Identifying underperforming franchisees: Keeping your franchise network strong

Weak links mean weak chains. Nowhere is this more important than in franchising.

Identifying underperforming franchisees: Keeping your franchise network strong

Weak links mean weak chains. Nowhere is this more important than in franchising. Identifying underperforming franchisees must be your first step to improvements in your business’ development.

The human body is an incredible organism. It comprises millions of chains – whether protein, kinetic or otherwise. Just like the human body, there are supply chains that ensure your food is brought to your table, mechanical chains to see that your car operates like it should and many others.

In franchising, as in all aspects of life, franchisees are the metaphoric links in the chain that play a crucial role in the business’ success. A franchise will only be successful when its entire network of franchisees is successful. And the risks of the alternative can have serious consequences for the whole system.

The risks of underperforming franchisees

In a franchise “chain”, a single underperforming franchisee can damage the overall reputation of the brand. This happens when quality standards are not met, when there are different approaches to complaints resolutions and when the bottom line is affected, too. 

Low sales and revenue from underperforming franchisees can impact the financial

health of the entire franchise network. Not to mention that these franchisees can have a negative impact on the morale of the franchise ecosystem. 

With some of the major risks having been identified, what are the ways you can recognise the problem before it starts spreading through the rest of your network like wildfire?

Identifying signs of underperformance

In many areas of life, awareness is the first step to resolving a problem. And because the links in the chain of franchising can be easily identified, there are some tell-tale signs of underperforming franchisees. 

The first is when the weakest link drags down the whole chain. This can be through poor financial and sales performance, poor product or service delivery, and poor reputation.

A second sign is inconsistencies in delivering on the franchise system standards. It is clear to all in franchising that customers visit a franchisor because they know they will receive the same level of service irrespective of the location. Poor delivery or non-delivery according to the system’s standards results in inconsistencies, which customers can easily spot and turn away from, leading to a loss of customers and hence revenue.

Thirdly, underperforming franchisees can be identified by their inability to compete with other franchisees or outside competitors effectively. Their poor performance affects the overall average performance and ratings of the peers in their networks while the competition is able to outperform them and eat at their market share with significant consequences on the franchise business.

Solutions for addressing underperformance

The risks, signs and consequences of underperforming franchisees don’t have to be a given in your franchise network. Instead, you can take actionable steps to address this underperformance and give the struggling franchisee a leg up so that they compete effectively and improve across multiple areas. 

Tips to consider in this regard include:

  • holding regular meetings with underperforming franchisees to identify issues and develop action plans;
  • carrying out ongoing training and support to improve franchisee skills and knowledge;
  • tracking key performance indicators to identify areas of improvement and celebrate successes;
  • sharing best practices from successful franchisees;
  • and providing additional resources, training or support as needed.

Importance of regular monitoring and evaluation

It should be clear by now that one franchisee’s underperformance can impact everyone else in the franchise system. A weak link ultimately means a weak chain. And in business, a franchise that has a weak link in its internal system will struggle to compete effectively. Reputation can be damaged and customers can be lost. All because of one franchisee whose performance was not managed accurately at the right time. 

This is why regular monitoring and evaluation are crucial to the success of the network. Regular evaluation helps identify the weakest link in the chain and the potential risks for the franchise network before they escalate. Furthermore, it is vital for franchisors to proactively intervene and support underperforming franchisees before their performance impacts the entire business.

In conclusion

Looking at it from a different angle, when al franchisees are strong links, the entire franchise chain is strengthened. In turn, this supports the overall success of the franchise network. As such, the importance of a cohesive and supportive franchise system cannot be overstated for the ultimate success of the whole business and its continued development.

Dani Peleva
Dani Peleva