Work Together !

To work together effectively and harmoniously, both the franchisor and the franchisees need to fully understand the nature of their relationship. To bring this to higher level of course is the primary responsibility of the franchisor. On the other hand the franchisee needs to keep an open mind about franchise business system even if there are aspects of it that they find difficult to agree with in the beginning. The franchisor has to be continually open to ideas that can further improve the business system of the franchise. These ideas will be contributed by the franchisees themselves. This is because the franchisees are in the front line of operations and will eventually have many operating insights to share with the franchisor.

Using what they have at their disposal is always the most efficient. One is sure; working with the franchisees regarding new marketing ideas can benefit the franchisor. Using their knowledge of the market and relationship with the customer can make a nature symbiotic of any campaign and it is essential to initiate a win-win scenario for both the franchisor and the franchisee. They can recognize the behavior of the potential customers and markets and help the franchisor to ensure the brand and the unique look of the franchise. By maintaining an existing customer loyalty and direct approach to the customer, like write testimonials (comments and feedback), they can get the most of their promotional materials. Repetition of a customer experience is fundamental for creating a successful franchise.

Besides working with the franchisees, the networking is still one of the most important marketing solutions available in their arsenal. First the franchisors need to establish their goals, define their objectives and key massages, and then make decisions through the customer’s eyes. They work on their customer growth with adding an online shopping and paying for their services and actually majority of the franchisors finds their franchisee on the web.

Local press and in store advertising can work for the franchise organization generation opportunities. The internet, social media and the web portals are still the most powerful and obvious tools which can be used in a myriad of ways to promote the franchise. Building a strong franchise brand takes persistence and patience and in order to achieve great success franchisors need to be consistently compelling.

 

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Cost reduction and efficiency strategies

In a growing franchise system, there will always be the need for cost reduction.Many of the franchise owners are struggling  with this so they are trying different strategies and approaches.

Here are some of them:

-Raw materials and stock

A variety of different initiatives have been undertaken to reduce the cost of raw materials and stock. Franchise companies, have negotiated new supply agreements that not only reduce costs, but also improve on-time deliveries, and in-store stock levels. They increase power over suppliers, and reduce costs, by attempting to increase co-ordination and volume of approved supplier purchases by franchisees.

Some companies have worked co-cooperatively or created alliances to address supply costs. For example, they recently sought to reduce its cost of goods by co-operating on product sourcing and business information with chains -which have more than 200 stores. This aimed to reduce costs through co-operating with a company that offers no competitive threat in the domestic market. Interestingly, not all attempts to reduce the cost of raw materials find favors with the public.

-Franchise set-up costs

Some companies have sought to directly address franchisee performance by focusing on set-up costs and made dramatic improvements to store design with a new store concept involving a prefabricated store that takes less days to build than their traditional outlets a new more compact and contemporary format – that not only looks more up to date, but also costs 30 percent less to build, and requires half the retail footprint. These changes should have a dramatic impact on profitability and return on investment.

– Efficiency and productivity

Smart companies are also looking for efficiency and productivity improvements. Not surprisingly, working very closely with suppliers to identify potential production and sourcing efficiencies, is working.  Expanding testing and use of labor saving equipment, and streamlining processes, including having many of their franchise restaurants change from standard beverage machines to automated ones.

Reduce its supply costs by establishing a centralized procurement division. The procurement function was designed to allow the company to consolidate purchasing of equipment, office supplies and other products, and centralize distribution and shipping of country bound items.

In one instance, the source of improvement went to the heart of the concept. Some companies tried to increase productivity and turnover by testing the removal of comfortable seating from their outlets.

-Staffing costs

Some companies are attempting to reduce overall costs by addressing staff related costs. In some instances, job cuts have been initiated. In other more long-term focused initiatives, companies have sought to address staff costs by introducing initiatives designed to reduce employee turnover.

When it comes to seeking cost, efficiency, productivity or profitability improvements, proactive franchise companies look to all aspects of the business. The big chain examples demonstrate that when it comes to seeking performance improvements, the most minor features, tasks and processes offer the potential for efficiencies and cost savings.

-Differentiation strategies

Cost reduction-oriented initiatives aren’t the only bright ideas employed by companies seeking a competitive edge over their rivals. Smart companies are also seeking to differentiate themselves from competitors in order to create a point of difference, build closer (and more meaningful) relationships with existing and potential customers, take market share, and build barriers to entry. Numerous examples are evident in the highly competitive fast food sector.

