Sustainability of the Franchise Relationship — THE 4 Keys

There are many keys to the success of a franchise and one of the most important ones is the sustainability of the relationship. A sustainable franchise relationship is one where both parties perceive they are receiving value.

Strong brands generate this sense of value from the brand recognition they offer which generates business for franchisees and thus more profits for both.  Yet brand recognition does not assure sustainability, the following four factors must still be present. For emerging franchisors, just starting to build brand awareness, these four factors are even more vital.

1. Is the concept viable? That is: do enough consumers desire and are able to afford the product or service offered? Will demand grow or at the very least stay constant? A product or service that relies on the popularity of the moment without the possibility of longevity will not yield sustainability; and, it is thus not a good candidate for franchising.
2. Are the franchisee and the franchisor profitable?If either franchisees or franchisors do not make money, one or both will eventually go out of business. The profits must also be commensurable to the effort and investment level required. If they are not, one or both parties will eventually find better investment opportunities.
3. Does the franchisor provide ongoing value to its franchisees?If franchisees do not perceive that they are getting value in return for the royalty payments they make every month, eventually they will leave the relationship. The agreement alone will not prevent the departure, and emerging franchisors do not have the funds to go after every franchisee who leaves the system. Thus, it is a smart choice to ensure franchisors are providing enough value for the royalties they expect to collect and to measure franchisee satisfaction often.
4. Are franchisees working the business and following the franchisor’s proven system?Success comes to those franchisees who are willing to do the work and who follow the franchisor’s success recipe. While the franchisor has the responsibility to provide value and support to franchisees, the latter must put the effort and implement the system if they expect to achieve the results of the franchisor’s proven model.

All of the above factors are of equal importance. If one is not present, the relationship will not last. Sustainability of the franchise relationship is achieved only when all of these elements are present.