New Year review tips for your franchise from HSBC
Cathryn Hayes - HSBC Head of Franchising
2012 is set to be another challenging year, with growth seen as a major concern for all of us.
The beginning of a New Year is a time when we think of changes that we hope will make our business leaner, more productive and more profitable. Here are our 2012 tips to consider for your franchise.
Maintain healthy cashflow
Effective cashflow management begins with minimising cost. Only buy what you need and bargain hard with suppliers. Aim to maximise your margins and sales. Ensure your invoices are sent out promptly and chase when due. Request deposits on order or cash on delivery for high-value sales and consider discounts for early payment. Get into the cashflow forecasting habit. It can help you identify potential cashflow crises in advance — and act to avoid them.
Read advice about cashflow management.
Stop doing things that don’t work
Sometimes in franchising, as in life, things don’t succeed — whether it’s a product that isn’t selling well, or a way of doing something that doesn’t have the desired effect. Sometimes it’s better to accept defeat and find a better way. It’s a New Year, so ‘out with the old and in with the new’. Doing things differently or stopping something can often materially affect profitability.
Find out how to increase profitability.
Strengthen your brand
Successful franchises are built on strong brands. Does yours need improving, or maybe even a total overhaul? And we’re not just talking about your logo, website, leaflets and stationery. ‘Brand’ means the entire customer experience, including how you answer the phone. Your brand is your personality; it’s what you stand for. How can you take it to new heights?
Learn how to create a strong brand.
Win new customers (and hang on to your old ones)
Inevitably you will lose customers, often through no fault of your own. So even if you just want to remain where you are now, you must win new franchisees, and that requires investing time, effort and usually money. But you also need to stay close to your existing customers and keep them happy if they are going to stay with you. Where possible, find ways to sell more to your existing customers.
Find out how to build customer loyalty.
Try something different
Trying something new can prove shrewd, perhaps by developing or introducing a new product or service, which could enable you to outflank your competitors. You might try to target a new market or diversify within an existing territory.
Get advice on new product development.
Harness the power of online social media
If you haven’t done so already, why not make 2012 the year your business finally embraces the marketing potential of Facebook, Twitter and LinkedIn? It takes time to build relationships and reputation, but such sites can deliver many more visitors to your website and drive sales. For more information on Internet Marketing Strategies contact Nick Strong at Select your Franchise
Learn how to make the most out of online social media.
Revisit your business plan
A well-produced, regularly updated business plan can keep you focused on your development strategy and key business goals. And while you’re at it, why not revamp your marketing plan?
Get advice about writing business plans.
Work more on your business — and less in it
Allowing yourself to get bogged down in the daily demands of running your business is a common mistake, but it can mean your business fails to develop — at least in the way you want it to. Try to make regular time when you can step back from the daily grind to focus on the bigger picture and help your franchisees to do the same thing.
Find out how other businesses plan to achieve growth.
Good luck!
Posting from the monthly HSBC Connections newsletter. For more information or to get on the mailing list for the newsletter please email franchiseunit@hsbc.com
International franchising advice from HSBC
Cathryn Hayes - HSBC Head of Franchising
A diverse range of sectors lend themselves to successful international franchising. A common example is retail, particularly the fast-food sub-sector.
In recent years there’s been a growth in service industry franchises such as in the cleaning and maintenance sectors, as well as management consultancy, and there’s been a big increase in home care. Numerous successful home care franchises are being operated all over the world, including in the UK.
Well-known British franchises
Several established UK brands – including Marks & Spencer – have sold international franchises for years. Providing jobs for more than 75,000 people worldwide, there are currently more than 300 M&S stores in 40 territories, many of which are successful franchises. Other well-known examples include Costa Coffee, Clarks and Toni & Guy.
Some UK businesses sell franchises in the UK and beyond, while some only sell overseas. To increase their chances of success, some UK businesses set up overseas subsidiaries or joint ventures first to establish their brand and then, armed with greater local market awareness, they begin selling franchises. Importantly, the business model must translate and provide returns for both parties.
Franchise agreements
Buying a ‘master franchise’ can give rights to an entire country. Other options include a regional/area franchise, down to a single-unit agreement. Bigger geographical exclusivity comes at a price.
The franchisee usually pays the franchisor an initial sum upfront. Then they pay a monthly fee – normally a percentage of turnover. The franchisor provides training and ongoing support. Some agreements simply involve the franchisee buying products from the franchisor, rather than paying a monthly fee.
