Customer relationship management benefits and drawbacks of franchising

Customer relationship management

A summary of the advantages and disadvantages of buying a franchise. management, having enough money and serving your customers. Get the skinny on the nine things franchising offers that may benefit your business. of franchising are capital, speed of growth, motivated management, customers) and any other line item expenses that can be reduced. Franchises have benefits, proven ideas and brand names but the franchisor may Market research · Understanding the local market · Keeping your customers .. Relationships with suppliers have already been established. As well as the initial costs of buying the franchise, you pay continuing management service fees .

CRM solutions fall into the following four broad categories. Outsourced solutions Application service providers can provide web-based CRM solutions for your business. This approach is ideal if you need to implement a solution quickly and your company does not have the in-house skills necessary to tackle the job from scratch. It is also a good solution if you are already geared towards online e-commerce. Off-the-shelf solutions Several software companies offer CRM applications that integrate with existing packages.

Cut-down versions of such software may be suitable for smaller businesses. This approach is generally the cheapest option as you are investing in standard software components. The downside is that the software may not always do precisely what you want and you may have to trade off functionality for convenience and price. The key to success is to be flexible without compromising too much. Custom software For the ultimate in tailored CRM solutions, consultants and software engineers will customise or create a CRM system and integrate it with your existing software.

However, this can be expensive and time consuming. If you choose this option, make sure you carefully specify exactly what you want. This will usually be the most expensive option and costs will vary depending on what your software designer quotes.

Managed solutions A half-way house between custom and outsourced solutions, this involves renting a customised suite of CRM applications as a tailored package. This can be cost effective but it may mean that you have to compromise in terms of functionality. How to implement CRM The implementation of a customer relationship management CRM solution is best treated as a six-stage process, moving from collecting information about your customers and processing it to using that information to improve your marketing and the customer experience.

Stage 1 - Collecting information The priority should be to capture the information you need to identify your customers and categorise their behaviour.

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Those businesses with a website and online customer service have an advantage as customers can enter and maintain their own details when they buy. Stage 2 - Storing information The most effective way to store and manage your customer information is in a relational database - a centralised customer database that will allow you to run all your systems from the same source, ensuring that everyone uses up-to-date information.

Disadvantages of Franchising

Stage 3 - Accessing information With information collected and stored centrally, the next stage is to make this information available to staff in the most useful format. Stage 4 - Analysing customer behaviour Using data mining tools in spreadsheet programs, which analyse data to identify patterns or relationships, you can begin to profile customers and develop sales strategies.

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Stage 5 - Marketing more effectively Many businesses find that a small percentage of their customers generate a high percentage of their profits. Using CRM to gain a better understanding of your customers' needs, desires and self-perception, you can reward and target your most valuable customers. Stage 6 - Enhancing the customer experience Just as a small group of customers are the most profitable, a small number of complaining customers often take up a disproportionate amount of staff time.

If their problems can be identified and resolved quickly, your staff will have more time for other customers. Potential drawbacks of CRM There are several reasons why implementing a customer relationship management CRM solution might not have the desired results. There could be a lack of commitment from people within the company to the implementation of a CRM solution. Adapting to a customer-focused approach may require a cultural change.

There is a danger that relationships with customers will break down somewhere along the line, unless everyone in the business is committed to viewing their operations from the customers' perspective. The result is customer dissatisfaction and eventual loss of revenue.

customer relationship management benefits and drawbacks of franchising

Poor communication can prevent buy-in. In order to make CRM work, all the relevant people in your business must know what information you need and how to use it. Weak leadership could cause problems for any CRM implementation plan. The onus is on management to lead by example and push for a customer focus on every project. If a proposed plan isn't right for your customers, don't do it. Send your teams back to the drawing board to come up with a solution that will work.

Trying to implement CRM as a complete solution in one go is a tempting but risky strategy. It is better to break your CRM project down into manageable pieces by setting up pilot programs and short-term milestones.

customer relationship management benefits and drawbacks of franchising

Consider starting with a pilot project that incorporates all the necessary departments and groups but is small and flexible enough to allow adjustments along the way. Don't underestimate how much data you will require, and make sure that you can expand your systems if necessary. You need to carefully consider what data is collected and stored to ensure that only useful data is kept. Since such materials are often expensive to produce, they would otherwise be beyond the reach of some individual franchisees.

The entrepreneur who becomes a franchise owner is instantly armed with proven products and production systems; inventory systems; financial and accounting systems; and human resources guidelines. Many franchisors also provide management training to new franchisees, and ongoing seminar workshops for established owners. BUYING POWER Franchisees are often able to fill inventory needs at discount prices because of their alliance with the franchisor, which typically has made arrangements to buy supplies at large-volume prices.

