February is often a time for planning and reflection, as the Christmas break gives a welcome pause from the day to day for most franchisors. Before diving back into the day to day, it is worth giving fresh consideration to priorities, and new ideas. Otherwise they can be lost as the pace picks up.

Here are a few thoughts on possible priorities for 2011:

  1. Position the business for sale or investment. Opportunity rarely gives much notice, and action taken to position a business for sale or investment usually has day to day benefits anyway.
  2. Create or improve on a multi-unit franchise model. Franchisees are scarce, and in Australia we are too dependant on the single unit franchisee model. Competition puts financial pressure on franchisees with a single outlet, and return on investment calculations can often be improved with a multi-unit model.
  3. Develop some more strategies to improve franchisee profitability, and communicate with franchisees that this is a priority. In this context it is worth remembering that initiatives focusing on the top line are much more effective. However, they can also be harder to implement, as franchisee engagement will often be necessary.
  4. Improve the quality of external input into your business. This can be formal, via an Advisory Board (provided they add genuine value!) or informal via conferences, strategic networking and seeking out more expert external assistance.
  5. Convene a review and feedback session with each of your professional advisors, focusing on any initiatives they are implementing for other clients. This can be informal, and usually will not cost. Share any strategic challenges with your advisors – they may have another client with the same problem, or may even have some useful suggestions.
  6. Review your Code, trade practices and general compliance. The ACCC has new investigative powers and is under pressure to use them. The 2010 Code changes were complex, and compliance should be checked so your system does not become a public example. It is also worth checking agreements and business processes for good faith risks, and conducting training on compliance given the extent of recent and proposed regulatory change.
  7. Reconsider, and possibly toughen, your franchisee transfer processes. Our experience is that a disproportionate number of problems arise from sales from one franchisee to another. The Code allows franchisors to reasonably withhold consent, but in our experience franchisors often exercise less rigour with franchisee to franchisee sales that if they had recruited the franchisee direct.  
  8. Review your dispute resolution processes, and consider the introduction of an earlier step prior to mediation.
  9. Consider a corporate model to supplement the franchise model. Not all systems will be able to do so, but there may be good profits to be made that bulk up the franchisors revenue stream and make the business more valuable.
  10. Actively manage the exit from the business of any non-profitable franchisee at the earliest opportunity. Do not allow problems to fester, as invariable an early exit will cost less overall, allow an unsuccessful franchisee to withdraw with dignity and take less overall management time.

If you would like legal assistance exploring or implementing any of these initiatives, contact Stephen Giles, Greg Hipwell, Fiona Wallwork or Tamra Seaton.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.