Franchise Audit: Points of Attention

The increase in the number of franchises leads to the fact that the requirements from potential buyers are becoming higher. If a few years ago, entrepreneurs approached the choice of a franchise, considering mainly only the financial indicators of the acquired business and the purchase price, but today the situation has changed significantly. And in order to meet the changing requirements of customers, franchisors need to verify that their franchises comply with the requirements and trends of the modern market. The most complete picture of the state of the company's franchise system allows you to get an audit of the franchise. About what it is, says the consultant of the company FRANSH Growth Strategy Julia Pigrova.

An audit of a franchise program includes checking all elements of a franchise relationship, namely: the internal structure of the company, the location of the franchising department and its interaction with other departments, the rules of activity of employees involved in the franchise area, the contractual design of the franchise, the profitability of existing partners, and much more.

An audit of a franchise can be performed both on its own, using the most qualified employees, and attracting third-party consultants. As practice shows, it makes sense to conduct an audit to franchisor companies every three years, since during this period the franchise system and the structure and trends of the market change.

If you decide to audit the franchise, then first of all you need to conduct a competitive analysis of all similar franchised offers in the market and evaluate the place of your own franchise among them. It is worth remembering that in this case, the analysis includes the study of franchises not only of direct competitors for the offered product or service, but also, in principle, of all competitors for franchised offers. After all, choosing a franchise for a clothing store, an entrepreneur can also consider the franchise of a shoe store, accessories and jewelry store, fast food and travel agency.

After conducting a competitive analysis and obtaining data on the market situation, you need to analyze the existing structure and size of franchise payments and assess the competitiveness of your offer, the justification of the costs incurred by the franchisee, in terms of the amount of benefits offered to your partners, as well as the adequacy and adequacy of your maintenance costs and affiliate network development.

Evaluation of the quality of training programs for franchisees

Today, the amount of support received from the franchisor is one of the main criteria when choosing a franchise business. As a seller, you need to evaluate, first of all, the quality and completeness of training programs for all employees of a franchisee enterprise, continuing education programs and certification systems, the volume of your participation and support of marketing activities of your partners, IT support, the responsiveness of franchising employees to arising from franchisees problems, the availability of franchising managers for partners and the smooth functioning of the system of interaction between franchising managers and other departments of your company.

Analysis of the work of the franchising department and each individual employee

The franchising department should be built in such a way as to fully perform the three main functions: development, support, control. To ensure the smooth execution of these functions, it is necessary not only to regulate all the processes of the department itself, but also to build an efficient and clear system of interaction between the employees of the franchising department and other divisions of the company.

Interaction between the franchisee and the franchisor is most effective when using the so-called “one window” principle, that is, when the franchisee communicates with his personal franchise manager and solves all arising problems through him. This improves the efficiency and clarity of the information received by the franchisee. However, at the same time, the work of other divisions of the company should be organized in such a way that the franchise manager can always promptly get advice from any specialized specialist of the company.

The system of motivation and control of employees of the franchising department

The motivation of the personnel involved in the implementation of the franchise strategy should ensure the most efficient use of human and time resources and set the right priorities for each employee. The system of quality control of the work of each employee should ideally be built in such a way as to exclude the system of external control in the person of a separate controller, but so that each employee is controlled by another employee of the department, using a principle similar to the principle of separation of powers, ensuring self-regulation of the system. To do this, the employer must distinguish between areas of responsibility and control zones, as well as create such a bonus system for each employee of the franchising department so that control functions are carried out by financially disinterested and independent employees in this area.

Employee Qualification Assessment

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When conducting a franchise audit, an employer needs to evaluate the qualifications of the employees of the franchising department, their relevance to their position and the ability of employees to effectively fulfill their responsibilities. Personnel assessment is one of the most important issues that require special attention, because it is the executors who will determine the success of the chosen franchising strategy of the company.

