Currently there are around 48,000 franchise businesses in the UK , a number which has doubled in the last 25 years, across 900 franchise brands that now employ over 621,000 people (an increase of 70% in last 10 years). Franchising is big business. For good reason too.
Banks prefer to lend money to franchises as they are proven business models with a higher success rate. For the exact same reason, they are growing in popularity for those looking to start their own business. Why spend years on trying to establish and build a brand and business model, when you can pay for one that is already established and likely to return a profit within its first two years?
For all the benefits of franchising and investing in a franchise model, there are still some issues which really impact on the potential success of a new franchise operator.
One of the biggest issues within the franchise marketplace is the discipline of marketing. It kind of hangs in a state of limbo between the franchisor and the franchisee, with neither wanting taking full responsibility for it.
Let me explain.
The franchisor perspective
As a franchisor you want to look after and control your brand, how the business is presented, what its values are, what the key messaging is and ensure that all of the above are represented consistently. You may also want to manage online paid activity to avoid different territories competing for the same online searches – thus controlling central enquiries that come in through the network’s website.
One of the ways of doing this is through having a central marketing team who control these elements – and it is commonplace for franchisors to charge franchisees a monthly marketing fee to manage this on their behalf.
This is fine, but what if the franchisee feels that they are getting little return on investment from their marketing spend? After all marketing is about generating additional profits. If you are paying a monthly fee and getting little in return, questions (or complaints) are going to arise (and quite often do).
The franchisee perspective
By the same token, franchisors also need franchisees to be self-sufficient. Franchisees are, after all, responsible for running their own business. No franchise network is going to successfully grow if all franchisees are reliant on head office for all leads that come in.
So ultimately, as a franchisee, you need create your own local marketing strategy in how to take the head office guidelines provided, to develop your own lead generation machine. This is where the problem occurs.
Generally speaking, over 95% of those who invest in a franchise have little to no prior marketing background. They don’t know how to create a marketing strategy, how to target specific audiences, how to differentiate themselves from the local competition, where the biggest opportunities lie and, ultimately, how to generate enquiries.
What’s more is that franchisors also do not effectively train them in how to do it. Yes, franchisees go through extensive training programmes and get intensive training on areas such as business operations, systems, products and services, and sales. As part of their training they may even be guided on which marketing activity they believe they should focus on – but they don’t train on the fundamentals of marketing or how to think like a marketer and maximise local opportunities.
Sales training without marketing training is missing the point (as is the reverse). Although they are two separate disciplines they are very closely aligned.
The franchise marketing dilemma
So we end up having franchisors wanting to centrally control the brand (understandably) but not wanting to be held responsible for localised lead generation campaign activity.
On the other side we have franchisees who, after all, are independent business owners and want to have a degree of autonomy over their marketing efforts. Ultimately, their success or failure as a franchisee is going to be highly influenced by how successful their local marketing efforts are.
The obvious solution
The only real solution is for franchisors to correctly train all franchisees at the point of onboarding on how to develop their own local marketing strategy that will deliver results (rather than just recommending activity), using the tools, materials and guidelines surrounding the existing brand.
Until franchisors realise that it is their responsibility to upskill franchisees in a more rounded way to maximise their potential performance, then franchisees are never going to generate them the potential royalties that they could. So figures, such as franchises contributing £15.1bn to the economy, sounds impressive but with a little more focus on the marketing upskilling of its franchisees, could be so much more.
The benefits in getting it right!
Let’s just think about that for a minute. If every franchisee had a clear local marketing strategy in place it could reasonably expect to at least see a 10% uplift in sales. If, currently, the average franchisee turnover is £250K (and more than 50% of franchises now claim an annual turnover in excess of this) and the average commission payable to the franchisor is 7%, then this would generate an additional revenue for the franchisee of £25K and £1750 of revenue for the franchisor. Multiply this number by the number of franchisees in the network, and the number of years in the franchise agreement and suddenly you are looking at a not insignificant figure.
You can quickly see why investing in marketing training for franchisees is potentially a “no-brainer” for any reasonably sized franchise network.
Unless the penny drops and franchisors realise the benefits in helping franchisees market themselves more effectively, marketing as a discipline will sadly continue to underperform in the franchise industry.
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