EXPERTADVICE
How should I determine my fi nancial projections for prospective franchisees?
It is absolutely essential that the fi nancial forecasts you provide to your prospects are based on empirical evidence – turnover and profi t that has been achieved in the past, either by a company-owned outlet or other franchisees.
Franchisors that do not base their projections
KELLY BLACKMORE-LEE Kelly Blackmore-Lee is head of compliance and finance at the British Franchise Association
on proven trading history are setting themselves up for potentially serious consequences – for both franchisee and franchisor – in the future. If you’re over-promising on what can be achieved then you may be in danger of misrepresenting your franchise opportunity and leaving yourself
open to challenge if a franchisee fails to achieve them.
Good franchising is based on proven business models, and that is vital when it comes to the projections. But it’s not just good ethical practice, it makes commercial sense too; a franchisee that has surpassed their targets rather than missed them is going to be happier, more productive and generate more MSF for you. And when they’re asked about the projections by a prospect, imagine how positive their answer will be and what a powerful recruitment message that is.
So look at the evidence and, if anything, err on the lower side of what’s been achieved with your projections. You’ll create a more satsifi ed network, rather than a disappointed one.
I’m involved in a dispute with a franchisee, how can I resolve this quickly and effi ciently?
Every established franchisor at some time or another will be required to address a delinquent franchisee – namely, a franchisee who has breached their agreement or who is alleging that the franchisor has not delivered on their promises. The fi rst step to mitigating disputes is to
ensure that the franchise agreement is well written, updated as your business evolves, and executed correctly. As many as 40 per cent of franchise agreements are not executed correctly and this can infl uence
their enforcement. The earlier the dispute is addressed, the easier, cheaper and quicker it is to resolve. Most disputes can be resolved with a meeting or telephone call to agree a practical solution, which is actually far more likely to resolve the issue defi nitively than a threatening legal letter.
If a solution is agreed, make sure that it is recorded in writing. Keeping a contemporaneous record of what has been agreed is essential to avoid a recurrence of the issue and to hold the franchisee to account if they fail to comply. Lastly, do not be afraid to take advantage of your solicitors’ and other franchisors’ experience early in the process. It is highly likely they have seen and addressed your problem before!
JAMES BARRETT
James Barrett is an associate at Hamilton Pratt.
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www.franchisornews.co.uk
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