Running a Successful Franchise

Congratulations! If you’ve followed all the steps so far in our series on buying and running a successful franchise, you now find yourself in possession of a franchise that’s perfect for you.

Doing all the careful research we’ve talked about puts you in an excellent position as you start out as a franchisee. You now understand the business model, you’re clear about what to expect, and you’re confident that you’ve made the best choice of franchise.

But you still have a lot of hard work ahead of you. In this tutorial we’ll look at how to get your business off the ground, make it profitable as soon as possible, and prepare for long-term, sustainable success. You’ll learn what to do to get started, how to combine the franchisor’s business plan with your own, and how to advertise and build the crucial relationships that will set you up for success.

Step 1: Get Off to a Good Start

As you start out in your new business, you’ll quickly see the benefits of the franchising model.

If you were going it alone and starting your own independent business, you’d have to figure out everything from scratch. With a franchise, you have a lot of things provided for you.

The details vary, of course, but in general you’ll receive some kind of operational manual, along with training and ongoing support from the franchisor. You’ll be helped with all the details on things like setting up shop, hiring staff, buying or leasing equipment, stocking up on inventory and so on.

Nevertheless, you still have a lot to do before you open up. While the franchise’s established business model takes a lot of the pressure off in terms of finding suppliers, negotiating prices and so on, it also places a lot of obligations on you. So it’s important to take the time to read through all of the requirements in detail, and make sure you’re not making any missteps.

For example, when decorating your store or choosing the right layout, there may be some very specific instructions on what goes where, what colors or styles you can and can’t use, and more. Mistakes can be costly at this stage, so pay close attention to the documentation you’re given and the training you receive, and stay in close contact with your franchisor to make sure you’re on track. Your franchisor may also help you with your grand opening event.

Step 2: Follow the Rules... But Also Make Your Own Plan

The franchising model gives you access to a business model that has worked for many other franchisees, but that doesn’t mean you’re off the hook completely. Just like any other business, a successful franchise operation needs a solid, comprehensive business plan.

There’s a lot of work to do in setting up the business and running it from day to day, so it’s easy to neglect the need to plan. But to be successful, you’ll need a clear roadmap. What are your specific, measurable short-term and long-term goals? How will you achieve them? Which metrics will you use to track your progress? What risks do you face? Who are your competitors, and what’s your unique value proposition?

You’ll need to consider all these questions, and come up with a plan that is both ambitious and achievable. Be as specific as you can, and set yourself SMART (specific, measurable, achievable, relevant, and time-based) objectives. And most importantly, the plan needs to be a live document that you revisit and update on a regular basis. For more tips on writing a business plan, read this tutorial.

Also make sure you have enough capital, not just to meet the costs you’ve planned for, but also to cover the unexpected ones that will inevitably come up along the way. Insufficient funding is a common reason for franchise failure. Your franchisor may help with loans or additional funding if necessary. Check our eight-part series on funding a business if you need more ideas.

As you start to run your business, you’ll need to adhere to both plans—your individual one and the one provided by your franchisor. Sometimes you’ll have particular objectives that you’re expected to meet as part of the franchise agreement, and those should be your priority.

Remember that any violation of the franchise agreement could potentially result in the agreement being terminated and you losing your franchise. That’s a worst-case scenario, and typically there’ll be some dispute resolution process before it gets to that point, but keep in mind that you’ve made some very specific commitments in the franchise agreement, and you need to meet them. Your individual plan should incorporate all these commitments, but also include your own goals and objectives, and your strategies for achieving them.

Step 3: Market It Like Your Life Depends on It

Successful franchisees don’t rely only on the advertising assistance provided by the franchisor. They gladly take the benefits of that high-level advertising, but also take the initiative to do their own marketing.

After all, getting the word out about a new business is a huge task. Being part of a larger brand gives you a huge advantage over an independent business with zero name recognition, but it doesn’t mean you can sit back and do nothing.

On the contrary, marketing is perhaps your most important task in the early days. Even if people are familiar with your brand, they don’t know about your individual store—or if you’ve bought a franchise unit from a previous owner, they may know your store but associate it with the previous management. So you need to do your own legwork, particularly doing local events and getting out into the community.

The key to effective marketing is to understand what you and your franchisor both bring to the table.

Where the franchisor can be most effective is with high-level, regional or national advertising, spending the big bucks on TV spots and billboard ads to build overall name recognition or to publicize franchise-wide deals and offers.

