Elements of a Strong Franchise System
What to Look For When Investing In a Franchise System
Contrary to popular belief, franchise systems are not all the same. While some provide franchisees with lots of assistance in order to ensure the franchise business is successful long-term, others provide very little support or guidance once the franchise is up and running.
For prospective business owners looking to start a franchise, finding the right franchisor and franchise system to invest in can be challenging if you don’t know what to look for.
This article will explain what a successful franchise system looks like and what elements you should look for before investing in a particular franchisor.
What Does it Mean To Operate a Franchise?
A franchise is a type of business that is owned and operated by an individual business owner (known as a franchisee or franchise operator) under the name and branding of a franchisor.
While the franchisee owns the business, they must pay a franchise fee and royalty fees in order to use the franchisor’s name, branding, products and services, and franchise system.
A franchisee performs the same role as any other business owner but must adhere to the rules and procedures created by the franchise system.
What Is a Franchise System?
The franchise system refers to the franchisor itself along with its:
- Entire network of franchises
- And more
The Key Elements of a Strong Franchise System
When researching different franchisors to invest in, always closely examine the franchise systems and look for the following:
Membership to the Canadian Franchise Association (CFA)
The Canadian Franchise Association (CFA) is a national, not-for-profit association that works with franchise business owners across Canada and upholds its members to a strong set of ethical standards. Being a member of the CFA is a good indicator that the franchise system maintains high standards when it comes to conducting business and is probably worth investing in.
Stringent Franchisee Selection Process
A franchise that cares about its reputation and the success of its franchisees will not let just anybody use their name and branding. Many franchises are selective when it comes to who they let become franchise operators. If a franchise system has strict criteria for becoming a franchisee and follows a strict selection process, this is a good sign.
Strong Payment Processing and Point of Sale Systems
Payment processing and Point of Sale (POS) systems are crucial to any successful franchise as they are what ensure your business gets paid and earns profits. They also can help create a positive experience for your customers. For instance, when a customer is providing payment, if your machines take too long to process the payment or they freeze up and time out, this can leave a bad taste in your customers’ mouths.
Some great features to look out for in a franchisor’s payment systems include:
- Customer tracking
- Inventory management modules
- CRM functionality
- Gift card processing
- Coupon processing
Managing the payroll for several employees can be a challenge, especially for first-time franchisees. Look for a franchise system that includes payroll software and payroll training from the franchisor, as this will help simplify the process and make your job as a franchisee much less stressful.
Lots of Training and Support
As previously mentioned, a good franchise system wants its franchisees to succeed and will offer lots of support to help ensure they are profitable.
Look for franchise systems that:
- Offer extensive training
- Help your business get up and running with effective onboarding
- Provide ongoing coaching and support by phone, video chat, or in-person
- Annual conferences so franchisees can continue to learn and network with one another
More specifically, look for the following types of training and support:
- Building the business
- Generating sales
- Staffing the business and hiring procedures,
- Using the franchise’s systems and technology
Celebration of Franchise’s Success
A well-run franchise system takes pride in the success of its franchises and will celebrate and uplift franchise operators when key milestones are achieved.
This can be done publicly through corporate communication materials or by reaching out to the franchisor to offer well wishes.
Healthy Financial Statements
When starting a franchise, the franchisor must provide the franchisee with disclosure documents. This must include the franchisor’s financial statements.
When reviewing the franchisor’s financial statements, look for signs of healthy cash flow and reserves, as these are signs of a strong franchise system. Also look out for excess debts, past bankruptcies, or lawsuits.
In House Marketing
While franchisees are typically responsible for managing the marketing for their franchise, many franchisors will also manage their own national/international marketing campaigns and will provide the franchisees with marketing support.
Having a strong marketing strategy benefits the entire franchise system and is something that you should be looking at when evaluating franchisors.
A Comprehensive Operations Manual
All franchisors must provide franchisees with an operations manual. This manual will outline all of the rules and procedures a franchisee must follow when running the day-to-day operations of the business.
In order for the franchisee to be successful, this document should be quite extensive and provide the franchise operator with expert guidance and suggestions that will help the business thrive both day-to-day and long-term.
Join the Gorilla Bins Franchise Family
Gorilla Bins is Ontario’s leading waste management business and is one of the fastest-growing franchises in Ontario. Founded in 2014, Gorilla Bins has achieved a sales growth rate of 328% over the past five years and built a track record for helping build many successful franchises across the province.
We also provide all of our franchisees with extensive training, coaching, support, and even marketing to help ensure they are successful long-term.