Good Governance

Harnessing franchisee input is vital for franchisors to succeed, say Franchize Consultants

It’s a tough time for franchise leaders right now. Destabilising events like Covid, war in the Ukraine, flooding, fires and supply chain issues are causing uncertainty. Add inflation, staff shortages, wage costs, competition, access to finance, legislation, climate change and developing technology, and the need for rapid adaptation has never been more urgent.

For franchise systems, good governance is especially important to meet these challenges. That is because franchising involves a complex commercial and relational situation compared to a company-owned chain.

Unlike company-unit managers, franchisees are both more invested in the business and more independent in their thinking. A franchise network must therefore bring franchisees on a carefully-considered journey when making changes. This means the board of a franchisor company needs to focus on a number of areas:

1. Assessing the operating environment and identifying trends, issues, opportunities and threats (including associated priorities and actions) that could impact the franchise network well out into the future.

2. Developing and updating strategic plans (and operating plans where necessary), to clarify direction, priorities and goals.

3. Addressing the five key franchise-specific areas identified by Franchize Consultants: monitoring franchising health and performance; improving franchisee returns; innovation; franchise relationships & satisfaction; and systemwide change.

Franchisor boards often lack the understanding vital for influencing necessary change among franchisees, which is where the Franchise Advisory Council (FAC) plays a vital role.

The Franchise Advisory Council

Many medium-to-large franchise companies have a FAC, a group comprising both franchisee and franchisor representatives with the core purpose of advancing the mutual interests of both parties. Common objectives include discussing opportunities for improvement, considering proposed changes, better understanding one another’s perspective, and so on.

In the current environment, franchisor boards would do well to recognise how an effective FAC can help a board and management understand the franchisee perspective, including key issues, opportunities and insights. This is not to suggest that FACs should be closely directed by the board – a FAC’s success is often dependent on franchisees recognising it as legitimately advancing the interests of franchisees.

The board should make sure that such a potentially valuable group can maximise potential advantages for both franchisees and franchisor alike. In some cases, that will mean very short-term franchisee issues might be prioritised; others might relate to long-term objectives; while there will also be times when focus on specific issues is required – for example, the need to implement a new Health & Safety system to provide directors with realtime visibility of systemwide compliance (including franchisees and staff).

More detail

Dr Callum Floyd, managing director of Franchize Consultants, says that, ‘In the current environment, goodgovernance will strongly harness the franchisee perspective. Ensuring your FAC has the right structure, operation and focus will help achieve this.

‘We work with many top franchisors on governance and engagement issues, including FAC set-up and management. Contact Franchize Consultants to find out more.’

Advertiser Info

Franchize Consultants

Contact Dr Callum Floyd

P 0-9-523 3858 M 021 669 519

callum@franchize.co.nz

www.franchize.co.nz