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Oct, 06 2014

Together they will sail the franchise sea

Across the entire franchise fraternity, many franchisors and franchisees are facing serious challenges pertaining to building a viable business network.

So how are they supposed to overcome the same and keep their heads above water? Read about to know why franchisees must revive their strategies to keep sales up and franchisors happy!

Franchise partnership begins right after the contract is signed between the franchisor and franchisee. The franchise business can survive for long if both of them work persistently towards accomplishing a common goal. In today's times, the fate of franchised businesses relies on both franchisors and franchisees. 

We all know that once the agreement is signed between both the parties, they agree to follow the terms and conditions of a contract. Since the franchisee has invested money in a brand, it's majorly his responsibility to take forward the brand's image to the next level.  As franchisor provides all standard operating procedures for running the business, training and marketing support is also given to franchisee so that he/she is able to make profits.  Since everything is in place, it's the franchisee’s call to take business to new heights. The success of a business venture depends on how franchisees perform regularly and how effectively they maintain quality standards of the brand.  Franchise businesses can only flourish if franchisees actively involve themselves in business and follow the standard guidelines for operating a store, get more customer feedback, research more about the ongoing trends in the market and keep on re-inventing strategies to attract more customer walk-ins. To keep franchise businesses afloat, it's important that franchisees must customise their services as per the market and customers' requirements. They must come up with fresh ideas and discuss their thoughts with franchisor and look for way outs to attract more profits their way.

Strengthen your relationship 

The key ingredients of a successful franchise business are trust, transparency, mutual respect, fairness and effective communication, so it's important that franchisors and franchisees should follow the same from day one. Undoubtedly, franchisor-franchisee relationship plays an important role in building a viable network. Once you have evaluated and negotiated on the terms and clauses of the franchise agreement and inked a deal with the franchisor, it's not the end of the road. Both the parties must try to understand the intricacies of a franchise business and work together to ensure transparency and understand each others' roles and responsibilities and work in tandem to make it a lucrative business venture. Commenting on the same, Seema Jhingan, Partner, Lex Counsel Law Offices, says: “Sustained relationship is based on trust and understanding and the franchisee can play an important role in multiplying the brand's portfolio by taking charge and onus of the franchised business. Many franchise business fail as the franchisee simply wants to use the established format of the franchisor business in his local jurisdiction. This lack of innovation, creative thought and alignment with local needs can impact the franchise business. Therefore franchisee needs to view the franchise business as a dynamic partnership between the franchisor and franchisee where the set format/franchise model may need tweaking and adaptation to the needs of the local jurisdiction. This proactive approach of partnership always creates channel for discussions and communication, transparency in relationship and oneness of objective and purpose and enable the franchisee to play a significant role in expanding the business in tandem with the local requirements.”  On the other side, enlightening on building franchisor-franchisee's relationship, Karnika Seth, Attorney at law and Partner, Seth Associates, says: “Apart from discussion on commercials, a deeper insight into market and consumer behavior can go a long way in increasing profitability and growing the business of the franchisor and franchisee.” On giving further advice, she adds: “Routine monthly meetings to discuss trends of market and consumer expectations will be useful. Any issues a consumer has with a product can also be pointed out. Survey forms/feedback forms from consumers will also be a useful point of discussion. A constant improvement plan should harness full potential of a brand in a market. Effective use of technology to market the brand should be deployed.” 

There is no doubt in saying that the obligation of motivating franchisees to grow their business lies with the franchisor, the franchisee too has to often be ready to recreate tactics to meet the set targets and profitably develop the business.  Commenting about the same, Seema Jhingan informs: “The franchisee needs to invest time in understanding the franchise business, its nuances, growth factors, target market, ethos and philosophy behind the brand, etc and then initiate and draw strategies aligned to the core essence of the product and the brand proposed to be sold. Any strategy that is not in tandem with the brand value, target audience needs and their paying capacity will fail. Secondly, structured implementation of the strategies is the key to profitably grow the business and generate returns. More than re-invention of strategies, the franchisee needs to focus on careful and planned execution of these prepared plans and strategies. In nutshell, careful planning and its implementation will take the franchisee to multiplied returns.” On the other side, Amit Singh, SBU-Head, EuroKids Internationla Pvt. Ltd, says: “In my opinion, the franchisee's role in development of the brand portfolio lies in adherence to quality standards and norms of the brand. Compliance to existing standard operating procedures and processes to ensure high quality standardised delivery of service would contribute in a big way to the brand's portfolio.”

Grow your business

To grow a franchise business successfully, it's imperative that franchisor-franchisee must follow some steps to enhance their relationship. Amit Singh feels: “Transparency right from day one is one of the building blocks for a successful franchisor-franchisee relationship. Maintaining clear lines of communication and timely communication helps in achieving this transparency. Also, fairness in dealings with each other is another key element to make this relationship successful and sustainable.” He also feels that prospective franchisees should look for a brand with the fundamental qualities of fairness and transparency and should have full trust in the brand.

For building a successful relationship with franchisees, Asheeta Chabbra gives a different perspective to it. She says: “Modules like retail maths, catchment area analysis and sales effectiveness are currently being delivered at all our locations. Our franchise system has room for flexibility and feasibility which allow a dealer to grow like never before.” She also adds: “For the first six months, Chhabra 555 pays six per cent of sales towards advertisement in the territory, and the dealer shall have earning of 23 per cent of sales. Chhabra 555 also fixes a target sale for every dealer from the second year onwards and has a progressive sales target linked incentive policy as well. In addition to this, the company lays a lot of stress on its branding and marketing strategy. The content and design of all marketing, advertising and promotional collateral is provided by its competent designing team as per requirement.”

Enlightening further on enhancing the relationship between the both, Seema Jhingan says, “In this regard, the parties should firstly negotiate the commercials and then enter into a detailed franchise agreement to understand and set expectations with regard to each parties' roles, obligations and liabilities. All terms and conditions related to scope and license, jurisdiction, payment terms, non-compete, operational guidelines, governing law, liquidated damages, etc should be carefully negotiated and agreed upon.” She also feels: “A well drafted agreement will not take the parties to success unless the obligations agreed there under are executed and implemented in full earnestness. In case certain circumstances require revisions to agreed terms, the parties should be open to re-discuss or re-negotiate the terms in ensure a successful relationship.”

Experts feel that if franchise businesses are managed well by franchisors and franchisees then it can certainly survive even in time of adversities. Therefore, it's important that both should understand their responsibilities and work in tandem to eliminate major risks that comes their way.

Some suggestions for new franchisees:

Before you jump into franchise business, make sure you delve into details by following the key steps: 

= Franchising is a surely a proven concept but it does not guarantee you instant success so it is wise to evaluate the business segment that you are planning to invest into .

= It's best to assess the associated risks or threats well in advance. 

= Talk to existing franchisees of known brand and gain insight about the support and training they regularly get from franchisor.

= Never go by the brand name, do your research; explore the market before making a final move.

= Seek advice from the legal experts who know about the nitty gritties of the franchise business. 




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