An underperforming franchisee in a network, not only does harm to their business, but to the brand they represent as well. However, the lead causes and signs of underperformance aren’t completely understood.
A franchisor generally relies on sales data after the fact, to identify their franchisors performance trends. But by that time, the effort needed to halt and possibly reverse that dip in performance can be considerably greater than if this drop had been identified when it first surfaced.
What’s probably even worse is that most analysis of sales data tends to indicate only one element of the overall performance of that franchisees business. This data doesn’t really provide much insight or information that can be used to assess how the costs are being managed in a business; this aspect too can represent a major area of underperformance.
Even in franchise systems where franchisors receive regular profit & loss statements from their franchises (these statements would show both the costs and the sales), underperformance can easily go unnoticed. This occurs primarily because the data isn’t comparable right across the rest of the franchise network. In some cases, underperformance goes unnoticed because the analysis is done too late for intervention to show any results and improve the franchisees business. Here are some lead indicators that a franchisee is underperforming:
Dedicated franchisees are always passionate and enthusiastic about their business and it is these very attributes that drive them to work hard, fight all odds and make a success of their business. And the opposite is equally true as well; if a franchisee doesn’t have the right attitude that can impact their potential for success and they will start to underperform.
A franchisee that is operationally proficient has proven that they have the competency and capability to run their business well. However, it’s important that this operational proficiency be assessed at regular intervals during their initial training period. Unfortunately, most franchisors falter on assessing the competency levels of their franchisors during the training programs. Post this stage, compliance is used to assess the proficiency of the franchisee which doesn’t always guarantee high performance levels.
A franchisee that has a great attitude and is operationally proficient, can easily get side-tracked, if they don’t focus on the outcome of their business. This is where planning comes in and the business plan needs to be created at the start of the business relationship and should be followed to measure the franchisees success. Sadly, most business plans are often prepared only to meet the condition of being part of the network; and neither the franchisor nor franchisee ever looks at them again; and so it becomes difficult to identify when the franchisee is going off track.
It’s true that some high-performing franchisees can be quite disengaged, but these are more of an exception rather than a norm. Franchisees that are very proactive in their approach will read memos, attend meetings and make it a point to attend upgrade training programs that are organised by the franchisor, and this this helps them grow their business. On the other hand, a disengaged franchisee won’t have the right attitude from the get go.
If a franchisor has the ability to monitor and assess these indicators would be able to introduce appropriate and timely remedies when needed and they stand a much better chance of maintaining and growing performance across their network.
If you want to know more about setting up a franchise business or want some advice, feel free to get in touch with us at The Franchise Institute. You can call us on 1300 855 435 or fill in this contact us form and we’ll reply as soon as we can.
Thanks for reading,
The Franchise Institute Team
1300 855 435