Four Tough Business Decisions That Every Franchisor Will Eventually Have to Make

Lily Sweeney, writer

Published at 23/06/2021, Updated on 04/05/2022 , Reading time: 5 min

Four Tough Business Decisions That Every Franchisor Will Eventually Have to Make — Photo © four-tough-decisions-every-franchisor-will-eventually-make.jpg

Making difficult decisions about the health and direction of your business is never easy, but as a franchisor, it’s extremely necessary. Some choices can’t be avoided, even if they’re tough. Here’s four examples.

When you’re making tough business decisions, you need to be strong enough to deliver less-than-ideal news and prepared enough to explain your choices thoroughly. Many things go into being a successful franchisor, and in this role, you’ll need to balance the provision of support and guidance with the ability to make the right moves for your franchise business. If something isn’t working, continuing to barrel ahead will only harm your business’s long-term health.

What business decisions do franchisors have to make?

Franchisors and franchisees both have a number of important obligations. Franchisors are, fundamentally, running the show, and as a result, will often need to make decisions that keep their franchise business ticking along successfully. Sometimes, these decisions will be simple and easy. Other times, they’ll be more tough, and they’ll require more thought. In terms of the scope of their responsibilities, franchisors handle:

Hiring and firing
Training and support
Budget and performance
Suppliers and products
Marketing and advertising

I'd be lying if I tried to paint the business world as anything other than a full contact chess match. Tough decisions have to be made on an almost daily basis, and therein lies one of the biggest challenges of being an entrepreneur.

– Neil Petch, Entrepreneur

Four tough business decisions that every franchisor has to make

These decisions are almost certain to crop up over the course of your career as a franchisor, and when they do, they’ll be your responsibility. Remember to communicate thoughtfully, think carefully and act rationally, regardless of the decision that you’re having to make. A little care, effort and sensitivity can go a long way.

1. The decision to let go of an underperforming franchisee

Recruitment matters. If you hire the wrong person and they’re a bad fit for your franchise, you could incur monetary losses, losses of time, productivity and employee morale, and damage to the overall brand reputation. There’s an art to recruiting trustworthy, reliable franchisees, and if you can manage that, you’re better off. But that’s not to say that a seemingly perfect hire won’t potentially cause an issue down the line.

>> Read more:

When you have an underperforming franchisee on your hands, don’t resort to letting them go immediately. Instead, give them a chance to redeem the situation by offering regular meetings, setting goals and deadlines, and increasing your offerings of support and training.

If this doesn’t work, the time will come when you need to end the franchise agreement gracefully. Make sure to:

Check you have the legal right to terminate the contract
Notify the franchisee in advance
Seek legal advice
Demonstrate a willingness to compromise
Try, whatever happens during the process, to end things on good note

The decision to terminate an underperforming employee can be a difficult one to make. It may keep you up at night. You may be looking for ways to keep them on or support them so you don’t have to “ruin their lives” by firing them. But you have a responsibility to your organization, your other employees, and the objectives of your own job, so sometimes you need to do things you don’t really want to. – Michel Theriault, Forbes

2. The decision to close or adjust poorly performing franchise units

Franchising your business increases your capacity for growth, but it also increases the level of risk that you’re taking. You need to manage this risk, and when you recruit franchisees, you should actively ensure that you’re pinpointing and allocating the right locations. Finding the right location means considering:

Is the location convenient for customers?
Will there be enough skilled staff available in the area to meet customer needs?
How much will a suitable premises in the location cost, and is this viable?

Still, certain locations will perform poorly, even if expected not to. And if you keep letting a franchise unit operate when it isn’t reaching the normal financial standard of your operation, you could damage the financial health of your franchisee, and of your entire network. Whether you need to adjust things slightly or close the territory completely, you need to take action when a unit is consistently underperforming.

3. The decision to shelve expansion plans in unsuitable locations

One of the best parts of running your own business in the franchising industry is the room for expansion. Multi-unit franchising is on the up at 36% [British Franchise Association], and expanding into a new area can be extremely exciting and profitable. But, if regular assessment deems a site of planned expansion to be no longer viable, it’s important to shelve your ideas without wasting too much time.

If an idea doesn’t look like it’s going to play out successfully, don’t let your franchisee go out on a limb with further investments that won’t pay off. Look after your franchisees, and want profit for them, as you want it for your entire franchise operation. Make decisions in the interest of everyone.

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4. The decision to pull unpopular products and/or services

Even when you spend a long time developing a product or crafting a new service, there’s no guarantee that a customer will respond to it. If something is proving unpopular with your consumer base, don’t be precious. Pull it, and go back to what was working and performing.

If you can’t offer products that actually appeal to your customers, there’s no guarantee of continued business. You have to go to where the demand is, rather than making choices that might seem right to you, but do not have wider appeal. Products and services that fail with customers are likely to do so because they:

Fail to meet customer needs
Target the wrong market
Are priced incorrectly for what they are
Don’t work as they should/produce their promised end result

Learning how to make tough business decisions is integral to the success of your franchise business

Hopefully, this article has shown you why tough choices have to be made, and what kinds of tough decisions you can expect ahead of you as a franchisor. For more franchisor tips, stay on Point Franchise, and discover how to develop the right franchise infrastructure, or the importance of prioritising franchisee satisfaction.