3D your franchisor progress...

Chart your franchisor progress pre- and post-COVID.

Amazingly, few franchisors regularly review their master plan or conduct a growth analysis.

They often wing it, grow (or not!), and then, months or years later, wonder what happened.

Charting growth relationships or correlations is only one piece of managing an ongoing master franchise plan. Many franchisors take a haphazard approach to the cause-and-effect relationships which exist within, or have influence on, their franchise system.

Few franchisors start quickly, but yet praise management on the brand (experience, product, or USP) they created – that’s usually called Luck! Some grow moderately, all amidst a very limited budget for people, systems, governance, IT, HR, and marketing resources. Some never grow, and blame whoever they can find, and realize that many years have now passed and not much positivity (or profitability!) had resulted. They were probably under-resourced either in terms of budget, people, systems, advice or intel, or were driven by ego, or they were personally satisfied not to build a real true growth platform in the first instance.

One of the very basic analytic tools franchisors can use is a simple 3D chart. It measures and visually charts their franchise growth (opened vs. sold) over a specific period (i.e. number of weeks or months or years).

For example – 75 units opened (gyms, clubs, shops, stores, etc.) out of 100 franchises sold ("awarded") in 24 months.

This would be represented by Point P (a-b-c) or (75o-100s-24m) in both charts above.

But firstly, let’s look at the basics.

“O” is the origin of your business – when your franchisor business truly started, after all your initial concept, design, staffing, branding, legal, regulatory, IT, marketing, and related business prep work is complete. It's your starting point.

Effectively, it’s your “go forward and franchise” launch point. D-Day for the franchisor. No franchises sold yet and thus no franchised units opened. But time waits for no one.

“O” is the starting representation of the vertical z-axis and usually measured in months (or occasionally 'years' for exceptional franchisors like McDonald’s or Subway, for example).

Occasionally, some franchisors choose to reset that “O” point, but it's not recommended! Some reset it for various reasons – a dramatic rebranding of their original concept, or a post-COVID reset, or the hire of in-house franchise specialist, or the implementation of a significant change to their original model, or the reentry into an international market after an earlier failure, or the purchase of an existing franchisor business, or a generational handover from parents to children, and so on.

But life rarely offers such restarts without ignoring history or prior performance analysis.

Essentially, it should really remain as the origin (date) point of your operating business. If you wish to reset that date, for whatever reason, you should create a separate 3D chart altogether, or mark when you reset your secondary “O” point along your vertical O-z timeline axis. FDDs should include that reset reason, or the purpose of a significant change in a brand's promotional pitch. Transparency leads to trust. Trust leads to franchise sales.

The franchisor should truthfully mark the timeline which corresponds to specific significant change-events (the inflection point) in that relationship dynamic and performance path.

The two-dimensional base plane, called the “floor plane”, is the xy-plane. This is represented as an ordered pair (x-y) or (75o-100s) in our example above.

Typically, but not always, and depending on the franchise type and industry, a Rule of Thumb in franchise development is that franchisors should exceed a timely 70-75%+ opening-to-sold ratio. In the example provided - Point P (75o-100s-24m) - this suggests a 75% opened-to-sold outcome within 24 months.

In the fitness industry in Asia and the Middle East, for example, that would be a very good outcome with a sales pace of one franchise awarded every week or so, and an opening pace of one gym or studio every three weeks over the course of 24 months (or 104 weeks).

That strong 'pace of play' recognizes however that a lead generation program is near-flawless, the vetting and introduction processes work well, and all other components within the franchise system are working efficiently and in a very communicative way.

The three directed lines O-a (units opened), O-b (franchises sold), and O-c (time) are called the coordinate axes and labeled the x-axis, y-axis, and z- axis respectively.

Let a form the distance from the yz-plane to P, let b form the distance from the xz-plane to P, and let c form the distance (vertically) from the xy-plane (the base plane) up to P.

To locate a point in space (and time!) however, three numbers are required as an ordered triple (x-y-z) of real numbers, such as (75o-100s-24m). By inputting the (time) period “z”, we can draw the orientation of the axes and now visualize Point P (75o-100s-24m) in space. Like a ready-to-assemble flat-pack that you pull upwards and outwards by a handle, you start to form its shape (like a tent, or workstation, or light fixture). Think IKEA!

