Consider the facts before franchising your business
Let’s imagine an entrepreneur named Jasmine has managed to combine fast food with “healthy” choices to create a “success” formula. She’s built her menu carefully, experimenting and formulating recipes to make her eatery a favourite neighbourhood haunt. Realizing that she has a competitive edge, she’s documented her recipes and developed quality controls for preparation and presentation.
Jasmine understands the need for a consistent customer experience, so she’s developed written procedures so the operation can run without her day-to-day supervision. Intent on growing her business, and proving the strength of her concept, she’s opened a second location, which operates under the managers she recruited and trained.
Fast-forward five years. Jasmine is now a successful franchisor. She has 15 outlets with centralized supply order and delivery, and she has her pick of highly qualified franchisees. She’s become the personification of the brand, with TV appearances to promote healthy everyday eating; her e-newsletter has a wide circulation. In her communications, Jasmine puts particular emphasis on building good nutritional habits in childhood. She continues to be chief ‘menu innovator,’ updating menu items as the public’s definition of “healthy” changes.
Jasmine also provides strategic direction for the company, overseeing product development and franchise expansion. Her head-office team keeps up with operating procedures and reviews training methodologies so new employees and franchisees can quickly become good representatives of the brand. Jasmine and her team also addressed issues that often confront new franchisors, such as franchisee support services, territory development, infrastructure development, staffing and brand development — it’s all part of managing growth in the franchise system.
Sometimes Jasmine misses the simplicity of her early days, establishing her eatery and balancing her time between cooking and managing. She also misses the interaction with front-line staff and particularly the customers and the thrill of finishing a lunch rush. She still has to resist the impulse to jump in and get involved in the day-to-day details, rather than leaving these to people she’s trained and trusts.
But mostly she’s changed from focusing on what made her a successful store operator, to developing the skills needed to lead her brand forward. It hasn’t been easy or smooth. But she likes her present — and her expected future.
Is this the future you want?
When deciding whether to franchise your operation, consider the alternatives, which can include taking on debt or equity partners to expand into a chain of corporate stores or selling the concept to another company, while possibly maintaining a management role. Decide if and when your business is ready for ‘franchise’ prime time. It is essential to have a proven business concept that is differentiated in the market and that has been formulated in a way that can be replicated.
If you choose the franchise route, it is important to realize that you’re embarking on a different venture — the business of selling and servicing franchises. You need to accept that the skills that made you successful in the role of owner-operator of a single location are not necessarily those that will help you succeed as a franchisor.
What gave you satisfaction as a hands-on owner-operator — daily problem-solving, immediate positive feedback, preparing meals — will now come from other things like, signing on a new franchisee, witnessing concept growth and creating a franchise network vision.
Here are some of the differences between the life and times of an owner-operator and those of a franchisor:
For many entrepreneurs, it’s all about control. They have developed the idea, made it happen and like being in charge of their own future. In fact, one of the chief reasons for the failure is the owner’s problems with handing over control. As the business grows, there is too much for one person to manage and failure to delegate can impede success.
A franchisor must be willing to give up some control, trusting the hiring and training process and systems and procedures in place. He or she has developed a business model with trademarked products that are licensed to others while maintaining control of standard of operations, brand development and new product trademarks. There is still control but it is now indirect and at a more strategic level.
A different passion — growth
An owner-operator is often passionate about building a concept with a high level of service. The franchisor is equally passionate about developing a different business model — one that creates greater leverage over a growing network where the business can expand.
The skills are different — the franchisor oversees the creation of an integrated system of standards and procedures that drive every aspect of the business. They must be willing to trust others with the implementation of ideas, becoming an ambassador of the brand, involved in the big-picture issues appropriate to the leader of a larger organization. Along the way, the franchisor needs to develop new skills and strategically hire team members that can counteract any gaps in capability or skills.
Still flying, but in formation with others
Many entrepreneurs like the idea of being able to act on their own judgment. If they think that a new menu item will do well, they just add it. If it doesn’t work, they modify it or drop it. A franchisor can add menu items, too — but this needs to be done in concert with the broader network of franchisees, suppliers, distribution centre and others. The franchisor has more financial and human resources to direct but, paradoxically, must exercise more care in using them. They can still “fly” — they just need to do it in formation. Fortunately, you won’t have to jump from one way of thinking to the next. It’s a gradual transition.
Think of the first time you left your store in the hands of hired staff. Franchising is like that, only more so. It’s a great idea to take time off, and see if the employees you’ve put in charge can make the operation a success based on the training and procedures provided.
Opening a second outlet is an excellent way to carry out a “proof of concept” test and see if your idea is replicable. Develop procedure manuals and try running the business based on those procedures; when you find procedures that don’t work or don’t cover all eventualities, rewrite them and try again.
As part of the process, consciously move yourself away from thinking “details” to thinking “big picture.” Eventually, you’ll be able to turn that dream into reality.
Luciana Galli, business consultant and principal with Meridian Consulting Group, has more than 15 years of business management and consulting experience. She offers practice management and consulting services to help franchisors and franchisees develop go-to-market plans that include franchise development, marketing, operational development and documentation of processes and procedures. Contact her at 416.525.5984 or [email protected].