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Nov, 07 2014

Burgeoning Challenges faced by the franchisors

Are you facing issues of stability in your franchise system? Are your franchise service standards below par? Is man power retention at the franchise end becoming a mammoth task for your company?

Read on to know more about the solutions.

These questions seldom cross an entrepreneur's/fairly organised mind about his/her business and the situation is not specific to only one brand. There are many internal as well as external challenges that the companies are facing on a regular basis which has hampered their growth objectives. The aim is to address the most (five) common concerns of the companies.

1. Deviation from the company standards

The gap in the service level between the franchisor operated i.e. company owned and franchisee owned should ideally be “zero” or at-least minimum.

However, it has been observed that not only the franchisees but also the franchisors don't adhere to this norm. The situation comes to forefront when the franchisors shows leniency in handling situations where the franchisee is unable to adhere to the established level of conformity for training, resource allocation or any other such quality standards not being appropriately met. These are usually traced back to lack of knowhow from the franchisees end, but majorly also due to lack of appropriate fund and manpower allocated. The company must thus aim to help the franchisee comply with the standards and treat such complains/queries with urgency. We feel that compliance in setting up the processes as well as implementation of these processes is a must for a healthy franchise company. More so, there are advantages of having adhering to the comprehensive, detailed and well-documented set of operating procedures for a franchise business.

It is also recommended for companies that they should adapt time bound escalation process where in when a franchisee is confronted with problems/issues or is found deviating from the set standards should be addressed immediately, in majority of the cases when the company establishes its hold in the market the services start to decline here the emphasis shifts from quality to quantity. It would be recommended for franchise businesses to adapt to the newly recognised, Lean Six Sigma process which is applicable in every business even more in franchise business model. It is not a tactic or a cost reduction program, but a way of thinking and acting for an entire organisation. The Six Sigma approach has already been adopted in the franchising industry in developed markets worldwide across all sectors in order to enhance productivity and quality performance and to make the process immune to quality variations.

2. Companies need to address franchising by way of independent business vertical

Success of a franchise business does not rest with the size of the brand but with the integrity and dedication of the franchisor.

Most successful franchisors consider the franchise business vertical as independent. However, when it comes to big corporate players, franchise business is one of the revenue units and not considered as an independent business vertical. It has been not an uncommon sight to find lack of structured teams even in the biggest of the organisation. Due to this lack of separate identity for franchise operated business verticals, many big brands are although successful as brands, but not profitable. The solution is to consider the franchise operated business vertical as an independent business unit regardless of the brand value. This will help the franchisor to look after the larger business activities and develop strategic alliances for the business, whilst the franchisee can look into the day to day store operations. Time is right when the franchisors start realising franchising as an independent growth strategy.

3. Ardent need of the hour is the long term vision of the franchise companies

In the franchise business model, we feel that there are only three channel partners; the franchisor, franchisee and the customer (primarily the end user). Therefore, a long term vision for success should be built on a healthy franchisor franchisee relationship. Most franchisor- franchisee relationships fall out because of the lack of clear communication between the two parties. Thus, we feel that the franchisor should have a long term vision for making the franchise business successful rather than expecting it from the franchisee. We feel, it would be best addressed when companies start putting the franchisees objectives before their objectives.

4. Supply chain issues and challenges faced by the franchisors

Managing the supply of products for one or two franchisees might be easy for the franchisor but the supervision gets complicated with the existence of numerous franchisees and even more with the existence of a large product profile.

Traditionally, different organisations along the supply chain operate independently for marketing, distribution, planning, manufacturing, and purchasing. These organisations have their own objectives which are often conflicting. A process called supply chain management (SCM) simplifies the entire working. Confidence between a franchisee and the franchisor is a must to achieve perfect SCM. Both the franchisor and the franchisee have a role to play in the process of SCM. The franchisee also plays an important role by keeping record of stocks under his surveillance. The companies need to create a technology platform through which efficient inventory management can be insured. This will include planning orders, stocking and delivering in order to maintain low lead time and ensure timely availability of standard spare parts; thus guaranteeing an efficient supply chain.

5. Franchisee staff recruitment and retention challenges

Franchisors are constantly faced with questions from respective franchisee regarding the recruitment of skilled workforce required for specialty services in particular. Even though franchisors give the brand name and required business operations expertise, unless and until the rightly skilled manpower is appointed in the franchisee business, the chances of franchisee to be successful are little.

Thus, staff retaining strategies must be employed by the franchisor at the grassroots level by way of “Franchisee Employment Engagement Programs” in order to create and restore employee's loyalties with the company which will automatically ensure better services at the franchisee’s end.

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