Want To Increase Your Profit Margin? Here Is How Franchisors Do It

Shahram Warsi
Shahram Warsi Aug 02 2018 - 3 min read
Want To Increase Your Profit Margin? Here Is How Franchisors Do It
Franchisors strategizing on increasing the profit margin can tend to be source of frustration.

Franchisors usually believe that there are only two ways of increasing the profit margins, cutting the cost and increasing the prices. But most of the time, it’s not possible. So the question still remains that how are you going to increase your profit margin?

Most franchise owners would typically work on ramping up their franchise sales. However, that may not be the best strategy. Besides getting the wrong franchise candidate by defying the principle of selection over sales, the franchisee himself may not be able to build a successful business and have an investor mentality rather than an operator mindset. 

How can you Empower the support or field and service staff at the Franchisor H.O?

What may work instead is that field staff or franchise service staff be more empowered to get the existing franchisees to perform better. This would lead to more confidence that franchisee’s get as a result of structured hand -holding and support from the Head office, which will up their sales, make them perform better, get better royalties and eventually happy franchisees will be your brand ambassadors to pull new franchisees on board. 

Here are 4 things that you can do to empower your franchise service team that could make the whole system more profitable 

Up the training – Most often franchisors would give one-time short training to franchisees and that is about it. While this may work for aggressive franchisees in the system it will not be enough for franchisees who are first-time business owners or have been in jobs before. What is needed is that service staff establish the gaps where franchisees are challenged in their results and accordingly device upping the training module on an ongoing basis for under-performing franchisees. Remember, franchisees are not against paying royalties - they don’t pay because they don’t earn. Finding a way to help them with their sales would improve better royalties.

Auditing: Auditing existing franchisee stores needs to go beyond a regular exercise or a policing routine. It needs to be established why the franchisee is cutting corners in the stores. It may be hiring un-talented staff or switching off lights /electricity etc or too much rent of a location or just plain lack of knowledge of how to do things. The right answers can lead to corrections that will often give unforeseen results for everyone.

Process for franchise management: Lack of communication is one of the biggest reasons why franchisee would leave the system . Painting communication system – something as basic as a what’s app group to understand and enable franchisees to perform better may be helpful. If the service staff can play the mediator and get better ideas from well-performing franchisee to under-performing franchisee – the whole system may see a change as a whole.

Taking Feedback – Some os the best R &D has happened at the franchisee stores. It is important to take continuous product /service customer feedback from franchisee to establish what may be lacking or some practice that is developed in one region may also be passed to another region. This could lead to innovation and change coming into the system with the feedback of the operator who is closest to the franchisee. 

While it looks like a tall task, it may, however, be essential to increases your profit margin.  The productivity of your franchisee is directly related to the service staff. Franchisors should lay equal if not more stress on establishing proper systems to optimize the service staff, which will directly reflect on the business sales at a point in time. Franchisors should also utilize technology as a tool for enhancing their approach and performance.


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