Franchisors often think that growth is the be all and end all in network development.
Of course, growth is good, but it’s not necessarily the only thing that makes for a successful franchise.
I’ve seen it a couple of times over the past few years where a franchisor has reduced the numbers of franchisees in the network and then gone on to do brilliant things.
Think of it as pruning a rose bush in the, errrrrm, spring(?) to encourage stronger growth in the summer.
But a franchisor shouldn’t just go cutting back willy nilly; there’s a bit of thinking to be done first. For example, the need for pruning is the result of either:
- Incorrect recruitment in the first place
- Incorrect support when a franchisee comes on board
- A change in circumstances of the franchisee
And a franchisor has to know which of these reasons has caused the need for the radical action of actively getting rid of franchisees.
Think about it for a second. The key reason for losing underperforming franchisees is to improve the overall strength of the network by recruiting stronger franchisees in their place. If recruitment is wrong in the first place, then the chances are that a franchisor will simply replace like with like. Although Franchise Fee is welcome, a strong network is based on franchisee success not recruitment.
If a franchisee is not performing because the support isn’t right, then it’s vital the franchisor gets the support right before deciding to do anything. If this doesn’t happen the franchisor leaves themselves open to litigation… but there’s an even better reason to make sure support is spot on; it’s a lot more cost effective to get existing franchisees working better than it is to recruit a new one who has to start from scratch.
Finally, of course, if a new franchisee is recruited and support isn’t right, well, once again the franchisor will end up in the same position.
But if support is right and recruitment is working as well, sometimes there is a need to reduce numbers to progress in a better way and there are some real benefits; things like:
- A happier network – successful franchisees tend to be a happier bunch and, as long as they stay successful, conversations with them, although sometimes demanding, are usually positive
- Easier recruitment – because there is a stronger bunch of successful franchisees, when prospective franchisees call them, the answers are always positive
- More income – successful franchisees sell more, turnover more, pay more MSF or buy more product from their franchisor
- More income – (I know – same as before, but different point, I promise) if a franchise is territory based, then an underperforming franchisee simply ‘blocks’ a territory. Not only do they not earn much, but they are stopping someone else from earning
So, you see, there is much to be said for reducing the size of a network to make it stronger… with the proviso that underperforming franchisees are nearly always underperforming because of some process or other (whether it’s recruitment or support) of the franchisor.