Buying a franchise is an investment for both parties. The franchisee is investing their time, money, and effort on a business they believe in. The franchisor is investing their company and brand in a business owner. The benefits of franchising are clear for both parties. Over years of franchising, some very important lessons have been learned on franchise effects on business success. Here are a few of those lessons:
An “All-In” Attitude is Far More Important Than Direct Experience
Imagine for a moment, a person who has worked, scooping ice cream at a local ice cream shoppe, for nearly a decade to save money for the initial investment to purchase his own shoppe so that he doesn’t have to work for “the man” anymore. He writes a check, opens his store, and waits. He’s got nothing to lose and knows that people recognize the brand of his shop; they are nationwide and who doesn’t love ice cream?
Down the street, a new Sign Me Up Sign Shop opens, the owner is a father of four in his mid-40s who used his saved retirement to buy a franchise when he got laid off at this previous job that he had dedicated 16 years of his life to. He didn’t know anything about signs or graphic design so he listened and studied during the corporate training, is in the shop every morning, and stays well after closing each night. He knows his family’s future is depending on his success and his drive is obvious.
We see this scenario, all too often, in the business world. There are two kinds of franchisees, the ones with money and the one with drive. There is an old joke about a bacon-and-egg breakfast where the hen is involved but the pig is invested. In any business, a can-do, will-do, all-in attitude is much more important than direct experience. It is for this reason that, over the years, franchisors have become much more selective about who they allow to buy a business from them.
Corporate Support Has a Direct Effect on Success
When you see the golden arches or the pair of gentlemen gazing through their bagel monocles, as a consumer, you know exactly what to expect; whether you see them in Pinellas Park, Florida or Windsor, Colorado. The key to the success of these chain restaurants is in the consistency of the product they serve, the atmosphere of their establishments, and the expectations of employees who work there. Both of these restaurant chains have a strong corporate structure that offers support, guidance, training, mentorship, and on-site feedback.
On the other end of the spectrum, the only thing in common that two video rental locations had in common was the shared name and the fact that their shelves were stocked with videos. Netflix ultimately choked out that video rental franchise once and for all, but it was likely doomed due to its inconsistencies between franchised locations, anyway. Pricing, due dates, and store layout varied by location as well as product availability. From one store to the other, they required different cards and memberships, with different fees and membership rules and benefits. This benefitted you if you had overdue rentals at one location and didn’t want to pay the fee, you could just drive across town and check out a few movies at a different location and neither location would know about your rentals at the other. There was very little corporate support; training and management were left to individual franchise managers.
The most successful franchises are the ones that the average consumer has no idea it is a franchise. When corporate takes a hands-on mentoring approach. This includes shared technology, standardized training, and centralized administration. Successful franchises do not simply hand off the company with a “good luck” pat on the back and a “call if you need anything.” Some of the best franchise companies have shared marketing and websites, a central accounting and payroll department, and corporate training and seminars. Corporate involvement benefits the franchisee by guiding and following up with each location. Corporate involvement benefits the franchisor because it leads to the success of the franchisee, which is a direct success for the company as a whole.
Traditionally, anyone willing to pay the setup fee could buy a franchise. However, over time, franchisors have learned that simply opening more locations does not mean success for the brand. A poorly ran location can do irreparable damage to a franchised brand. Franchisors have become more selective of franchisees, as they represent the company and are critical to building the brand. Franchisees have become more selective in which franchises they buy into because corporate success and involvement directly affects individual success. Franchises have developed into more of a relationship that results in success for both parties.
In our next article installment, we will discuss the element of standardized corporate training more in-depth.