Corporate Support Systems
Training and Support Systems. As the CEO and the final decision maker, it is your number one priority to teach your franchisees how to become profitable. There is a direct correlation between the total number of training and support hours a franchisee receives and their overall performance and profitability. However, the type of training and support services that you develop may be a “perfect fit” for your franchisees, yet your operations department may still be operating at a financial loss. The key to your training and support system is to simultaneously “maximize” franchisee and franchisor profitability. New franchisors struggle with a constant need to re-design these processes. WHY?
Stage 1 (Years 1-8):
They have the wrong people and the wrong processes.
Stage 2 (Years 9-16):
They have the right people performing the wrong processes. They have the right processes and the wrong people.
Stage 3 (Years 17-24):
They have the right people performing the right processes.
This inexperience causes a reactive cycle of poor decision-making and an inability to maximize profit. With FGP’s proven and tested training and support system, you are able to improve franchisee revenue growth and calculate the actual cost to service a franchisee during each stage of their respective development, thus increasing your net operating income. Our system will reduce the cost of supporting each franchisee up to 50% of your overhead, and increase the measurable productivity of franchisees. This combination offers unparalleled efficiency and generates 30% net profit on every $1 of corporate revenue.
FGP has invested over 1 million dollars in research and development, and has benefited from 3 current and former CEO’s of major franchise companies. We have developed a proprietary training and support system, which is operated on our web-based Franchise Operations System (FOS) technology and easily transferred to retail, service-retail, home-based, kiosk and mobile franchise systems.
Your benefits include:
- A higher % of Healthy and Connected franchisees.
- Reduce the actual cost of servicing franchisees by 50%.
- Improved overall “revenue and profit” of franchisees.
- Substantially increased corporate profitability by 50%.
Additionally, we will consult with you on how our system works and discuss the potential of licensing our Franchise Operations System (FOS) to you for your long-term benefit.
There are two (2) primary support philosophies in the franchise industry: centralized and decentralized. Each has its own advantages and disadvantages. The key is to determine which support structure, or combination, will boost system wide revenue, while increasing your corporate earnings. From 1990 to 1996, we budgeted a $500,000.00 annual overhead expense ($40,000.00 per month), which provided a centralized support system. This “command and control” approach utilized 100% of our corporate team working at our headquarters. Telephone support and onsite field visitations with quality assurance checklists were enforced regularly.
From 1996 to 2002, we budgeted a $500,000.00 annual overhead expense ($40,000.00 per month), to provide a decentralized support system. We recruited our field support representatives (regional directors) within four regional satellite home based offices, who reported directly to our Director of Operations based at our corporate office. We performed telephone support, onsite field visitations, and regular quality assurance checklists were enforced.
This $1,000,000.00 investment over a 12 year learning period offered us the harsh yet necessary lessons to find our highest level of efficiency to train and support our franchisees, from the lowest number of corporate employees. During the next 10 year period, we reduced our labor expenses by 50% and improved our training and support to our franchisees. We hired Bernie Browning, a former CEO of a franchise company to consult with us. After a thorough franchise system analysis, he reported his findings:
“Scott, you have 25 well-paid executives and I have reviewed each job description. Your monthly overhead is $200,000.00 per month. Every executive at the corporate office seems responsible, however, which one person is directly accountable for the profitability of each franchisee?”
Bernie went on to coach us on how to re-engineer each marketing, sales, training, support and financial process to improve all levels of efficiency.
Our lessons of efficiency, to be shared with you, will allow you to avoid wasting hundreds of thousands of dollars BEFORE YOU START YOUR FRANCHISE COMPANY! Our goal is to increase your revenue and profit per employee up to 50%.Unfortunately, we learned that the amount of our investment, effort, and energy did not necessarily translate into leaving traction or a measurable return on investment for every training/support dollar we spent. If it can’t be measured, it can’t be managed.
- Is your philosophy to grow with your franchisee’s revenue or to empower franchisees to retain the economic upside to their business model? What are these advantages and disadvantages?
- What variable royalty percentage or fixed amount should you charge?
- Is this a random decision and how should it be calculated?
- What training and support overhead structure supports the profitability of this decision?
- What relationship strategies avoid the resentment of your high performers paying more royalty, and protect the viability and payment of lower performers who are struggling to pay their royalty? (There is gradual resentment in both that can be prevented in advance.)
- How do you determine the actual cost to train and support a franchisee and maintain a 25% net-operating income?
- How do you avoid confrontation when a royalty non-payment occurs and put the relationship back on track so that both parties are comfortable?
These royalty “questions and answers” are an integral part of your early success. Getting off on the right track is essential. We have developed a proven training and support system directly tied to reduced labor costs and workflow processes, which yield the highest return on investment. We are seasoned veterans in this area of franchising strategy.
Your franchisees have a strong desire to remain close to your vision and leadership. This will enable them to feel your continuous heartbeat and passion, which rejuvenates and reinforces their commitment to grow their business. More importantly, they gain confidence in the strategic direction of your leadership team. There is a watchful eye on each decision you make and how you make it. Knowing when to be “firm and flexible” can build tremendous momentum or spiral the mood of your franchise system. We will train you on the variety of scenarios that you will encounter. As the CEO of your company, your private and public style of communication will be highly scrutinized. There is a professionalism and etiquette that must be upheld at all times by each member of your corporate team. Each interaction you have with your franchise partner is an opportunity to strengthen your franchisees original trust and confidence in joining your franchise family.
Your preferred vendors are invaluable strategic partners. The interviewing and selection process must be rigorous in all areas of stability, profitability, pricing, delivery, and franchisee service levels. Eventually, you may have as many as thirty (30) preferred vendors, i.e. banking, credit, furnishings, fixtures, equipment, printing, products, marketing, real estate, architectural, and design services, just to name a few.
The collective service culture that is provided to your franchisees from these preferred vendors has a measurable impact on reducing the start-up costs and increasing unit-level profit of your franchisees. These vendors will be held to a high standard of operational values to build brand trust. Whether exclusive or non-exclusive, there will be a preferred vendor agreement which outlines your corporate requirements from each vendor. Contracts will be annually assessed and renewed. Preferred vendors, which you require franchisees to utilize, must legally submit their contracts as exhibits within your Franchise Disclosure Document. From the start, this aspect of franchising is underestimated. The higher the caliber of preferred vendors and management controls that you put in place, the happier and more profitable your franchisees will become. Over 25 years, we have contracted with many preferred vendors within our franchise industry. We have learned which vendors match the required “core values” and provide excellent service and pricing to franchisees. We have a solid list of vendors who we will put our name behind. These vendors have demonstrated that the interest of our franchisee is more important than the up selling of more products and services.