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 donít
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
When in Doubt Say No:
- Avoid taking a chance on a franchise candidate that doesnít
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
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 doesnít have the benefit of years of
- Include select franchisees in designing new marketing and
- Donít 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. Itís ok to make an exception for the
- 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 shouldnít take a great
deal of effort by a knowledgeable person to diagnose the
- 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 firstname.lastname@example.org
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