The Citi analyst’s note that last week sent the Dominos share price into a spin sounds a warning for all franchise groups – ignore the wellbeing of your franchisees at your peril.
The factors that appear to have provoked a less than favourable forecast for Dominos will be all too familiar to many real estate operators – the spoils of success have not been equally shared. In the Dominos scenario the franchisor has taken a high share of the profit split and cannot it expand further without providing its franchisee base with greater incentive and opportunity for growth.
It’s a complaint that we hear often from disenchanted franchisees reviewing their performance and profit and questioning where they stand within the franchisor’s own business objectives. Aggressive expansion that cannibalises the territory of existing franchisees is a recipe for discontent given its inevitable impact upon profitability.
One of the most common complaints we hear is to do with the encroachment of new same brand offices in some cases right next to existing offices. It doesn’t take a lot of imagination to recognise the impact that this might have – seeing another office take advantage of your investment in brand development and creating confusion amongst clients and customers.
Our exclusive canvassing territories protect franchisees allowing them the certainty they need to plan for the long-term and make appropriate investments in business and brand development.
Naturally R&W is pursuing growth but our focus is on making sure existing and loyal franchisees are our priority. Many of our Principals have been able to leverage their exclusive territory to secure and expand their operations into neighbouring territories. In the fast-growing south-west of Sydney, for example, the R&W Campbelltown office has grown to become the dominant presence in the area opening new offices as the region expands.
This approach not only serves the best interests of the franchisee and franchisor but promotes the collegiate culture that we encourage within the network.
The real estate business is cut-throat enough without having to fend off competition from within.