General questions about franchising
In this section, experts answer general questions most commonly asked which go beyond the specific subject areas listed above.
Why are controlling measures carried out in a franchise system?
Controlling provides a method to diagnose the weak points within a company with the aim to produce an efficient use of all means available. Among others it consists of the analyses of different business plans and reporting methods, the comparison of targeted goals and standards with the actual results of businesses, the phrasing and examination of guidelines as well as the carrying out of comparisons between the businesses themselves.
Controlling measures are effectively an instrument that is used to pinpoint
the weak points of a system as well as to ensure that all means are being
The following questions, among others, are useful for finding such weak points:
- What individual components make up the operating turnover and where are the highest sales made?
- What are the individual operating costs and what are the most important cost factors?
- What is the minimum turnover needed to cover the fixed costs?
- What is the profit margin and what interest is paid on invested capital?
- What are the business assets and how do these change?
- Where are the strengths and weaknesses compared to other businesses?
- To what extent do the actual business results differ from the planned results and what are the reasons for this?
- To what extent must the planned results be amended and what consequences will this have?
Controlling measures consist of, among others, analysing the various business plans and reporting system, comparing planned results and standards with the actual results, formulating and revising guidelines as well as comparing the results of the different franchise-run businesses.
As a rule these tasks are carried out by qualified people, responsible for assisting the businesses, at head office who know the system in great detail and have close contact to the separate businesses. Consistent controlling produces above all quality assurance, standardization of the system’s appearance and a movement towards an increase in efficiency.
In most systems the franchisors themselves or specialists from the head office visit the different franchise businesses several times a year in order to check that their instructions are being kept to as well as to see if there are any weak points and should it be necessary to find ways to eradicate these weaknesses. As a result of this close contact a relationship built on trust is created on the basis of which problems and misunderstandings can be solved in a more positive manner.
The contract often provides the franchisor with the right to enter and inspect the premises, to examine and test and remove products, supplies, equipment and packaging for the purpose of ascertaining that the franchisee is operating in accordance with the terms of the franchise agreement and the system manual.
The franchisor has a limited right of instruction and supervision. Within this framework the franchisor has the right to enforce a conduct which conforms to system standards and to see to it that uniform norms are adhered to. Thus the franchisee is advised as to how he/she is to utilise the know-how put at his/her disposal and the targets to be aimed at. For this purpose quantitative and qualitative criteria are to be drawn up, by means of which an adjective appraisal can be made as to whether the franchisee has reached the quality standard characteristic for the franchise in question. Controlling is instrumental in ascertaining weak points.