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
What type of support can you expect from a franchise?
Karl Lewins - Franchise Support and Business Development Manager, Spoton.net
Contrary to the Jewish Proverb; I ask not for a lighter burden, but for broader shoulders – investing in a franchise opportunity offers you a lightened burden!
In my last post I spoke about the benefits of joining a franchise over starting your own business, one of the benefits I touched on is the support you will (should) receive from head office, a head office that consists of a team of skilled, industry experts unique to their field.
But what type of support should you expect? What areas of the business will they support you in? Will they go that extra mile to support you even in the most unlikely events?
Since I’ve been working in franchise industry I have been fortunate enough to have come across many people looking into buying a franchise and they have all sorts of backgrounds. Everyone comes in with their very own skill sets and qualities that are unique to them, these traits mainly come through with their personality but have also been acquired throughout their education, experiences and training in the work place.
It is these skills and qualities in the franchisees that franchisors should look to exploit and harness to ensure that they are as successful as they can be, for themselves and the company. Support on a local level from the franchisor should come in all sorts of forms and sizes, it can vary from marketing an area to help achieve higher sales, to helping with the day to day tasks of running a business, such as accountancy, support calls, technical expertise through to ensuring that customer satisfaction is met at all times.
It is important that franchisees do not feel isolated out in the field and know they have the support and back up of the head office. General support whilst actively running your franchise is crucial and it is all well and good having these support channels in place but unfortunately there are sometimes circumstances that no one can foresee and it is these times that going beyond the call of your normal day to day support is essential.
For home based franchisees or individually operated franchises there will always be the worry that you are unable to run the business for reasons beyond your control. Thankfully, these occasions are very few and far between, but when circumstances such as ill health, bereavement, family crisis arise, it is important the franchisor has the ability to step in and keep the business operational to ensure that the franchisee does not have extra worries and stresses to handle, so they can make a swift and positive return.
As I said before, support from a franchisor will come in all forms and sizes, it will also depend on the scale and set up of the franchise business, but it is having this extra support that offers franchisees encouragement and a drive to succeed, because not only should you have the support of head office, but the franchisor should have built up a network of franchisees where you can easily communicate and share best practices, you will have a pool of information and experience where you can draw further information from.
Karl Lewins is the Business Development Manager at Spoton.net. For further information, see our page on the Spoton.net Web based franchise.
What happens when a franchisor goes into liquidation, do the franchisees have any rights?
Sheilah Mackie - Senior Solicitor, Blake Lapthorne
Liquidation marks the “corporate death” of a company. After paying the costs and expenses of the liquidation, the liquidator will distribute the net proceeds realised from the company’s assets to creditors subject to a statutory order of priority.
A franchisee would not usually be owed monies by a franchisor, although where a national account business is operated a franchisee may be due credits from the franchisor. However, unless monies have been kept in a separate designated deposit account in the franchisee’s name, it is unlikely that the liquidator can pay them over. The franchisee would be left to lodge a claim for the monies as an unsecured creditor.
It is more likely that the franchisor, before the liquidation, withdrew support and failed to carry out marketing activities or supply stocks. Normally, a franchisee might claim damages for breach of the franchise agreement. However, on the liquidation of the franchisor the franchisee would be left seeking such a claim as an unsecured creditor. In many cases, there are insufficient funds available to pay unsecured creditors anything at all.
An interested party may seek to buy some or all of the assets of the franchisor. This could include the franchise network – the trade marks, property, stock and franchise agreements. This is more likely if the franchisor has entered into administration since the primary purpose of administration is to rescue the business. In these circumstances, franchisees would be advised to collectively try to persuade the liquidator or administrator to only to sell to a purchaser of their liking.
There is usually no contractual right for a franchisee to unilaterally terminate their franchise agreement on a franchisor’s liquidation. Indeed, any franchisee attempting this could be in breach of contract and the liquidator might seek to enforce a claim for damages. In many cases the liquidator will disclaim the agreement since the company will have ceased trading and be unable to fulfil its obligations. A liquidator may let franchisees buy themselves out of their agreements and take over properties if this will realise assets for the benefit of the company’s creditors. If a franchisee can afford to take these steps, it presents a good opportunity to continue their business (debranded) free from the constraints of the franchisor. If not, it is possible that their business will in turn fail.
Sheilah is a Senior Solicitor for Blake Lapthorn’s Commercial IP/ IT team and heads up the firm’s non-contentious franchising practice. She advises on the full range of issues faced by those in the sector including setting up and managing franchise networks, complying with relevant regulatory requirements, dealing with underperforming franchisees and extracting franchisees from networks and much more. For more specific help on any franchise legal issue, Sheilah can be contacted at Blake Lapthorn.
