Franchisee success starts with the right expectations from day one.
KEY TAKEAWAYS
Setting clear expectations with franchisees is critical for supporting their success.
Being upfront about fees, royalties and other obligations can help franchisees set realistic expectations about their business from day one.
By choosing franchisees whose goals align with your franchise offering, you can mitigate the risk of disappointing franchisees in the future.
As a franchisor, setting the right expectations is important for supporting your franchisees' long-term success.
From improving unit economics to optimizing performance, building trust and creating an internal culture focused on results-driven goals and accountability, the advantages of communicating clear expectations to franchisees from day one are undeniable. Still, setting the right expectations is often easier said than done, especially when you’re just getting started in the industry.
In this article, we’ll explore strategies for managing franchisee expectations and helping them set – and ideally achieve – realistic goals while growing your brand.
1. Choose franchisees that are a good fit
As a new or emerging franchisor, choosing the right franchisees is critical for long-term growth and success. Throughout the franchise sales process, it can be helpful to look for warning signs that a franchisee might not be a good fit for your franchise, including misaligned values, clashing personalities, unrealistic expectations, undercapitalization and more.
To get a better idea about whether a franchisee candidate is likely to be a good fit for your brand, consider doing the following:
Assess your opportunity profile. Your franchise opportunity profile differentiates your franchise offering by identifying the economic opportunities it provides franchisees.
Evaluate candidates’ goals and capital. Before selling a franchise, validate each candidate and ensure that their goals, values and capital are aligned with your offering.
Set realistic expectations. Your initial franchise fee, royalties and territory structure set the tone for your franchise offering, so remember to clarify your expectations for franchisee performance and other obligations before closing a sale.
By selecting franchisees whose goals, values and funding align with your franchise offering, you can ensure their expectations will be realistic and achievable from day one.
2. Manage franchisee expectations
For most franchisors, managing the expectations of franchisees is a process that must be continuously maintained over time. Because of that, it can be helpful to establish ongoing, positive professional relationships with franchisees by listening to their needs and communicating your expectations and goals.
To make sure you’re properly communicating your expectations to franchisees, consider the following:
Put expectations in writing. Your Franchise Disclosure Document (FDD) and franchise agreement contain valuable information about franchisees’ obligations, so make sure to describe your expectations appropriately in both documents with the help of a seasoned franchise attorney.
Communicate performance goals. Whether you’re looking for increased year-over-year sales, profitability, growth or something else, communicate performance-related expectations to franchisees so they can set realistic goals from day one.
Address royalties, fees and other obligations. During the franchise sales process, be upfront about franchisees’ financial obligations in terms of royalties, fees and other costs.
By establishing clear lines of communication and being upfront about financial, performance and other business-related expectations, you can create a culture of accountability for your organization without leaving anyone in the dark.
3. Prioritize franchisee success
To grow their brand, franchisors need to recognize their responsibilities to franchisees. Although you shouldn’t make promises or guarantees about meeting franchisees’ expectations, taking steps to actively support their success and inform them about their responsibilities as business owners is critical.
To establish a strong base of initial franchisees, new and emerging franchisors should consider the following:
Educate prospective buyers. During the franchise sales process, inform candidates about their future obligations as franchisees, then quiz them to make sure they understand what they’re investing in and what’s expected of them.
Put franchisees first. Listen to the needs and goals of your franchisees, and do your best to meet them where they are to support their growth and development.
Offer perks and incentives. Franchisees can benefit from business mentorship and results-driven incentives like free conference tickets, discounted training, temporarily reduced royalties or other perks in exchange for extra work or optimized performance.
Be fair and transparent. Treat franchisees fairly by charging the same fees consistently from day one. Remember to be transparent about business decisions without making any promises or guarantees about meeting franchisees’ expectations.
By making sure franchisees understand what they’re investing in – and that they’re prepared for the reality of operating a franchised business – you can set your franchisees up for success while making sure their expectations are grounded in reality.
4. Plan for disputes and legal challenges
No matter how well franchisees might seem to fit into your organization, misaligned expectations and disputes are always possible. While conflicts between you and your franchisees will hopefully be rare throughout your career as a franchisor – especially if you’ve set the right expectations – it’s still important to be proactive about legal issues early on.
To mitigate the potential for future lawsuits, building a rock-solid legal foundation for your franchise is critical. It’s also important to have a plan for dealing with potential business disagreements in the future, including but not limited to the following situations:
Disputes with franchisees. Tackling thorny issues with the help of a third party like a franchise advisory board composed of franchisees at different levels can sometimes be helpful for advocacy and internal dispute resolution.
Franchisee exits. Whether you arrange for another franchisee to take over a territory to avoid closures or choose a different approach, having a plan to facilitate smooth exits for unhappy franchisees is important.
Lawsuits. By setting the right expectations early on, you can often avoid legal issues with franchisees. Still, the franchise industry is heavily regulated and it’s important to work with a strong legal team to mitigate risk and adhere to federal and state laws.
By working with an experienced legal team that understands the franchise industry, new and emerging franchisors can mitigate the potential for future lawsuits while setting the right expectations with franchisees from day one – and beyond.
Watch the webinar with Charles Internicola and Kelley Rosequist below!
Need advice for setting expectations with franchisees while legally protecting your business? Contact us today and speak with one of our Franchise Growth Advisors!
