Owning a franchise is a great business opportunity. It provides the flexibility of running your own business while also providing the support of a larger company. As a franchise owner, you have a lot on your plate – managing employees, day-to-day operations and trying to grow your business. We’ve compiled a list of things you should be doing to make your franchise business successful.
Work with your franchisor
One of the biggest benefits of owning a franchise is the support you get from your franchisor. It would be silly not to take advantage of this by reaching out to them for advice. They want you to succeed as the franchisee and franchisor relationship is mutually beneficial. They can usually provide you with marketing support, system recommendations and possibly financial support. Your franchisor can also connect you with other franchisees for help. There may be other local and experienced franchisees that can provide guidance and support. On the flip side, your franchisor also has specific guidelines for how you run your business. Adhering to these guidelines will help you maintain a great relationship with your franchisor.
These guidelines typically include:
Inventory guidelines
Operating hours and products offered
Remodel and facility requirements (It’s common for franchisors to have remodel requirements)
Marketing outlines and templates
Contractual obligations not to operate competing franchise
It’s important to clarify what you can and cannot do. Franchisors have specific guidelines about many aspects of your business. Use this to your advantage as it will allow you to spend time and money on growing, as most daily operations are governed by the franchisor.
Check-in with your employees
Happy employees provide better service. To ensure your employees are engaged and satisfied, you should check in with them. At a minimum you should be doing some sort of employee satisfaction survey to get feedback. This will also give you a benchmark to compare your employee’s satisfaction over time. As your business grows, continue to invest in training and career opportunities for team members.
Pay attention to data
As a business owner, it’s important to do a pulse check on your business. You likely have a lot of data from your website, point of sale, ordering system and employees. But what do you do with all of it – and how do you interpret it? We recommend paying attention to the metrics below. It will help inform your decision making and provide insight for your business.
Sales
A successful business will keep an eye on how much they’re selling. This metric alone is not very useful if you don’t put it into context. At the most basic level, you should know your gross monthly sales. To make the most of that number you’ll also want to look into sales trends, where your sales are coming from and how much profit you’re making.
Growth rate
It’s important to compare your sales data by month and year. Knowing your growth rate will help you determine if your business is growing and how much. Your growth rate comparison will also let you know if your business is shrinking. It will be harder to maintain a high growth rate over time, so with any metric, context matters. Knowing your growth rate will also help you make decisions about when to expand, cut back or adjust your strategy.
Profit
Profit is the number one metric to pay attention to. Profit effects all your other metrics. To monitor your profit, you’ll also need to look at expenses, sales and losses. If you calculate profit and then find that your spending 105% of gross sales, you’ll need to find ways to reduce expenses. Looking at your profit and losses will give you the most insight into your business and where you can improve.
Customer Satisfaction
Providing great customer service should be one of your biggest priorities. Positive word of mouth is one of the best marketing tools you have. Your current, satisfied customers will be your biggest advocate. You don’t need fancy software to do this either. Pay attention to your online reviews and monitor your customer interactions. We recommend investing in Net-Promoter Score (NPS) or Customer-Effort Score (CES). These can collect responses via email and provide you with quick results and dashboards.
Aim to grow
Once you’ve successfully run a single franchise you should look to expand. Running multiple franchises or locations can be extremely lucrative. It’s also efficient as you can scale your business. You have a few options:
You can diversify your operation and open another franchise.
Open another unit of the same franchise.
Both options have advantages and disadvantages but require a few considerations. Running multiple units or franchises involves hiring talent you can trust and delegating tasks as you will need to focus on more general management. Expansion can also make your business more secure as you won’t have all your eggs in one basket. If you’re looking to open additional franchise concepts, check your contract to ensure you aren’t breaching the agreement. Many franchisors have strict rules about their franchisees opening competing concepts.
Meet with a banker
Are you looking to grow aggressively? Will you need new equipment? Facility upgrades or maybe purchase a new location? Or just looking for a partner that understands your business? Like any business owner, a franchise owner should have a great relationship with their bank. Your banker can help guide your decision making by ensuring it is financially sound.
Franchises operate differently than other small businesses. As such, you need a bank that understands franchises and their specific financial needs. You will want to work with a bank that can provide hands-on service and products that meet your needs as a franchisee. Look for banks that can offer you access to capital such as development lines of credits, acquisition lines of credit, SBA loans and treasury management services.