Most likely the answer to this question is an unequivocal “No, you wouldn’t.” So the question that begs to be asked is “Why would anyone pay an ongoing fee if they don’t perceive they are getting value?” And, that answer also is: “They wouldn’t.”
The issue of providing ongoing value is often overlooked by many business owners considering franchising. They tend to focus on all the knowledge and experience they convey to franchisees initially, and forget that they need to offer value on an regular basis if they expect franchisees to pay ongoing fees.
Initially franchisees don’t know the business. They realize that in order to succeed they need the franchisor. They justify the initial investment because they understand the franchisor made costly mistakes as he or she was building the business, errors they will get to avoid and thus save time and money.
As franchisees mature, however, they start becoming more independent and self-confident. Not unlike a teenager reacts to his or her parents, many franchisees stop giving credit to franchisors and what they have to offer them. That’s when the questioning starts: “Why pay all these monthly fees? What am I getting in return?”
Franchise systems that don’t address these inevitable concerns and don’t prepare for them invariably become a revolving door type of system where franchisees have to be replaced because they leave. This problem is more serious when the profitability of the franchise is not high and/or the brand is not well known. In other words, if franchisees are making a lot of money and royalties are reasonable, they are not as likely to question what they get for their money too often.
Revolving door franchise systems are expensive to manage and operate. Franchisees departing the system always leave a void even if it is just temporary. Their leaving makes other franchisees question their own reasons to stay. In many cases, depending on their popularity, departing franchisees affect the morale of the entire system. Replacing franchisees costs money and nowadays is not an easy feat. Furthermore, franchisees that leave your system have an impact on how prospects evaluate your opportunity. This raises unnecessary issues and the greater the number of franchisees that leave your system, the more common and frequent these questions become.
So, how can you provide the ongoing value your franchisees demand? Exactly how you do this depends on your industry and your franchise system; however, in general terms you need to ask yourself the following questions often:
- Are you an innovator making sure that your brand and franchisees always stay ahead of the competition?
- Are you investing enough money to promote, protect, and build your brand?
- Are you making sure your franchisees are profitable?
- Are you constantly finding ways to create savings for your franchisees, such as negotiating discounts for supplies and other operating expenses?
- Are you always working on creating new revenue generators for your franchisees without taking them away from their core business?
- Are you providing state-of-the-art operating systems?
- Are you continuously training your franchisees in all the aspects of operating the business?
- Are you paying attention to franchisee relations?
- Are you communicating often and effectively with your franchisees?
- Are you always improving what makes your business unique and desirable?
Having these questions always present will ensure you are providing ongoing value. It won’t prevent franchisees from leaving your system, but paying attention to these matters will make your franchise opportunity more stable and your franchisees happier members of the system.
