Franchisors Need an Effective Board of Directors

Part 2: How to Profile and Choose the BOD

by Ed Teixeira

A competent board of directors or advisory board can be an invaluable resource for a franchisor. In the case of small or medium sized franchisors having advisors from outside the family offers the opportunity to receive advice that is objective and based upon experience.

In part 1 in the Franchise Expert Blog I wrote about the benefits that a franchisor gains from having a competent and effective board of directors or advisory board. In this article I’ll address how to profile and choose the members. Since some business owners would prefer to have an advisory board rather than a formal board of directors (which has more power than an advisory board), the process we describe below can apply to either group. We’ll refer to these collectively as a “Board”. Since a board of directors is a legal body, franchisors should understand the differences between the two and consult their attorney before choosing the type of board to use. You’ll also need to have documents drawn up in order to protect confidential information and the company.

Profile the people for a Board.

• Target particular areas in your franchise where you can use help or input, such as franchise operations, finance, marketing or other areas.
• Identify any potential problem areas and priorities that you may need support with.
• Consider a broad range of people, including attorneys, CPAs, fellow executives, and educators. Include people with an expertise in franchising and those from the business segment you operate in. In other words, people with experience and skills that are different from yours.
• Don’t make the mistake of installing friends and family members on a Board especially if they lack the credentials. They may be unwilling or uncomfortable providing honest feedback and advice.
• Decide how often the Board will meet. Most Boards meet on a quarterly basis. The frequency of meetings could be a factor when candidates decide whether or not to join a Board.
• The membership term for a board of directors will typically run from one to three years with staggered terms.
• Expect to pay your Board members a modest fee per meeting, depending upon the size of the franchisor. Advisory board members without legal responsibilities should receive less. Some members may be willing to serve without receiving a fee since there is a degree of prestige available when serving on a Board.

Be objective and honest when identifying the type of people you would like to have as a resource. Consider them as business advisors who can help develop strategies, analyze and critique performance and be a valuable resource and sounding board for the franchise operation.

Finding the people for a Board

• Speak to business associates, the Chamber of Commerce and trade associations in your market area to find out if they have anyone they would suggest or recommend.
• Academic institutions can be a source of talent especially if a local college or university has a business school.
• The local media can be a source of candidates since they may be familiar with business leaders from your market.
• Attorneys and accountants can be good board members and also a source of other candidates for a Board.
• There are firms that conduct searches for Board members; however, they charge a fee. For small franchisors the fee can be costly.

Choosing the people for a board of directors or advisory board is the most important part of the process. Add people who complement the business skills of franchisor leadership by bringing in people with a combination of new abilities and experience who understand the business you're in. Influential people with visibility in your industry or market area can provide competent advice and add credibility to the franchise company.

© 2012 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at franchiseknowhow@gmail.com