum consumers, business owners and franchisors keep on innovating and upgrading themselves. Franchisors also need to continuously update and change their operating and marketing systems to maintain their position.  However in case of franchise network, it becomes a tedious process because these changes have to be inculcated at the franchisee level also. In most cases franchisees may have different perceptions from their franchisor about what is important, and whether the changes are needed or not. This leads to the misunderstandings with franchisors initiating changes in the entire system and franchisees resisting these changes.

Why franchisees resist changes?

Franchisees generally resist changes and innovations because:

Increase in cost: The most natural reason for franchisees to resist any modifications in their outlets or products/services is because it inevitably leads to additional cost, which has to be encumbered by the franchisee himself.

Confusion among new franchisees: Franchisees who have recently joined the bandwagon may get perplexed when confronted with new modifications. Alterations in their new business can make them more frustrated and negative towards the franchisor and his changes.

Risk from changes: There is an obvious risk in minds of franchisees about investing their hard earned money in the changes if they do not deliver the desired results. In this case they would be investing money as well as hard–work without any guarantee.

Change in comfort level: Another reason for not being happy about the franchisor’s wish for modification can be the comfort-level of franchisee with his present business model.  In few cases the business a franchisee bought may become quite different after installing the changes by the franchisor. This would undoubtedly raise concerns, especially if a revised business model requires a franchisee to engage in new types of work or activities.

Aftermath of alterations

Usually franchisors, are responsible for driving changes in a franchise system as they want to match their pace with the competitors and find alterations initiated by them to be interesting, motivating and exciting.  On the other hand, franchisees are mostly at the receiving end. The changes suggested by the franchisors are forced on them whether they are ready for it or not.  Therefore changes for them can be unpleasant, scary, de-motivating and frustrating. Thus, it leads to strained relationship between them.

Understand the need of the hour

In most cases franchisors are excited about alterations recommended by them but franchisees are unsure. This may lead to bitterness and disputes between both the parties. The best way to deal with such trying situations by the franchisor is to make his franchisees adapt the changes easily. For this few guidelines need to be followed by the franchisors, which are:

Justify need for changes: Franchisors should justify the change and explain the benefits to franchisees. These benefits can be explained in terms of how the alterations can save money and  time, increase profit and customer service.

Need for pilot testing: It is essential for franchisors to test the alterations in the business model at certain locations before implementing these into the network. In certain cases franchisors in their impatience forget to test the results of the changes in pilot centres.

Keep communication clear and simple: While initiating modifications in the franchisee outlets franchisors should make things clear to the franchisees. It is always better to have a face-to-face interaction rather than sending long and complex documents.

Keep suppliers, important groups in loop:  Before implementing changes in the entire system, franchisors should discuss the changes with people who are essential in implementing the changes. This can include suppliers who would be supplying new products or marketing people who have to develop new methods etc.

Give time to franchisees: Franchisors most often do not wait for franchisees decision on the idea of modification. Initially all franchisees would be silent and thoughtful about the idea. Instead of taking their silence for agreement, franchisors should give franchisees time to come up with their own ideas for alteration which can further boost the brand.

An ear for franchisees: Franchisors need to listen and understand the franchisees inhibitions from changes. If they are emotionally attached to a particular mode of the business being changed then franchisors need to convince them by using logical arguments. Franchisees will feel important when their doubts are heard and they will respect the franchisor more.

Franchisor’s initiative matters: Few franchisors stop making modifications in their model after seeing the franchisees resistance. If franchisees resist an initiative this does not mean it is wrong or flawed. Franchisees need time to get used to the idea of change but they would feel blessed after seeing the success at later stages.

It can aptly be concluded that changes when required help a great deal in raising standards of any business. Franchise networks also need to have timely changes in accordance with the customers’ and clients’requirements. However these changes should not be forced by the franchisor on his franchisees. They should welcome and add on these modifications to accelerate their franchise success.

Related: Critical success factors for a franchisor

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