This denotes a degree of franchise efficiency as the “time” element has now been introduced. How many franchises can you sell, open, in a specific period of time?

Many franchisors sell & award franchises - but can't get their franchisees to open on time. Many franchisors sell too slowly, as they don't have the market expertise or investment channels to explore. Many franchisors don't have the overall coordinated sales, vendor, compliance, IT, media or marketing capabilities, or governance programs in place to produce results even assuming their core concept or brand has been soundly created.

The good news is, in a few cases, like in a post-COVID world, history & timing can play in your favor - such as in the fitness, health, exercise, and wellness industry where franchise growth should be VERY strong as a result of these repeated and prolonged periods of lockdowns, quarantines, 'circuit breakers', and so forth. Similar to the QSR growth in the early 90's in the (old) Eastern Bloc countries and other examples of industries in certain developing regions, sometimes history intersects with the right industry and the right brands in the right hands.

So, back to our 3D chart, if franchisees open 75 units out of 100 sold but only over 40 years (480 months), it can hardly be called a very successful franchise in many respects! That “box” on the 3D chart would be tall & slim, like an elevator shaft or obelisk.

If franchisees open 150 units out of 200 sold in a period of 24 months, then that visualized box would be relatively flat, like a stone step or base or foundation plate. The analogy makes sense, as you would now have created a firm base to your franchisor business ready to support further steady and powerful growth. Your franchise system is executing well.

Was a new 'master' franchisee or multi-unit franchisee signed up? – A significant growth on the y-axis (the “sold” axis) but probably no progress quite yet on the x-axis (the “opened” axis) in the near term. Onboarding can often redirect resources for the step ahead.

Did the franchisor lose some key leaders? – A significant time passes on z-axis, with probably no franchises sold (“awarded”) on the y-axis, and probably few (or only previously-sold) franchised units opened on the x-axis. This disruption often usually occurs when a franchisor’s entire business is sold to a new investor or to an equity group. There is a major transition or implementation period in play, and continuity generally suffers.

Did the franchisor expand internationally, or a cash injection or new funding involved? – Again, time clicks by (and the O-c point continually moves vertically up the z-axis), but momentarily few franchises get sold or opened as the new international team sets up, structures itself, and connects with its HQ on policy, people, systems, legal, governance, cultural assimilation, language, and so forth, and all whilst anticipating long cycle times. Similarly, opening teams sent from HQ can also unduly delay new regional start-ups as they get settled into the local environment. So, that ideal balance needs to be established as promptly as possible with assets and resources which are experienced, mobile, and mature.

The proverbial “pivot” (e.g. a strategic change) can positively recharge the business but can also cause a delay or disruption in its growth if it is poorly or incorrectly managed.

Let’s also bear in mind that in this 3D illustration, time always continues (the z-axis extends upwards/vertically), and there may be disruptions in the openings and sold rate of the business as the franchise sales, operations, compliance, marketing, and other teams, and other (even) external events, interact and engage with each other. Patterns will develop.

In some cases, and sadly in a COVID world over the past 18 months since March 2020, many franchisees’ previously-opened businesses may have also defaulted and are now permanently closed, yet time (the z-axis) continues. This anomaly creates a retraction or reversal in the overall x-axis opening rate and probably a stalled sales pattern on the y-axis, yet time continues.

It is important that franchisors time-track the milestones and record those events which impact their growth or idle periods, and correlate those influences onto a realistic growth path. Even 2 or 3 years after COVID eases, it will be all that easy to unnecessarily blame COVID, but franchisors need to make preparations now even before restrictions are relaxed.

Creating S.M.A.R.T. goals and developing relationship and data analytics are always useful business exercises and part of a discipline and work ethic which will drive efficiencies and scalability long-term in your franchisor business.

Feel free to connect with your local or regional franchise specialist and ask questions on how best to audit and inspect your brand and then to prepare and develop a scalable growth map towards further success and profitability.