When a business owner first contemplates moving his enterprise to the franchise model, one of the key drivers is the vision of a steady predictable stream of revenue from a growing network of units.
When a person first considers the notion of becoming a franchisee, one of their key drivers is being able to build on a proven model and having the support of a “head office” team.
The glue that connects both of these two visions together is the royalty collection. It is, in many ways, the foundation of the franchisor-franchisee relationship. To use our favourite analogy, royalty collection is the sharing of the honey in the hive with those that contributed to its creation.
The “Honey” is the measure of value
From the franchisor perspective, receiving a royalty payment validates the success of the concept and it enables the corporate office to continue investing to support the franchisees in a variety of ways.
For the franchisees, making the royalty payment is a reflection of the value that has been received from the franchise system and is the tangible compensation for the helping they have received in attaining their dream of owning a successful local business.
Transparency in the “Honey” distribution
For emerging franchises, that are growing rapidly, it is critical to establish a high degree of trust between the people at head office and the owners of the units. One of the best ways to nurture this trust is to automate the tracking of sales and the calculation of royalties and take it out of the hands of a specific person’s role and responsibility to chase the franchisees for sales data and payments.
When a web-based system does the data collection, this allows the head office staff to focus on interacting with the franchisees on important operational issues. An automated collection system also establishes a culture of transparency between franchisor and franchisee. Transparency is a vital building block for trust and when it’s present in the royalty collection function it overflows to other aspects of the business relationship including compliance and recruitment.
The additional value in sharing the “Honey”
While the creation of the monthly or weekly royalty invoice may be the initial motivating driver of creating the system, the data that is gathered is highly valuable and can be used in many ways to move the franchise network forward.
Corporate support staff can now be up-to-date about what is selling in each location. This helps them decide how best to assist each franchisee with growing and improving their business.
A well-designed royalty system can also track and compare and rank the locations or stores across the entire network to assist with both short-term action plans and with long-range planning.
Some of this information can be shared with outside partners, such as bankers and vendors, so they can see what may be needed by the network and adjust their offerings to better service the franchise.
Just as the bees have an established system to share the honey, a franchise needs a digital system to calculate royalties and compensate the franchisor.
If you want to create a digital royalty and payment system that will sweeten your bottom-line, check out the possibilities that zeeHIVE offers.