Profit Improvement Strategies for Franchising

Everyone would like to improve profits, more so than ever in the current climate. But is there an easy model to follow? Well YES and NO, there is of course no magic wand when the fundamentals are poorly executed but there are a few procedures to follow to help franchisees along the way.

Let us start with the basics of pricing and customers. In franchising there can sometimes be little scope in setting prices since they are set nationally by the franchisor. However, where there is flexibility you must test the boundaries. How do you know what the price ceiling for your product and service is unless you test it? Businesses continually add “extras” to sweeten deals for customers without thinking these “extras” add value, they add cost to my business I will charge for them.

“Bundling” and “unbundling” products and services has been popular for years but often the presentation of something alongside something complimentary or helpful will enable you to reconsider the price to be asked.

Every business needs customers and every customer is a good customer? – Well no actually, what every business wants is an “ideal” customer. Someone who appreciates the effort will pay the sum asked, will repeat the order and even more amazingly tell other people about you without being prompted. Far fetched? Again, no. If you start with the definition of who you want to deal with, how you won the good customers in the first place or how you might meet them, everything will start to click into place. Once you have a few ideal customers you will establish a connection, trust will grow and you will then be able to add further services, more volume, higher margins etc. Even site based businesses like Costa build on this basis. They look at their target market, get the location, décor, food and coffee right, add service with a smile, a loyalty scheme and soon the place is full of people who keep coming back.

Clearly there are many other areas to look at to improve profit:

  • Cost reduction techniques (an area with many specialist consultants to call on)
  • Product extension (you will be amazed how easy it is to widen the scope of your product or service)
  • Cash management generally
  • Marketing techniques (how do you reach those new customers in a new and interesting way)
  • Engagement and motivation of your key resource – people. (A motivated and engaged staff will perform better)

Time however is too short to go into all these areas in this article.

So in summary start with the strategic thinking part since in essence to build value you will do one, two or preferably all three of the following:

  1. Do more of what you already do
  2. Do what you do differently
  3. Do different things altogether

But all I do is bake muffins I once heard someone say.

Yes but if you got better retail customers you would sell more, if you changed your ovens you would make them faster and cheaper and if you delivered drinks with the muffins you would add value and make more from the same delivery!!!

Business can be simple sometimes.