There are plenty of reasons to maximize the shareholder value of your franchise business. Some franchisors could be looking to sell their businesses for profit or need to raise cash via share offerings, while others are concerned about persuading banks and financiers that their business is sound.
If you are concerned about maximizing the value of your franchise business, creating the right internal communications systems can make a massive contribution.
For one thing, a franchise-based organization can enhance its value by implementing smooth, simple and secure intranet systems across all of their outlets. But there's a deeper reason to embrace the concept of a common cross network communication hub. That's because they allow the knowledge and documentation that your franchise is based upon to be collected, stored, searched, shared and used - showing investors and banks exactly what they are buying, and how well it works.
Let's look in a little more detail about why implementing a modern cloud based franchise intranet could be the route to a higher sale value, better financing terms or a lucrative IPO.
Think About What Buyers and Creditors Are Looking For
When investors purchase companies or shares, they should always carry out diligence tests to assess the quality of the assets they are buying. If they calculate that your franchise business will deliver reliable returns and doesn’t carry undue risk, they will be much more likely to invest.
The best investors always look beneath the surface to find out how well companies are run. Like second hand car buyers who know how to avoid being exploited, savvy investors know the value of the collective knowledge and communication systems that underpin a successful franchise business.
This kind of knowledge infrastructure is the foundation for a franchise business that can be expanded smoothly without compromising on quality. This is particularly attractive for investors who are looking for companies with the ability to grow and grow fast.
Buyers Want Access to Your Knowledge Network
Another factor driving investors is the ability to take over a company seamlessly, without the need for months of internal research, consultancy fees and human resources processes.
In other words, investors want to be able to take control and be able to draw on the knowledge and experience of franchisees. In a franchise business, the franchisees are the customer-facing element. They are the ones who sell your products, know your market and turn central directives into raw profit. If they can feedback to new owners, and owners can communicate with them easily, it saves both time and money.
With the right franchise intranet in place, franchisees can provide investors with the benefit of their knowledge. In turn, new owners can communicate their ideas directly to each franchisee. It's all about creating a database of knowledge that can be used effectively - something that isn't always the case in franchise businesses.
Instead, franchises will often rely on the expertise of managers and support staff to store the knowledge that keeps their operations running. For investors, the lack of documented, shareable knowledge is a major red flag. They want to step into a business that pools and uses its knowledge efficiently, and will be looking for franchises that display soft values like communication, openness and flexibility. Having the right intranet in place is a very good starting point to provide evidence to potential investors that you have exactly this kind of knowledge base. Reducing risk and unkonwn factors carries high value for a new owner or creditor.
We know that investors appreciate the value of a well-run franchise business, and that the right intranet can make a major contribution, but what key elements also need to be in place to ensure a high market valuation?
Of course all legal and formal issues like Trade mark registration, FDDs, Franchise Agreements, Supplier agreements etc has to be in place. Then, aside from profitable outlets, having a uniform, clearly run corporate culture makes a big difference. Providing all franchisees with Operations Manuals that are current, easy to use, comprehensive but not overwhelming is one vital step. Connecting those manuals up to internal knowledge bases and forums to answer queries from franchisees is another.
Strong customer service is another fundamental driver of higher value, and it can also be promoted via the right franchise intranet. This could be in the form of FAQs for customers, rapid resolution channels to instantly provide support for front-line staff members or online learning events around customer service. It all adds up to a more agile and dynamic chain, happier customers, more effective staff, stronger Brand and a higher shareholder value.
Make Shareholder Value a Factor In Your Business Planning
You may not be considering selling your franchise business, or even raising capital via an IPO, but it’s good practice to make value a driving force behind your internal strategy. What investors are looking for is well-run businesses with strong links between the franchisor, franchisees, customers, information sharing and flexibility.
All of these things are positives for franchise businesses, no matter what their future plans, and all of them can be enhanced by installing a communication framework that is tailored to your business needs. It could very much be one of the best cost/benefit ratios you will ever have for an investment in your franchise.