The most successful brands recognize that new franchisees require dedicated support to ensure a successful launch and help them thrive during the first year of business. No matter how strong an onboarding program is, plenty of factors can lead to a rocky first year: undercapitalization, general inexperience, and a lack of well-rounded skills.
Unfortunately, a franchisee who is struggling may experience a long lead-up to a critical performance indicator: “days to first dollar,” or the time between the signing of the franchise agreement and the moment the cash register rings. If the franchisee waits for data on this “lagging” indicator, it’s often too late to turn things around. That’s why we recommend that franchisors provide robust, ongoing support for new franchisees, before and after they’ve opened the doors and are officially in business.
Keep New Franchisees Focused on Business Development
People are often drawn to a particular franchise because they enjoy some aspect of the core business. When they become a franchisee, however, they need to shift from being the technician to being the manager and leader. Among new franchisees, a common pitfall is an inability to prioritize the most essential part of any business (at least according to management guru Peter Drucker) the making and keeping of customers. For some franchisees, this may be the most daunting task of all.
Opening a business is complex. The franchisor must obtain furniture and fixtures, hire employees, open bank accounts and complete all sorts of other work. It can be easy for franchisees to feel overwhelmed and, in response, focus on the tasks they are the most comfortable with, even if they aren’t the most pivotal from a business perspective.
Yet business development is a must, especially because it may take a franchisee several months to break even. In fact, undercapitalization is the top cause of business failure, according to the Small Business Administration. That’s why it is imperative to provide the necessary support and to pay close attention to that key performance metric: days to first dollar. One way to do so, without placing an undue burden on franchisors, is to utilize onboarding software that tracks business development activities.
Surprisingly, few franchisors invest significant time into this aspect of operations — often just one or two days per week. During that critical first year, supporting franchisees means putting programs in place to monitor and measure what they are doing to make and keep customers.
Help Franchisees Build Habits for Long-Term Effectiveness
From an onboarding standpoint, once a store or business opens, the work is just getting started. Some franchise owners address this with a “quick start” program. A dedicated expert works with franchisees during the first year, after which the franchisee transitions to the oversight of a franchise business consultant (FBC).
In practice, we estimate that only a small percentage of franchisors go this extra mile from a support perspective. Often, the role of the store opener ends once the physical location is established: “Congratulations, you’re open for business! Meet your FBC.”
The problem is that FBCs are often unable to pay close attention to new locations, given their many other responsibilities. A startup specialist, on the other hand, is solely focused on shepherding the franchisee through the first year. That’s important because most franchisees aren’t truly comfortable until they have experienced a complete, four-season cycle.
From the franchisor’s perspective, this type of support can seem like a questionable expense. After all, one of the biggest challenges in franchising is that a brand-new franchisee contributes the least amount of royalties, because it takes time to ramp up. The point at which they’re putting the most demand on the system is also when they need the most support.
When franchisors take the time to get people ramped up properly, however, these franchisees will ultimately put less strain on the system. That frees up resources to address other franchisees that may be beyond their first year, but still struggling. Perhaps they are struggling because they didn’t get started correctly to begin with.
Extend Franchise Culture and Values Through Desired Behaviors
One of the best ways to instill the right habits is to establish specific, behavior-oriented standards that reflect the franchise culture and core values. Company executives may be clear on these values and may communicate them to franchisees, but without a behavioral component, franchisees and employees might fail to execute them in the desired ways.
Consider the value of teamwork. From a training perspective, what does “teamwork” look like? What does it look like for employees in specific roles? If a camera were recording an employee, what would the camera document as behavioral evidence that the employee is manifesting teamwork as intended?
The need for specific behaviors is why many fast-food establishments, for instance, measure “friendliness” by how quickly an employee acknowledges a guest entering the restaurant. Whatever those behaviors are, they should be part of the standards. This type of documentation, subject to measurement, ensures that as new franchisees onboard, they uphold the markers of “culture” that serve to differentiate the business.
These types of structures, together with the right technology tools and ongoing support, ensure that new franchisees get off to a great start — for their first year and beyond.
Did you know that engaged franchisees are 3.7 times more profitable than non-engaged franchisees? Download our eBook “High Impact Franchisee Engagement” to learn the art of franchisee engagement and how to overcome challenges to improve engagement, and ultimately increase unit level profitability.