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Re-franchising is a powerful strategy that improves cash reserves, drives growth, ensures execution of re-image programs on a timely basis and will attract qualified new franchisees to the concept.
Many franchise companies have come to realize that re-franchising is a powerful strategy. Re-franchise programs, the sale of company operated units to franchisees, has proven to be extremely effective for:
* Attracting new operationally and financiallyqualified operators to the system,
* Motivating existing franchisees to cure deficiencies and prepare for expansion,
* Driving growth through new development commitments,
* Raising capital to reduce debt or invest in the concept, and
* Accelerating remodel programs.
Each re-franchising program is unique and carries with it its own specific challenges. Solid execution and the knowledge of possible unintended consequences is what will make the difference between success and failure. Our experience over the last 10 years has taught us that the following are critical elements of a successful program.
Employee Communication
Most employees fear change and the franchisor must guard against losing store managers once the re-franchise program is launched. The franchisor should communicate to employees that refranchising initiatives will not only ensure their continued employment, it may create opportunities for them. It is important that employees understand the following:
* Franchisees acquiring units want the existing employees to stay on and typically offer at least the same pay and benefit programs.
* New franchisees want to grow, usually much faster than the franchisor, thus creating growth opportunities for employees.
* For larger multiple-unit packages, it is not unusual for a vice president or director of operations to become the operating partner for the...