How Fledging Franchisors Can Survive the Recession

by Ed Teixeira

As businesses continue to struggle through the recession emerging and smaller franchisors that are attempting to grow their network can face obstacles. However, there are steps that can be taken which can lead to successful outcomes. Read more to see what these steps are.

The current recession has certainly taken its toll on countless people and businesses. This includes the franchise industry. Tight credit, the collapse of the housing market and high unemployment have all contributed to creating a difficult environment for new and smaller franchisors. Although the popularity of some franchise segments may help to overcome the negative effects of the recession, a number of franchisors continue to struggle.

Here are some strategies that franchisors can employ, which can help to overcome these challenges.

Focus on Specific Markets:

• Focus on those markets and geographic areas that will result in the greatest impact for the brand, instead of having franchisees in disparate markets.
•  Servicing and supporting franchisees will be more efficient and cost effective.
• The results of having more franchisees in a market will create more brand awareness.
• The benefits available from advertising will be much greater for franchisees and the franchisor.

Evaluate and Measure Franchisee Lead Generation:

• During these difficult times every financial decision by an emerging franchisor had better be correct.
•  Investing money on lead generation vehicles that don’t produce results can waste valuable capital.
• Measure the results of franchisee recruitment programs with a focus on the quality of leads and closing rates. Some sites generate a large number of leads but the quality is poor.
• Consider the use of social media such as Facebook and Twitter to gain publicity and generate interest in the franchise and brand.

When in Doubt Say No:

• Avoid taking a chance on a franchise candidate that doesn’t have the qualifications. When times are tough and selling franchises difficult the temptation is to overlook the deficiencies that a candidate may have.
• The cost of making a mistake can be painful for the smaller franchisor. Possible litigation and/or applying valuable human resources to support and attempt to salvage a weak franchisee can carry a high price.
• Stick to the strategy of building up franchise networks in specific geographic areas. Operating the franchise on the east coast and selling a franchise 2,000 miles away could be problematic.

Listen to the Franchisees:

• An important trait of effective franchise leadership is being aware of how franchisees feel about the program.
• Gain feedback on the effectiveness of training and marketing programs and be willing to change or adapt where necessary. A new or smaller franchisor doesn’t have the benefit of years of experience.
• Include select franchisees in designing new marketing and sales programs.

Innovate:

• Don’t be afraid to take a chance and innovate if things are not going in the right direction.
• If franchise sales are slow put on the thinking cap and create programs and promotions that can stimulate the franchisees, create enthusiasm and increase revenues.
• Consider reducing or financing the franchise fee for highly qualified candidates that may not have the total investment. Make sure your franchise attorney is involved in crafting the needed changes to the FDD. It’s ok to make an exception for the right reasons.

Do Something

• If the franchise program is not heading in the right direction then take a critical look at the operation. The worst thing is to do nothing at all.
• Contact a consultant, industry expert or another franchisor that can take a look at the program. It shouldn’t take a great deal of effort by a knowledgeable person to diagnose the problem.
• In some cases, a successful business that was the launching pad for a franchise program may not be easily duplicated therefore be open minded in your analysis.

The current recession has made it difficult for certain franchisors and their franchisees. It can be a challenge for a franchisor to sell new franchises and it can be difficult for franchisees to grow their business. If a franchisor is in this situation they need to employ strategies that can succeed. In some cases, this may require minor adjustments while in other cases more radical changes may be needed. The key point is to do something.

© 2011 FranchiseKnowHow, LLC

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