Sustainable growth requires good structure, and a franchise network is no different. We spoke with Dr Callum Floyd, owner and managing director of Franchize Consultants, for more information.
Dr Callum Floyd has been a consultant, educator and researcher in franchising for more than 20 years. After gaining a PhD focused on franchising organisational forms, Dr Floyd has been consulting and led the development of franchise system management education in New Zealand, launching multiple public and in-house franchisor, field manager and franchisee development programmes.
Dr Floyd says franchising can be an unparalleled way of growing a retail network. Its benefits include the ability to access capital from external owners; more motivated, engaged managers; efficiencies related to bulk purchasing and marketing, and more. In a franchise relationship, the franchisor grants a third party a license to conduct a business under their trademark while specifying the product and services which will be offered.
It’s not just about controlling the brand, however - the franchisor has a responsibility to not only induct the franchisee into the business, but provide them with an operating system and ongoing support, including training. Dr Floyd says it’s this responsibility which makes franchising simple in concept, but complex in application.
“There’s only one way to franchise, and that’s to do it properly.” Retailers who are interested in franchising their business should first consider if the model is suitable for them. Dr Floyd says that the nature of retail means most retail businesses will be appropriate candidates for franchising as long as the business itself is operating well.
The business model should be unique; resistant to replication by competitors; and backed by legally protectable branding. A franchising consultant like Franchize Consultants should be brought on board to assess and evaluate the business’ suitability for franchising. Looks can be deceiving, and the task of documenting a businesses’ processes ready for replication across a franchise network is always more complicated than the would-be franchisor expects, says Dr Floyd.
“There’s a lot more to it than most people realise,” Dr Floyd says. “Most companies find that working through the process of exploring the feasibility and preparing for franchising is beneficial for their business.” Dr Floyd says it’s important to make the right strategic decisions at this point, as longterm business growth will be impacted by factors like contracts and agreements which may not be able to be changed later on.
The layers of responsibility and reporting involved in franchising do bring unique challenges. It’s harder to manage change in a franchise situation, says Dr Floyd, as the franchisor must bring their franchisees on board rather than rapidly implementing solutions from the top down.
“In a company-managed chain, the boss can tell the staff and change will happen, but franchisors need to convince franchisees and the leverage of ‘What’s in it for me?’ is applied,” Dr Floyd says. Evolving a business under a franchise system requires more planning, and more sophisticated change management.
Floyd advises retailers operating in a fastmoving environment to invest in robust, two-way internal communications if they choose to franchise, but says this extra layer of responsibility is balanced by the organisational stability brought by the franchisees’ commitment to the brand. “Franchising attracts a better operator, typically. It’s not just a job to them.” Dr Floyd points out that franchising a business also introduces the franchisor to a secondary market – that of franchisees.
The need to attract quality candidates adds further complexity to the existing business, doubling down on the need for good management.
As more and more global businesses enter the New Zealand market, Dr Floyd says it’s important for local retailers to be at the top of their game. “Make sure your chain is so dominant that the foreigner doesn’t enter.”
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