“The franchisor is focused on the Top Line, I’m focused on the Bottom Line.”

“The franchisor is focused on the Top Line, I’m focused on the Bottom Line.” said a franchisee yesterday.

This ‘co-operative tension’ is a typical scenario in franchising.

In many cases, the franchisor charges royalties on sales turnover, or revenue (the top line).

So, for them, they’re interested in maximising the sales a franchisee makes.

But for the franchisee, their profit (the bottom line) is what’s left after paying expenses. Royalties can be a significant expenses, so they keep a keen eye on this.

If royalties are charged on revenue, the franchisor will focus on strategies which will generate sales for the franchisee.

It’s in their interest to help the franchisee make more sales, as this generates more royalties for them.

It’s also good for the franchisee, as sales drive a business and are a key driver in building profits.

So far, so good. But, what about when it doesn’t work?

Like, when a franchisor introduces a ‘promotion’ for a specific product line or service, which actually runs at a loss.

Yes, sales might increase, therefore more royalty, but the franchisee is actually losing money on the promotion!

This is crazy!

Carefully consider any promo that has this result. Keep the objectives aligned, where everyone is making money.

Let me know if you need a hand.

Peter