-Quality Improvements

Recent initiatives included promoting greater quality in a further attempt to differentiate companies from each other.  The quest for quality is obviously a serious one for.

-Brand value changes

One third of franchise companies have also attempted to differentiate their brand values. Testing and learning from experiences in other countries proved a fresh, sophisticated environment could generate increases in sales and profits. Companies introduce a range of healthy products and differentiate themselves from competitors by returning to social issues.

-Product/service/delivery changes

Several companies have also sought to improve operations by altering their price, product line and/or introducing new initiatives. Companies attempted to differentiate on price with a 1 euro value menu that was intended to stimulate traffic and better compete with their competitors. Also, they have been pushing franchisees to open 24 hours.

A number of technology inspired changes have also been implemented – presumably in the hope people will visit more often and/or stay longer (and therefore purchase more). Free Wi-Fi, e-loyalty card, paper loyalty cards, ordering products by mobile phone and Internet are just a small part of technology inspired changes.

-Store format changes

Many of the franchise chains have been reinventing their store format and concept in efforts to improve attractiveness and all-round competitiveness.

 

 

Factors driving franchise growth

Franchise performance drivers are:

 

1. Consumer Value Proposition

2. Consumer Brand

3. Franchise Model

4. Franchise System

5. Franchisees’ Performance

6. Franchisors’ Performance

7. Franchise Brand

 

Consumer Value Proposition

The key to success in any franchise system is, and always will be, the success of the franchisees. With that in mind, one of the most important things for a new or established franchisor to do is constantly strive to improve the value of the proposition at a consumer level.

The more the franchisor does to improve the core value proposition, the better each franchisee’s financial returns are likely to be.

The franchisor should strive to impress on franchisees the importance of high consumer satisfaction levels. Feel good statements will not be sufficient.

Validation through objective review directed through measurable outcomes is needed to lift the awareness of franchisees to the importance of a Consumer Value Proposition. Many franchise systems are now closely analysing their key performance indicators and directing these to measure consumer value with significant success.

Consumer Brand

The Consumer Brand is the basis of the relationship between the brand and its consumers.

Branding as a concept is often confused with aspects which make up the totality of branding. Franchisees need to be educated on the importance of focusing on branding as a continual reinforcement of the perception of the franchise system and its products.

It is often difficult to quantify or explain the branding of a particular franchise system and its products, due to the fact that each consumer will have a different interpretation of how the franchise affects that person. It is important that the franchise system clearly identify which group will represent their primary customers and which group of customers the franchise system wishes to target to expand its reach. The Consumer Brand will need to be accurately modelled on this target group.

Franchise Model

The Franchise Model encompasses all the elements that set a particular franchise apart from the generic business model utilized by its competitors. The Franchise Model must add significant value to every process and business activity, rather than following a template of assumptions.In developing the Franchise Model, particular focus needs to be made of the goods or services marketed by the franchise system. Where these items are subject to change due to technology, competitive forces or government regulation, the Franchise Model will need to include contingency plans and anticipatory strategic programs to allow for this change.

Franchise System

The Franchise System includes not only franchisee and franchisor manuals, but systems, procedures, management tools and resources that combine to deliver industry-leading performance achievements in every aspect of the operation of the franchise. The procedures to be followed by franchisees on a day-to-day basis are a major interface between the franchisor and the franchisee.

Franchisees’ Performance

The franchisees’ performance relates not only to the usual financial performance criteria, but also to the way the franchisees commit to and consistently deliver the customer value proposition and consumer brand. Franchisees must be consumer brand champions.

Franchisors’ Performance

The franchisor’s performance encompasses not only the specific training and support functions that are carried out, but also as a brand guardian and as a caring, supporting franchise partner.

Franchise Brand

The franchise brand represents more than the procedures manuals and support service; it is the emotional bond between the franchisee and the franchisor. Unless the franchise brand engages the franchisees in a positive and natural dialogue, the full potential of the franchisees’ input will not be realised. The contribution of the franchisees to the success of the franchise can be cost-effectively harnessed by franchisors developing and nurturing the power of the internal franchise brand.Franchisors should be realistic and understand that many franchisees are constantly approached by other franchise systems to move to greener pastures. If a franchisee does not have a close affinity to the Franchise Brand, these offers will be considered carefully. Franchisors who fail to guard against their loss of a franchisee do so at their peril.