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:
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.
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.
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
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.
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.
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.
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
Review your dispute resolution processes, and consider the
introduction of an earlier step prior to mediation.
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.
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.
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