When you become a franchisee, you have the collective buying power of the entire franchise system. Franchising, then, can provide a huge lift in this regard, for many franchisors maintain ongoing research and development systems to develop new products and forecast market trends.

As a result, the entrepreneur who decides to become a franchisee can generally count on a wide range of training and consulting services from the larger company. Such services can be particularly helpful during the start-up phase of operations. COST The initial franchise fee, which in some cases is not refundable, can be quite expensive. Some fees are only a few thousand dollars, but others can require an up-front investment of several hundred thousand dollars.

In addition, some franchisors require their franchisees to pay them regular royalty fees—a percentage of their weekly or monthly gross income—in exchange for permission to use their name.

Some franchisors also require their franchise owners to help pay for their national advertising expenditures. Other costs include insurance, initial inventory purchases, and other expenses associated with equipping a new business. As the Federal Trade Commission FTC acknowledged to prospective franchisees in its Consumer Guide to Buying a Franchise, "these controls may significantly restrict your ability to exercise your own business judgment.

Site Approval—Many franchise agreements include stipulations that give the franchisor final say in site selection. Some franchisors also limit franchise territories, and while such restrictions generally prevent other company franchisees from impinging on your territory, they can also act to restrict your ability to relocate once you have become established. Operating Restrictions—Franchise agreements include many instructions on the ways in which a franchisee must conduct business.

These encompass all aspects of a business's operation, from operating hours to accounting procedures to the goods or services that are offered.

Franchisees generally accept these regulations willingly, for these standards of appearance in the areas of decor, design, and uniforms have proven to be part of a winning formula elsewhere.

This is just as well, for the franchise owner who does wish to make changes in his business's appearance often has little freedom to do so. Business experts note, however, that a franchise outlet can suffer severe damage if its franchisor is beset with financial difficulties or public relations problems. But most small business consultants acknowledge that these factors usually boil down to a couple of fundamental concerns. As Steve Spinelli wrote in The Portable MBA in Entrepreneurship, "the choice of becoming a franchisee or starting a stand-alone business hinges on your answers to two important questions: Is my personality and management style amenable to sharing decision-making responsibilities in my business with the franchisor and other franchisees?

But the selection process can be a bewildering one for the unprepared entrepreneur. Franchise opportunities are available in a wide array of industries, each of which offer their own potential benefits and drawbacks. Moreover, every franchisor has its own strengths and weaknesses. Several business areas, then, need to be investigated as part of any effective franchise selection process. Prospective franchisees should also have an understanding of their ultimate business and personal objectives before beginning the search for an appropriate franchise.

The entrepreneur who is most interested in achieving financial security may want to look in an entirely different industry than the entrepreneur who hopes to land a franchise that will enable him or her to devote more time to family life.

They also need to determine whether the franchisor's principal goods or services are in demand in the community in which he or she hopes to operate.

Customer relationship management

Other industry wide factors, such as the cost of raw materials used and the amount of industry competition, need to be weighed as well. The latter issue is a particularly important one, for it can be a fundamental factor in a franchisee's success or failure. The presence of some competition, for instance, often indicates a healthy demand for goods or services in that industry area.

A dearth of competitors, though, might indicate that demand is low or nonexistent. Similarly, the presence of several competitors might necessitate an examination of whether the market can support another provider in that area, or whether you might have to take meaningful market share from already existing businesses in order to survive. Factors that should be considered include the franchisor's profitability, organizational structure, growth patterns, public reputation, litigation history, financial management capabilities, fee requirements, and relationship with other franchisees.

Perhaps the best source of information on these and many other issues is the franchisor's disclosure document. This important document, which must be given to prospective franchise owners at least ten business days before any contract is signed or any deposits are owed, usually takes the form of the Uniform Franchise Offering Circular UFOC. The UFOC contains important information on key aspects of the franchisor's business and the nature of their dealings with franchisees.

Information contained in the UFOC includes a franchise history; audited financial statements and other financial history documents; franchise fee and royalty structures; background on the franchise's leading executives; terms of franchise agreements; estimated start-up costs for franchisees including equipment, inventory, operating capital, and insurance ; circumstances under which the franchisor can terminate its relationship with a franchisee; franchisor training and assistance programs; franchisee advertising costs if any ; data on the success or lack thereof of current and former franchisee operations; and litigation history.

A number of claims against the franchisor may indicate that it has not performed according to its agreements, or, at the very least, that franchisees have been dissatisfied with the franchisor's performance. Be aware that some franchisors may try to conceal an executive's litigation history by removing the individual's name from their disclosure documents.