Is Your Delay Putting Your Franchise Network at Risk?

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The costs associated with slow franchisee ramp-up are many.

A slow ramp-up puts your your franchisee at risk.

Slow ramp-ups affect not only the franchisee in question, but the entire network & your own staff are also influenced by those under-performing franchisees.

The costs of franchisees' slow ramp-ups include:

  1. Unplanned Expenses. When franchisees struggle, more unplanned training and support resources are necessary to remedy their situation. The money franchisors spend in this effort is often syphoned away from resources the franchisor would have invested in strengthening the system, hiring key people, introducing innovation, and improving the long-term stability of the brand.
  2. Poor Morale. As the franchisor's support staff appear to take one distressed call after another from a steady stream of "problem" franchisees, their own morale suffers. They begin to doubt that the system works. They become more detached and frustrated, which impacts the entire system.
  3. Fractured Franchisee Relationships. Struggling franchisees get frustrated and discouraged, and they share their disappointment with other franchisees, bringing down the morale of the entire system and fracturing the franchisee-franchisor relationship.
  4. Halted Momentum. The enthusiasm that franchisees experience during training is thwarted if they can't produce results when they get back home. Once lost, this momentum can't be recovered and a new drive must be created, which is not easy to do.
  5. Poor Validation. As frustration levels go up, validation starts to suffer as under-producing and unsatisfied franchisees share their frustration with prospects. Negative franchisee validation destroys franchise sales, halts growth, eliminates future royalty streams, and decreases the dollars franchisors can spend on tools and support systems to avoid the problem.
  6. Brand Deterioration. Under-producing, unhappy franchisees create negative customer experiences. If the unit or territory fails, customers will remember, and it will be difficult and, in some cases, perhaps even impossible to regain lost traction.
  7. Breakdown in Leadership. Struggling franchisees rally other franchisees or franchisor's support staff to their plight affecting the franchisor's ability to effectively lead the larger franchisee body. In many systems, the frustration engendered by this breakdown in leadership creates a culture of compliance and top-down authority, rather than a participatory culture focused on positive relationships and results.

Unfortunately, some franchisors actually add to the ramp-up problem!

And the the delays are all visible to the world, the Item 20 will show all the sold but not open franchise units. You need to make sure your Grand Opening process works, even if that mean hiring outside professionals to assist.

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The post Is the Slow Ramp-up of your Franchisees Costing You too Much? Is It Risking the Success of your Franchisees? appeared first on InFraSu.

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When delays happen to franchisees it eats up their reserves.

And if they've negotiated free rent in the first few months of their lease that has a negative compounding effect.

It should be easier to figure out from the Item 20 how long it took on average for locations to open.

Mike, there is a disclosure of opening times in the FDD, but it is in Item 11. It requires disclosure of the "typical length of time between the signing of the franchise agreement . . . and the opening. . . ., [and] the factors that affect" the length of time. You have a good point that it should be more specific, e.g. the median actual length of time in the past three years, and the shortest and longest.

Gary -

How does the reporting work requirement work for franchisors who use a preliminary agreement and execute a Franchise Agreement upon site acceptance?

Joe, the franchise law does not answer the question you pose, so it is a bit ambiguous. It would be safest for a franchisor like that to report as its typical time to open the longer time; that is the time from signing the preliminary agreement until the time of opening.

Thanks, Gary. You are right about Item 11. And I was wrong to look for it in Item 20.

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About this Entry

This page contains a single entry by Lizette (Gamez) Pirtle published on March 9, 2015 10:06 PM.

Do You Know the True Cost of Even Successfully Defending a Lawsuit by Your Employees? was the previous entry in this blog.

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