Small to BIG – Challenges of Growth in the Franchising Sector

This article is written from a practical point of view from close quarters seeing many franchising companies which grew from small to Big and how some of them crashed and some of them thrived even in this pandemic and how mind sets of organisations need to change from time to time based on the technological changes and advancement and how these technologies can help garner great growth and penetration with out much human intervention and still remain process driven which will help companies to grow their business from small to BIG.

After working over 3 decades in the field of franchising with a PhD in this area and now helping many organisations to move some small to Big I am writing this article to help readers, organisations who want to move to find the right mix to make this big shift, with a caution and highly recommended with process driven approach.

Every organisation in those days if they want to multiply, they look at establishing their own offices across many states and then look at giving distributors and franchisees. But now things have changed, and people has started looking at reducing their cost and giving away sate franchisees or district franchisees or even regional franchisees to ensure the franchisor is safe with his investments and give away the brand name and the know how to make things work for the brand, which is the ideal way of penetrating a market. If this is the case, why do brands fail after a point of time and how they wind up their business in some states and why are they not steady and what makes them fail.

Appointing the right franchisee:

In my experience an opinion the important thing is to appoint the right franchise to do this there are some scientific ways of doing this and many companies do not apply those techniques and they look at the size and the money power alone. One of the brands that I personally like is Raymond, if you see these shops are run generation after generations and the company identifies protects the interest of the existing franchisee and ensure all stake holders are protected. But there is a continuity of their brand name is being protected with all the advertisement being done by the company to ensure the brand recall and the pull continues. Which is the job of the franchisor. Many companies do not do this and this is the reason they don’t survive in the long run. I have helped few franchising companies to put the process and we have seen some tremendous growth with longevity. 

Training the franchisee to the culture of the organisation:

It is not just appointing the franchisee, a constant training needs to be given to the franchisee and his staff on a regular basis in terms of the culture, product, and process. In most cases in India, franchisees consider this as waste of time, and they do not attend these meetings and they do not send their staff for training. They have a mentality if their staff are trained, they will leave or they will be pouched by others. I strongly believe if the franchisee sends them for training and pays their staff well, they will bring in more busines for the franchisee. I worked with a training brand for 8 years and I have been part of the training department and I have seen that this brand insist that their franchisees come for the training. They use the carrot and stick method to bring them for these trainings, I can vouch the first franchisee who completed 25 years with that brand still attends their training and meetings and I have high respect for that individual who has done business with this brand for last 25 years and going strong having your first franchisee with you for 25 years it self-shows that the brand is doing something good. If the franchisor is not able make this as a process, then the growth will not happen and it this will become a great challenge for the brand.

Recruitment of right people in the franchising company as well as the franchisees company:

Values and ethics are a part and parcel of any organisation that wants to be long term which wants to build a brand. I am sure today many companies want to reward employees who have values and ethics, may companies who have failed did not look at this aspect and overlooked their values, some of the companies are extremely strict with taking bribes from vendors or franchisees but some of them ignore and I have seen great brands collapse when the management do not look at these things. Some of the owners thinking I can pay less and let the employees make money from the vendors, but they do not know that they are also cheating the customer and may be who knows if the staff is reporting the right figures. Its important to have checks and balances and weed away such practices and build trustworthy brand, which will last long. This is another challenge short term gain long term pain. The franchisor and franchisee should be ruthless in showing the door to anyone who has an intention of doing anything like this while you build a great brand.

Ensure the franchisee follows strict SOP and pays up on time to the franchisor.

Making the franchisee adhere to the rules of the company and making them pay on time will ensure the brand can do more for the franchisee and there will not be issues on cash flow for the franchisor to support the franchisee. But many franchisors do not collect the money on time, and this becomes bad debt which is not good for growing from small to BIG. But it is important that the franchisor also gives great service to the franchisee if not the franchisee will not be able to pay to the franchisor. This is a relationships business. Many companies do not consider their franchisee as their customer and treat them as their partners and some of them treat them with high handedness which is not a good sign. We need to be soft but firm with lot of respect for the franchise. Franchising is a relationship business with values and ethics of doing good business through the franchisee in a remote location serving the company customers. (These are concepts not understood in the context and hence the challenges increase in making small to BIG)

Cash Flow:

Many franchisors think they can take the money from the franchisee and build their brand, never. (Its call OPM – Other people’s Money) many franchisors are smart but they do not know they are digging their own grave. It’s after you build a brand, people will come to you and ask you for a franchisee. In India I know many people who have put up stalls in franchising shows even with out their own outlet they have come to sell their franchisee stores and some of the franchisees have burned their fingers. Franchisor should have their own stores and should have made at least few cycles in business to ensure all the nuts and bolts are fixed before launching a franchised business. Need to have enough cash to do this. I worked for a great brand that did 100 stores of 50 lacs investment on its own and then franchised their stores today they are 500+ stores strong and have done well. These brands serve their customers both franchisees as well as the end user who believes in the brand. This is paramount to make small to BIG and there are many more aspects.

Franchising needs passion and you need to have a mind set that let your franchise make some money from your brand let them live so that you live. But if the franchisor thinks that they need to make all the money and kill the golden goose, God alone can help. Small to Big is not that easy you need to have the right mind set now with technology it can be done. Wishing all the readers a great opportunity to build it BIG.

Dr. Chackochen Mathai

The author of this article Dr.Chackochen Mathai holds a PhD in franchise management and has 3 decades of experience in the field of franchising. He has helped more that 850 entrepreneurs through the franchising route, he can be contacted at 9884051455 or visit www.franchisingrightway.com or appointments.

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