Who Else Wants Better Franchise Operators?

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After I had been hired to run the Operations and Sales for a large franchise region, I was able to hand a franchise owner a rebate check for $50,000 from a preferred vendor program.

In front of all the franchise owners at our regional meeting.

Another owner, who was seated beside the $50,000 recipient, looked at me and said:
"Where's my check?"
"Well, you remember that vendor program you and I talked about?"
"Yes"
"You remember that I explained the program several times to you. But, you said that it wouldn't work for you, you had a better local deal? Do your remember that?"
"Uh, well, I meant ..."
"Well, here is what I meant back then. Your fellow franchise owner made the program work for him.
And now he has a very nice rebate check for $50,000.
Now do you want to work with me on the vendor program? Because we will need to have an accurate and up to date profit and loss statement, or P&Ls from you to start?"
I tell this story to every franchisor - whether start-up or mature- who asks me how they can get better reporting from their franchisees?

"You have to show them what is in it for them", I explain.

The franchises system that I was the VP of Operations and Sales of had a relatively simple business model. There were only a couple of inputs to manage, which could cut your cost of goods sold dramatically. But, to walk a franchise owner through the exercise, we had to have accurate and up to date P&Ls.

At the beginning of my tenure, we weren't collecting the P&Ls from our franchise owners. And so we weren't doing any business reviews with them.

We had more of a newspaper route mentality. Go out once a month to pick up the royalty checks and chat up the owner.

We didn't know about the franchise owner's profitability. And when we didn't know, we couldn't help.

We had to change that.

I knew that we had valuable vendor programs. But, I also know that simply asking the franchisee for their up to date P&L's wasn't going to get much of a buy-in.

That's why the presentation of the rebate checks at the regional meeting was so important to our success in getting those P&Ls.

Most owners could now see exactly what was in it for them.

Most owners could now see that the real cost of non-compliance was not getting that easily earned rebate check!
We showed how complying with the P&L reporting requirements worked for the franchise owners.

It made the franchisor much more competitive because we had good data driving our decisions.

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2 Comments

I was recently reviewing an FDD in which the franchisor's Item 19 was constructed by a survey of the franchisees instead of a compilation of the P&Ls.

A survey?

Really?

How much faith are you going to have with a franchisor who refuses to even demand its franchise owner's P&L statements?

This article points out that good franchisee reporting opens up opportunities for franchisees and franchisors.

Franchisors need to take the lead on making franchisee financial performance reporting easy to do and meaningful to them.

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About this Entry

This page contains a single entry by David Gould published on February 12, 2015 11:37 AM.

How to Beat the NLRB was the previous entry in this blog.

You Don't Need to End Up Cash Poor after You Buy Your Franchise is the next entry in this blog.

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