Printer-friendly version
Keys to a Successful Start-Up
December 2007 Franchising World
Satisfied first-year franchisees are essential to validation and the consistent growth of the franchised concept year after year. By Joe Bourdow Picture an excited new franchisee ready to join a growing franchise system. This new franchisee has already made a life-changing decision after searching for the right concept and the right company. He strongly believes that the franchise organization offer is the perfect fit for his lifestyle, skills set, financial hopes and dreams. He has attended “Discovery Day,” been “disclosed” and has carefully investigated the concept. Obviously a successful start-up begins with the critical role in the selection of qualified applicants. Whether it is operating capital minimums, specific prior experience, personality profile results, credit scores or any other requirements appropriate for the system, insist that applicants meet those standards. Don’t be tempted to cut corners in the name of unit growth.
Consider These Questions
Managing Unreasonable Expectations
Don’t be afraid to continue the qualification process beyond the scheduled time. If there are real concerns, work to resolve them or don’t award the franchise.
Training and “Red Flags”
Offer Resources for First-Year Challenges
The start-up year normally includes structured, on-location field support. Establishing a relationship based on trust is essential. The franchisee must have a strong reason to believe that the support being given will help him build a profitable business and is not simply to comply with the franchise agreement. Once the start-up phase is winding down, it is important to assure that continuing field support really adds value in the eyes of the franchisee. If the franchisee is not welcoming additional visits, consider why this might be the case. Most likely it is because a now more-experienced franchisee simply does not see the value. Joe Bourdow is president of Valpak Direct Marketing Systems, Inc. Largo, Fla. He can be reached at joeb@valpak.com.
Now, it is the franchise company’s turn to prove to the franchisee that he has made a wise decision by providing him with all the start-up support he expects. Regardless of the picture painted for them of how much time is normally required to become successful, it seems that many new franchisees think “they are different.” The first six months of operation are critical because the franchise organization needs to appropriately manage their expectations in many areas, including support.
There are many good personality profiling tools available on the market today. The results of these instruments can provide another opinion at the table when it comes time to make the decision of whether to award a franchise.
For those responsible for a relatively new and emerging franchise system, they will want to visualize what that system will look like five years from now and try to award franchises based on that assessment. It is not only critical that the franchise system chooses the right franchisees for the start-up, it is also important that the territories awarded are the right size for the future. The history of franchising is filled with examples of early franchise sales covering territories far too large to make sense once the concept matured.
Make sure there is a balance of sales and qualification taking place during the “Discovery Day” process with multiple executives and other operating personnel involved with the applicant. The desire to make the sale must be balanced with collaborative input and good judgment.
This may be the one chance to discover a “red flag” or a major disconnect between the opportunity being offered and the opportunity the applicant thinks he is purchasing.
There are many questions franchise organizations might ask when selecting new franchisees. They include:
Is it clearly understood why applicants have contacted the franchise system? Does the organization understand applicants’ short- and long-term objectives for income, equity and lifestyle?
Have the applicants ever owned a business or been a franchisee of another company before? Are they looking for the level of structure that the franchise system can provide? Do the applicants really understand what being a part of a franchise system means versus simply starting their own business? Have they thought through the differences between a retail franchise and a service franchise and which might be better for them? Do they understand the difference between business-to-business franchises versus consumer franchises? Are their personal goals aligned with what the concept offers to a successful operator? Do they have buy-in and support from family and friends? Does the franchise organization build in any sort of reality check into its sales process? Have prospects spent a day or a week actually working in one of the system’s locations?
Are prospective franchisees prepared to give their new opportunity a full, intense personal focus for a defined period of time knowing that they may have to work harder and make less money than they are accustomed to? No doubt about it, the first year of a new franchise is probably not the year to volunteer as soccer coach or PTA president.
If the franchise system is offering a concept to an experienced franchise operator or experienced corporate buyer, it is even more important to ensure that the applicant does not have unreasonable expectations to drastically surpass the earnings claim based on previous business experience. Especially during the first year, he might figure that he will secretly rewrite the operating system to make the opportunity work for him.
Valpak franchise applicants interact with as many as 15 different people from headquarters (including representatives of senior management) in a carefully scheduled “Discovery Day” format that includes dinner the night before. At the end of the day, each of the corporate staff completes a questionnaire providing an opportunity to air any and all concerns. These questionnaires are reviewed prior to final approval of the applicant and remain in the new franchisee’s file for the duration of the relationship. When problems occur with a particular franchisee down the road, it is great to go back and see if anyone on the team spotted the same issue on “Discovery Day.” Someone on the corporate staff should always be looking for ways to enhance the system’s selection process to improve the chances of spotting the same issue with future applicants.
Actually, few applicants score perfectly on our simple internal questionnaires. There are almost always concerns even with applicants who eventually become very successful franchisees. Keeping these concerns firmly in mind as the relationship begins is a good thing. That is particularly true as training begins.
Training is the next critical key to a successful start-up. This is a franchise company’s first opportunity to deliver on what it has promised in the sales and selection process. It is also an opportunity to deal with any remaining concerns the firm might have had about a particular applicant. Make sure the organization has good communication from the training personnel back to the qualification team, as well as ahead to those in field support. If there were concerns about an applicant’s skills, commitment or level of engagement, a formal training program is a time when those “red flags” can be put to the test. If these red flags turn out to be valid during training, stop everything and deal with them. It is far better to have an amicable early divorce shortly after the honeymoon rather than a long and unhappy marriage.
Valpak asks its new franchise owners to produce a business plan prior to opening. If they have obtained outside financing, this is normally required anyway, but having a business plan carefully thought out and documented can help ensure that both parties are on the same page during the initial training process and the first year of the new franchisee’s association with the organization. Talking about marketing, staffing and other issues can also provide a framework for communication that is very helpful to the new relationship besides having a financial model discussion.
Particularly with franchisees experiencing business ownership for the first time, the initial year is often a real “eye opener.” It is never as easy as they thought it would be. Understand that the franchise system must provide plenty of attentive coaching to help its first-year franchisees who may otherwise become disillusioned quickly when the work of creating a profitable business turns out to be harder than expected.
Once the start-up has actually begun, stay in close touch. Set small benchmark goals to monitor and celebrate progress. Help clear the way inside the company to provide necessary resources, timely advice and help. Encourage mentorship with other franchisees who may have successfully navigated the same unsettling waters in recent years. Encourage communication with other start-up franchisees to provide mutual, real-time emotional support.
Simple and inexpensive tools can be used to ensure that this kind of communication occurs. Consider this method tested by this system: Record an audio CD of best practices for start-ups presented by some of the successful franchisees who have been in the system for less than three years. It has been found that new franchisees seemed to hang on every word spoken on these recordings with the key ideas resonating much better than if they had been presented by corporate staff.
A new franchisee’s first convention or franchisor-sponsored conference is especially important. Make sure franchisees are made to feel very welcome and introduced to the company’s most successful operators. Orchestrate the interaction. Otherwise, it is likely not to happen.
Make sure the franchise organization is structured appropriately to give start-up franchisees the focus and attention they need and deserve. In some situations, it may be appropriate to have a dedicated person or team to perform this function. Challenges and questions from new franchisees are usually consistent. By having a team that focuses on this group exclusively, the franchise company might be able to more easily handle their support needs.
Franchise systems hope that their new franchisees will surpass their mutual expectations in the start-up year. If companies are able to achieve this objective most of the time, it is probably because they have a superior process in place to make it happen.
The good news is that satisfied first-year franchisees are essential to validation and the consistent growth of the franchised concept year after year.
