As a franchisor you have invested much time‚ effort and dedication into your franchise system and its profitability‚ but what is the key to a truly successful franchise system?
My take on the characteristics of a "successful franchise system" – Controlled and Sustainable Growth characterized by franchisee profitability‚ unit growth‚ sustainable royalty streams and properly managed litigation exposure.
In reviewing a recent article in the Franchise Update Magazine‚ the author‚ Steve Olson‚ reviews a study by Franchise Business Review (FBR) – a company specializing in independent franchisee satisfaction reports and ratings – and points out one of the many important factors to a successful franchise system: "Franchisee Satisfaction". While FBR may be a "franchisee advocate" with a point to prove‚ nevertheless‚ franchisors cannot ignore the fact that franchisee satisfaction / franchisee profitability is critical for a successful franchise system.
According to the FBR study "franchisee satisfaction" boosted sales an average of 600%. The study conducted by the FBR was done with franchise systems with a minimum of 50 franchise units. Studies show that happy franchisees create not only a better environment for existing franchisees but also creates a better opportunity for franchise growth.
If the start-up and established franchisor alike‚ recognition must be given to franchisee profitability and satisfaction. Franchise agreements‚ operations manuals and the numerous other legal and administrative documents that govern and define a franchise relationship must be geared toward a "firm" but‚ nevertheless‚ "balanced" relationship focused on overall franchise system growth and success.
Licensing vs. Franchising