I moderated a franchise conference panel earlier this month.
We talked about how the best franchisors obsess over one thing
Franchisee profitability
Many franchisees are first-time business owners & invest their life savings into the business.
They’ve never hired people before.
They overstaff (bleeding cash) or understaff (restrict growth).
They don’t know the difference between fixed and variable costs.
Here’s a framework that actually works:
Leverage Buying Power: Use your buying power to get better rates from vendors and pass along savings to franchisees, not capture as a rebate.
Facilitate Best Practice Sharing: Your top performers should be teaching the struggling ones. Create regular forums for this.
Multi-Unit Expansion Program: Help your best franchisees acquire more units. They need structure around leadership teams and back-office systems.
Bottom Quartile Buyout Incentives: Let your A-players acquire underperforming locations. Cap royalties for a period of time. Give them money and time to reinvest into growing the business.
P&L Coaching: Review every month. Focus on the two biggest profit drivers – cost of goods and payroll.
Reduced Royalty: Reward top-performing franchisees with a lower royalty based on volume. Set it up like an inverse tax bracket: lower royalty on incremental sales.
Here’s an example that I helped create for Waterloo Turf:
Profitable franchisees buy more units.
Profitable franchisees refer other buyers.
Profitable franchisees become your best marketing.
Franchising is a long-term game.
When done right, it’s a win-win that makes everyone very wealthy.
Unfortunately, not every Franchisor sees it that way.
All they care about is selling units and prioritizing their bottom line over franchisees.
This is a recipe for disaster.
I’m on a mission to help change that.
Cheers
Brian
P.S. This franchisee-first approach is exactly why Waterloo Turf brought me on as a strategic partner.
We’re implementing everything I just outlined & more. As of today, we have two franchisee cities launched and three more coming soon.
Reply “turf” if you want to learn more.
