SUCCESS IN FRANCHISING
By Steve Murphy, President of Franchising
Starting a business can be overwhelming and intimidating. The thought of writing a business plan, formulating a pro forma, documenting processes and procedures in operating and training manuals, hiring and developing staff, and capitalizing the venture, all on the hope it will work out and generate a profit, is mortifying to the average business person.
Franchising reduces the learning curve
Many people turn to franchising as an alternative to satisfy their entrepreneurial drive. With proven business models, a track record of success, and profitable franchisees as mentors, people looking to get into business for themselves can make a smart investment and own their own business, while leveraging the brand equity of a well-known and well-established franchise.
Franchising is not a guarantee
Buying into a franchise does not guarantee success. Like any start-up business, a franchise must be well run by an involved and committed owner operator who will listen, follow and execute the model. The business does not run itself, and if there was a franchise that did, every one of us would be in line to own one! The degree of separation between the top and bottom performers in any franchise usually comes down to a few things – and those who prioritize them are typically the franchisees with the best results. Following are three common things that separate the best franchisees from their average counterparts.
Get proper capitalization
Most small businesses, including franchises, fail because of improper capitalization. A great franchisor is one who awards a franchise to a properly vetted candidate who has passed the minimum liquid capital and net worth requirements. The next steps are up to the candidate who must select the right lending partner, request the appropriate level of financing, and be sure to invest all of the money into the business. Capitalizing a business, especially a start-up, is not fun. More money goes out the door before it comes in, but a franchisee must be committed to the concept and trust the hundreds of franchisees who have come before that the model will work for them as well. It is a huge leap of faith in both the franchisor and the brand, but the alternative of being undercapitalized is far worse.
No franchise is so hands-off that you can invest your money and walk away. If you do, two things are likely to happen. Employees who have no clear direction or management, and no vested interest, will inevitably fail. Franchising is not a passive investment like stock ownership; it is an active investment that requires the owner to stay involved in the business to keep it on track. Second, even if you hire and develop all the right people who are dedicated and determined to make your business a success in spite of you, employee turnover is a reality of any business. You cannot assume all your best employees will stay forever. Employees need to know that you know how to run the business without them, and that you are more vested than they are to make it successful. That type of leadership will go a long way toward ensuring your success.
Follow the model
The best franchisees are the ones who closely follow the brand model. Why do all the research, find the right opportunity, and invest in the perfect franchise, only to decide to re-create your own wheel? Don’t start your business by deciding you know more than the franchisor and the hundreds of franchisees who are already in the system. Execute the model as flawlessly as possible your first two or three years, and then work with your franchisee counterparts and the franchisor to continue to enhance and improve the model throughout the system. After all, you were smart enough to make the right choice in the first place – now be equally as intelligent in ensuring your investment provides the return you desire by doing what has worked for other franchisees before you.