Welcome cash injection
International franchising can provide brand owners with a welcome cash injection and a regular, predictable income stream, without the risks, investment and resource commitment of establishing their own presence overseas. Franchisees are no less motivated to run the business successfully, and it is firmly in their interest to do so.
As well as enhancing a brand – providing its reputation stays intact – franchising can be a way to spread development costs across a wider set of markets. The overseas franchise must be properly resourced and operated if standards are to be maintained. Potential partners must also be carefully selected and should understand and respect the brand.
UK business models may need some tweaking, if they are to work in overseas markets. There are questions of language and culture that need to be considered, too. The cost structure in another country could be very different, which could have implications for your franchise.
Key recommendations for UK businesses considering becoming international franchises
Early on, it’s a good idea to speak to a specialist international franchise consultant affiliated to the British Franchise Association (bfa). You should also make sure your intellectual property is safeguarded, and seek tailored legal and tax advice. Agreements should be drawn up by a qualified professional – preferably an experienced franchise lawyer affiliated to the bfa.
Someone within the organisation needs to take charge of managing and developing franchising activity. This must also be properly resourced and can mean significant people, time and money.
Research is crucial, too. You must consider which franchising model is best for your business and identify territories in which your franchise is most likely to succeed – it might not work in some places. Carry out thorough due diligence on all prospective partners. Pilot your franchise before making it generally available. This enables you to iron out any minor problems before committing major resources.
- Visit the website of the bfa. See the organisation’s international page for links to international franchise organisations.
- Visit the International Franchising Association website.
- For information about overseas markets, visit the UK Trade & Investment website.
- Find out about how HSBC can support your efforts to become an international franchisor. You can email us or call 0800 234 6224.
6 Steps to Building Trust with Prospective Franchisees
Steven Frost - Partner, Smith & Henderson
Recent events have made it difficult to build trust. The forced nationalisation of banks, for example, saw many life-long customers queuing for hours to withdraw their savings. The MPs expenses scandal hardened the public’s widely-held scepticism about politicians and the phone hacking scandal damaged the media’s integrity.
Closer to home, franchisors are now likely to find that they need to give prospective franchisees more “reasons to believe”. Rather than just saying that their training and support are good, franchisors need to prove it. Otherwise, prospective franchisees may perceive the risk too high and either choose an alternative to franchising or worst still, their competitor.
In addition to the need to build trust in today’s business climate, there is another factor that makes this more critical. There are now around 1,400 franchise opportunities in the UK competing for the same talent and the figure is increasing. Franchisors can, however, build trust with prospective franchisees in a variety of ways.
1. Communicate your approach
There is an old saying in franchising – good franchisors award franchises, bad franchisors sell them. By explaining to prospective franchisees at the start of your process that you turn away many more candidates than you recruit, you start to exude trust. For example, instead of using an email address like sales@franchisor.co.uk think about a more appropriate message.
2. Display your trust badges
A major benefit of joining the BFA is being able to include its logo in your franchisee recruitment marketing. Many prospective franchisees use this (or the lack of it) to form an opinion about your franchise. Membership of other organisations, like Investors In People, can also provide positive associations for your professional standing.
3. Enter the awards
Marketing collateral doesn’t come much better than being independently recognised as being the best at what you do. Invest time in submitting strong entries for franchising and trade awards. If you are shortlisted, don’t forget to exploit the PR opportunities.
4. Offer case studies
Success stories act as testimonials and what makes these even more powerful is when prospective franchisees can relate personally to a franchisee, perhaps because they are from
a similar background.
5. Provide evidence
Share statistics about how many of your existing franchisees renew their agreements. Be specific about the level of support you provide, the length of your initial training and the investment that has been made in your brand.
6. Prove it
In the US, Canada and Australia, hundreds of franchisors participate in annual franchisee satisfaction surveys. These are independently administered and provide franchisors with insight to improve their franchise system and also unique marketing collateral. Rather than just say how good their franchise is they can prove it by sharing details of the percentage of their franchisees who would recommend it.
Closer to home, Smith & Henderson launched the Franchise Satisfaction Benchmark in June 2011. It works by inviting existing franchisees to complete an online survey about their franchise ownership experience. Franchisors receive a free franchisee satisfaction summary report and can also upgrade to a 20-page analysis of the results. They can use these independent statistics, such as the proportion of existing franchisees that would recommend their franchise, to boost their marketing and instantly win trust.
Within four weeks of the launch of the scheme, 18 franchisors have registered to participate in the benchmark. For more information please visit www.FranchiseBenchmark.co.uk