Where you can be most effective is in highly targeted, local marketing. Think of giveaways you can do, contests you can run, local events you can sponsor, local media outlets you can build relationships with. Think about where your ideal customers spend their time, and find ways to reach them there.

“To bring customers in the door,” says this Wall Street Journal guide, “successful franchisees report using tactics such as discount coupons, free samples, direct-mail ads and fax blasts. No marketing job is too small or difficult for a franchisee determined to succeed. Many have success with community-based marketing initiatives, such as those involving schools.”

Step 4: Build Relationships

It’s true in any business, but it’s particularly true in franchises: your success depends heavily on the relationships you develop with some key people. Here’s a look at why, and what you can do.

Customers

Once you’ve got customers coming in the door, how do you keep them?

Remember that because you’re part of a franchise, many of the levers that independent businesses use to keep their customers happy are out of your control. You’ll often be subject to restrictions on what products or services you can offer, what price you sell them at, how you communicate them and much more.

In a way, that’s a disadvantage. But you can also turn it to your advantage. After all, those restrictions are in place because those particular practices have been tested and proven to be effective. With so many things fixed, you can focus on the main thing that is in your control, and probably the most important factor in business success anyway: your relationship with your customers.

Many franchises are retail operations, and the franchise owners often act as hands-on managers. If that’s the case for you, then it gives you a wonderful opportunity to talk to customers every day, find out what they want, and figure out ways to make them happy.

And beyond that, it gives you a chance to build strong relationships with your customers. Official loyalty programs are a great idea, but often the best way to build loyalty is through personal connections. Giving efficient customer service goes a long way, but going beyond that to deliver the personal touch can win you a lot of repeat business.

Employees

Building relationships also means keeping your employees happy. Again, many things are out of your control. The franchise will often have its own rules on everything from pay to working conditions, and you have to stick to those rules. Your serving staff may hate having to wear uniforms, for example, but if it’s part of the franchise rules, you can’t make exceptions.

But what you can do is treat your employees fairly, get to know them personally, communicate with them clearly, and have reasonable expectations around their performance. Managing staff effectively is a huge topic, of course. For some good approaches, read these tutorials on managing difficult employees and whether to manage with a carrot or a stick.

Experienced franchise executive Jeff Elgin recommends the following strategies:

• Lead by example. Do whatever it takes to get the job done—willingly and with an enthusiastic attitude—and employees will often follow suit.
• Put people first. Create loyalty, value and trust through your interaction with employees and customers.
• Seek out and follow advice. Take advantage of best practices developed by others rather than re-inventing the wheel at every opportunity.

The Franchisor

And finally, it’s very important to maintain a good relationship with your franchisor. Keep in close contact as you’re setting up and running your franchise, and complete any reports you’re required to provide on time.

There are a couple of reasons why this is important. The first is simply to avoid problems and disputes. We already talked about the worst-case scenario of having the franchisor terminate your agreement. Building a good relationship can help you avoid this scenario—even if things do go wrong, you’ve got a better chance of working out a different solution.

The other reason is that if things go well, you may find yourself with additional opportunities if you keep the franchisor on your side.

Franchise consultant Cheri Carroll tells the story of a friend called John who opened a quick-service restaurant franchise with a company that was relatively new to franchising. When problems occurred early on, he was sympathetic. When the company’s field rep visited, he always treated him with respect, and willingly implemented new policies.

Later, the company became successful and expanded, and it was John who got first choice on acquiring a new unit. He came to run multiple units, and eventually sold them for a huge profit.

How the Story Ends

In this series on buying and running a successful franchise, you’ve learned how franchises work, and seen all the steps involved in finding and evaluating franchise opportunities so that you can choose the right one for your particular situation.

In this final tutorial you’ve got some tips on running that franchise successfully. You’ve seen how to start off in the right way, and how to plan, advertise, and build the relationships you’ll need to be successful.

Of course, this is only the beginning of the story. How it ends is up to you. Running a franchise is a long-term commitment, involving just as much sweat, worry and determination as running an independent business. To be successful, you’ll need to follow all the steps we’ve outlined here, but also add in a lot of hours, some patience, and a lot of grit.

But rest assured that having read this series and done all the research and preparation we’ve outlined, you’ve given yourself the best possible chance of success. Good luck!

Editorial Note: This content was originally published in 2014. We're sharing it again because our editors have determined that this information is still accurate and relevant.