franchising aspects Sep, 29 2009

Unviable stores turn profitable

Are you a franchisor facing the problem of unviable franchise stores running losses for you. Are you just a spectator waiting for things to get back on track but still can not see any results. Here is what you can do

By Neha Malhotra
Sub Editor, Franchise India Holdings Limited, Web Division
Unviable stores turn profitable

A franchisee takes up a franchise to generate profits. When taking up a franchise he might be very sure of his decision but there could be a time when he feels he can’t live up to it and that this is not his cup of tea. But as he is bound by an agreement, he may not see the door to an exit. In such a situation, it’s time for the franchisor to take the plunge and control the situation.

Here’s how…

Step 1 Being a franchisor you can try giving the support from your end to the franchisee so that he may be able to get the situation under control. In case he does not succeed, you can get in talks with him and try to get the franchise back from him. All the legal hassles can sure be handled amicably in such cases.

Step 2 Now that you have the command in your hands, it is for you to decide how you wish to proceed further. The most crucial decision here would revolve around which format would you want to run the store on. From here we can devise three paths, which are:

  • Convert to a co-owned store Now that you have the operations in your hands, you keep them with you and turn it into a co-owned store.
  • Further give it for franchising If you do not wish to run the store on your own, you can further give it up as a franchise to another party. This can be a new franchisee or an existing franchisee; however, it is more advisable to give it to an existing franchisee as he is already familiar with your business’ systems, operations, policies and procedures. This will be advantageous as he can put to use his experience and expertise to deal with the hurdles that come in the way.
  • Apply both the paths And if you feel, that any of these will alone not solve your problem, then you can put both of them to use. Wondering how… At first as you take the operations in your hands, you can keep them with yourself for a while. During this time, you can first identify what all is hindering the running of the store. Then you can obliterate the negatives and induce positives in the working of the store. Once you feel all the operations are streamlined and the business is back on the track, you can give up the franchise to a franchisee. But here again it would be advisable to pick an existing franchisee, the reasons being the same as mention in the second path given above.

Step 3 Once you’ve made the decision as of which path you wish to choose, its time to give actions to your thoughts. So it’s time to bid a farewell to unviable stores and shift your focus on profit generation!

Related: Engineering the management team

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