Franchisor Best Practices
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Here are a few recommended best practices to remember as you sell franchises, and as you manage your franchise company.
As you sell franchises:
- Number franchise legal document sets as you distribute them to interested parties. Apply an expiration date on the franchise offer, perhaps 30 to 60 days from the date of distribution.
- Be aware of the requirements for offering franchises in registration and filing states.
- You should probably only take contact information from potential franchisees located in registration states where you are not approved. Do not send any marketing information or discuss details of your program until you are approved to offer franchises in that state.
- Be careful not to make "financial performance representations" that are not published and substantiated in your FDD.
- Always allow 14 calendar days to pass between receipt of the legal documents and signing of any document, or receiving any payment.
- All company managers and members of your management team need to complete the Client Bio Form and send it to Biltmore Franchise Consulting.
- Complete the names and contact information of all those involved in making the franchise sale on the "Receipt" (last page of the franchise documents).
- Put the appropriate disclaimer on your web site stating that franchises are not available in registration states where you are not yet approved. This is a legal requirement.
- Don't accept faxed copies of signed documents. Always receive signed originals.
- Establish a way to communicate with the franchisees at least monthly, or even weekly, whether by email, through the mail, via a phone conference, by publishing a newsletter, etc. Keep a dated copy of all written communications to franchisees and make notes after all phone conferences.
- Develop a corporate culture of treating the franchisees with courtesy, fairness, and respect.
- Convey a sincere desire that you want each franchisee to be successful and that you will help them.
- Develop a mentoring relationship with the franchisees.
- Recognize success, outstanding performance, and loyalty before the others in the group.
- Hold an annual convention. Recognize success, assistance, and provide new information.
- Visit each franchisee at least monthly in the beginning. Once they are established, set a schedule and visit them as often as possible. Complete a visit form each time and place it in their file.
- Conduct a complete evaluation quarterly or semi-annually, review it with the franchisee, and put a copy in their file.
- Follow up on all communication with a written memo or email. Put a copy in their file. This is particularly important when providing training, instruction, making corrections, or giving suggestions.
- Put forth extra effort to help assure the success of your first few franchisees.
- Enforce royalty and ad payment schedules and amounts. Do not normally allow any exceptions.
- Enforce the requirements to provide you with financial statements and reports.
- Explain and require adherence to your operational systems and procedures during visits, in memos, and with updated pages in the Confidential Operations Manual. Good operational systems are very important to a successful franchise organization.
- Solicit suggestions from franchisees but let them know that you won't be able to act on all of them.
- Be sure that franchisees know about new products, services, and programs. Communicate clearly and early enough so that they don't feel surprised or left out.
- Pre-sell new products, services, advertising programs, suppliers, etc., to the franchisees, even though they may be obligated to participate. Help them see the benefit of necessary changes.
- The amount of insurance the franchisee is required to provide is outlined in the Operations Manual. You set the amounts as recommended by your insurance agent. The franchisee is required to list you as a co-insured and to provide you with proof of insurance. Be sure that you follow up on this so that it is taken care of properly. Be sure that you have coverage.
- Be sure that the public knows that the business is a franchise, and that you do not operate it.
- Select a few of your most successful and loyal franchisees and ask them to be part of an advisory committee that meets quarterly or semi-annually. Carefully listen to their suggestions and feedback. Recognize them before others but be careful to maintain your own contact with each individual franchisee.
- Understand that anything you communicate to any one franchisee is likely to become known by all franchisees.
- Notify the franchisees in writing of infractions to the franchisee agreement. Give them a time line to resolve serious infractions. In very serious situations, you may need to have your attorney write a letter that outlines consequences. Keep a copy of all such notices in their file.
- Be careful that the franchisees don't get together, make decisions, and try to dictate them to you. You must maintain overall control of the franchise program. Avoid recognizing self-appointed leaders.
- Start early each year to complete your audited financial statements.
- Update your FDD and Franchise Agreement annually, or when there is a material change.
- Be sure to renew your franchise application to each registration and filing state annually, where required.
Franchisor Best Practices - To learn more about this author, visit John Power's Website.
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