To carry out this kind of personnel assessment, the employer needs to develop a certification system for franchising specialists, as well as psychological tests to determine whether the internal qualities of employees correspond to their positions. To conduct such evaluations, it is also possible to attract franchising consultants with experience in conducting both training programs and subsequent certification of personnel.

Analysis of financial indicators of partners, as well as changes in their sales

The business performance of your franchisees is a litmus test for determining the effectiveness of your business system and your franchise program. In addition to financial indicators, management with the help of franchisee support managers needs to analyze the most common problems of partner enterprises and understand the reason for their occurrence, which in most cases lies in the flaws of the franchise program. Financial and other problems of the franchisee can be caused, for example, by the lack or poor quality of the help of the franchisor at the stage of compiling the assortment matrix or the initial purchase of goods in the retail, the lack of marketing support from the franchisor, the untimely or incomplete response of the franchising managers to the current problems of partners and many others.

Contract Design Analysis

The franchise agreement must take into account all the nuances of the franchising policy of the company, while the balance of interests of the parties is mandatory. That is why, as practice shows, in developing a contractual design of a franchise, it is not enough to attract only specialists in the field of jurisprudence, but the participation of franchising consultants who have experience working with both franchising companies and franchisees of various fields is also necessary.

An audit of a franchise must necessarily include an analysis of all the guides and instructions for doing business that your partner receives after signing a franchise agreement. The quality of the copying of your business system depends on the quality and completeness of the materials transferred to the franchisee, since these materials are a kind of instruction for its operation and effective use.

Audit of franchise marketing and sales systems

It includes analysis of the target audience, that is, determining the portrait of a potential franchisee, since the franchise promotion strategy and the success of the franchise program depend on the correct choice of the target audience. An audit of the marketing system cannot do without an audit of the channels used to promote the franchise and the effectiveness of each of them, as well as an audit of advertising and presentation materials used to promote the franchise and personnel involved in this process.

The franchise sales system is one of the key links in the development of the franchise network. The quality of the selection of partners and the technology of working with them at the pre-contractual stage of the relationship determines both the quality of the partner network and the safety of information that constitutes the trade secret of the franchisor: it is at the initial stages that the partner forms an opinion about the franchisor and the degree of reliability of cooperation.
Analysis of the franchise sales system includes many different points, such as analyzing the personnel aspect of sales, determining the appropriate professional skills and qualifications of the franchise sales department, analyzing the training system for sales managers, their completeness and quality, analyzing the quality and efficiency of processing requests from potential franchise buyers, analysis of the security system (verification of potential partners for competitive intelligence, the composition of documentation for the protection of information).

The practice of our company shows that at present the problems associated with the promotion of franchises are the most urgent for franchisors, it is these issues that cause the most discussion at seminars and conferences on franchising. As experience in the franchising market shows, the most effective channel for promoting franchises is now the Internet: their own websites of companies presenting both goods and the success of the franchisor’s business, as well as industry-specific Internet resources, such as www.beboss.ru, which the largest franchise catalog in Russia. Another effective tool is the regional franchising conference, where franchisors are given the opportunity to personally present their franchises to regional entrepreneurs. The effectiveness of these franchise promotion channels is explained by the fact that they allow the franchisor to personally interact with the target audience, that is, with entrepreneurs who have already decided to purchase a franchise.

In this article, we tried to highlight the main components of the audit of a franchise program and franchise system. As it was said at the beginning, an audit of a franchise can be carried out both by the company itself and with the involvement of external consultants. Both methods have their advantages and disadvantages. The company's own specialists possess deep knowledge of the company's business processes and all the features of the business and at the same time are not specialists in the field of franchising and may miss important nuances for this area of ​​activity. In addition, the audit conducted by the company's own employees does not provide an objective assessment and significant deficiencies of the existing system may be missed. If you attract a team of independent consultants, you will avoid the above problems. But when choosing consultants, you should personally get acquainted with the direct executors, learn about their experience and completed projects, otherwise there is again a risk of establishing partnerships with unreliable people.