Up your franchise game with a board
If your franchise system doesn’t have a board, you’re missing out on a critical opportunity to develop your business’s (and people’s) credibility and inspire confidence throughout the organization.
From helping you sell new franchise units to positioning your organization for future growth opportunities, a well-structured board has the potential to add practical value to many areas of your franchise.
Companies interested in establishing a board generally have two options: they can establish a board of directors or an advisory board. Larger organizations can use both.
A board of directors is a formal organization that represents the company and its stakeholders by focusing on governance, executive performance and high-level strategic issues. Members have fiduciary responsibility and can be held liable if mistakes are made. These individuals are also listed in your franchise disclosure document.
An advisory board is an informal gathering of professionals from outside your organization who come together to offer their perspectives and experiences to support the owners, CEO and management team. This combination of unique credentials can add value to your organization by providing you with a “behind-the-scenes” team to discuss current and future business decisions, situations and opportunities.
If you’ve never had a board before, I recommend starting with an advisory board, since they are easier to establish, low risk and less expensive to operate. They are also easily modified if the board (or a few members) aren’t working out.
Although boards rarely get involved in the day-to-day operations of an organization, they do play an important role in helping the ownership and management team execute better and pay attention to strategy, legal ramifications, blind spots and other important issues. Not only does this process help the organization make better decisions, but it also has several other valuable benefits as well:
1. Inspiring confidence with franchisees (always good to do.) A board helps build confidence with franchisees who realize the success of the organization doesn’t sit with a single individual.
Confidence also comes from the knowledge there is a contingency plan in place should the owner become seriously sick or injured. While I was serving on a board years ago, for example, the owner became suddenly ill and fell into a coma. Since we had prepared for such an event, we were able to keep the wheels of the organization moving in his absence—avoiding a catastrophic failure and ensuring the business stayed afloat while he recovered.
2. Building credibility with candidates and stakeholders. By increasing the legitimacy of your organization, you’ll not only encourage new franchise sales, but you’ll also build credibility with other stakeholders and enhance your future growth opportunities.
By showing that you have an established board, you’ll make your business behave and appear larger, more professional and less dependent on the leadership of a single owner. With a board of directors, you’ll also be able to clearly show the impressive qualifications behind your board members by including their names and bio in your FDD.
3. Developing vendor relationships. Telling a vendor that you need to run a proposal by your board allows you to think about the vendor relationship before making a decision. It also allows you to utilize the network of your board members, some of whom may have experience with making important decisions, or have other ideas that may be able to help you negotiate a better offer.
When you set out to build your board, you want to make sure you select individuals who you know, trust and respect. Some possibilities to consider include friends, neighbors, former classmates or retired executives from competing organizations.
Also keep in mind that a bit of diversity can be very beneficial. In addition to making sure both genders are represented, look for people with different areas of expertise who will see things differently. Set clear (written) expectations, keep it simple and avoid uncertainty. Then expect and ask for accountability—that’s the key.
Compensation is also an important consideration when building your board. Typically, meeting fees range from $500 to $5,000 depending on whether members are setting aside time for a two-hour phone meeting or a day-long event.
Compensation also depends on the size of the company, with larger, more complex situations offering retainers and higher compensation amounts. Keep in mind you’ll be expected to cover the cost of all meals and travel expenses for your board members, as well.