Why Franchisors should run a franchise of their own by Andy Cheetham

30/07/2021
Investing in a Franchise

I’ve been a franchisor 6 times now, 5 brands have been sold some time ago, all as profitable franchised brands with hundreds of franchisees between them, and the sixth one, Lime Licensing Group, is where I am currently loving every minute as a franchised franchise consultancy firm!

Each franchise brand I have owned benefitted enormously from maintaining a trading franchise of its own whilst I cracked on with building the franchise network. If you’re considering buying a franchise then there’s a lot of compelling reasons why you should look favourably at franchisors who are still directly managing areas or outlets of their own. If you’re a new franchisor I’d generally advise not to transfer all that you have now immediately into franchised ownership. It’s tempting to cash them in as ongoing concerns, and you could of course do that, but there are some advantages you’ll lose if you do.

You’re not blagging it

There’s a lot of credibility in being in the same boat as your franchisees. It also means that you’ve proved that you genuinely know what you’re talking about. Often when an underperforming franchisor asks for our help this is one of the early questions we ask of them. I’d be willing to bet that there is a disproportionate number of underperforming franchisors who don’t run at least one of their own franchises compared to those that do. It keeps your management team sharp and more importantly, knowledgeable.

All my previous franchise managers worked in a company owned franchise for at least part of the month or at the very least they were very recent previous franchise owners with the same brand. There’s no better way to stay in touch with reality than to get your hands dirty with practical experience and being responsible for the same business as your franchisees dealing directly with the same customer and supplier issues as they do.

Share the struggle

Franchisors are going to struggle like their franchisees do in tough times …. or otherwise be an example of how things should be managed! Running a franchise of their own gives franchisors priceless real life, up to date experience of what to do in any scenario that directly affects unit performance. Their franchisees don’t question their advice because you’re walking the walk not talking the talk and everyone knows that.

When something like Covid happens those franchisors who also operate their own units “feel” it just the same and have to come up with solutions that work in today’s commercial environment and not what worked last year or has become routine advice in the ops manual.

Testing testing 123

In my experience there is no shortage of franchisee volunteers to test new things but really that’s the franchisors job. A franchisee’s role is mainly about replicating what works remember? So, franchisors can use a company owned location to test out initiatives. But franchisors can also embrace all the suggestions that come from within the network. If you’re a great franchisor reading this, or striving to become one, then you’ll always bear in mind that McDonalds didn’t invent the name Big Mac, one of their franchisees did. Because of this, franchisors should stay open to suggestions, some will delight them, and some will make them despair – but the best franchisors listen to new ideas, then test and measure them. Potential franchisees want to know that their franchisor is pushing new initiatives all the time and not being afraid to fail in front of their network in the never ending pursuit of doing things better.

Having a company owned franchise lets franchisors play with all those new ideas and suggestions before they let them loose on the whole network. Franchisees joining networks that do this should see it as a positive thing. If anything didn’t quite work at least you know the trial has been forensically measured directly by the franchisor and that the results weren’t summarised by Dave from Doncaster who made a mess of it but didn’t want to admit it!

Discovery days

We’ve all employed staff who interviewed well and then it turned out they were hopeless. You might think a franchisee joining your franchisor who turns out to rubbish is the franchisors problem, sadly it’s likely it could be your problem too as a franchise owner in the same network. Let’s hope for your sake they are skilled at sorting problem franchisees out double quick!

A company owned location gives a franchisor a very clear view of how suitable the next franchisee might be before appointing them as a franchisee. When I owned the special event franchisor Ambience Venue Styling I got a lot of the potential franchisees up early on a Saturday morning and working at setting up a real event. It made them realise the work required behind the gloss of the actual event and it gave us a chance to see their attention to detail and also how courteous (or not) they were with hotel staff and other suppliers. They were there thinking they were assessing the franchise but the truth was we were assessing them just as closely. As a new franchisee you want to be sure you’ve got good calibre colleagues within the network, believe me when I say that this is more important than you are probably thinking!

Training platform

Training new recruits in a company owned location is a great idea. They’re not going to get in the way of an existing franchisee and crucially it’s the franchisor who gets to judge their competency. When I was running the retail supply network Appletree Cottage in the mid nineties we trained new franchisees on our own area and worked them quite hard. 20+ calls a day carting stock in and out of convenience stores regardless of the weather taught them a lot about the work rate required to be successful. They all found it exhausting at first but we weren’t just setting the standard we were showing them the standard we work too in a successful company owned area.

It was a great training ground that was always available for new starters and also those who needed a refresh or were taking on new staff. It also forced us as the franchisor to hear what our customers said so we always heard it from the horse’s mouth!

Sharing good and bad practice

Sharing what works and what doesn’t and knowing the difference is a by product of directly running a franchise area. Letting that information flow through the network is then the job of the franchise department. Sharing best practice and the credibility of the source matters greatly. New franchisees in particular benefit greatly from this flow of information, and because the franchisor has maintained the standard of franchise recruitment (see point above) those franchisees who also help the newbies are generally giving good advice too.

Part managed / part franchised.

There is a misunderstanding amongst a lot of potential franchisees that a franchisor is usually 100% franchised. In fact it could be argued that this was never the case because a bonafide franchisor is replicating their own business to start with and so the first franchise units usually trade alongside the company owned one(s). So it’s often about how long it’s been since a franchisor sold off their original business by dividing it into fractions owned by franchisees.

If your chosen franchisor is completely new at franchising then all aspiring franchise owners should look for a pilot operation being run, and I’ve seen some amazing pilot operations. A pilot that is run by a genuine third party also demonstrates to a new franchisee that the franchisor has the skills required to pass on the know how and get the till ringing for someone else in a different place.

If no pilot exists then a potential franchise owner needs to examine the credibility of what’s on offer in far greater detail. But it’s true to say that I’ve seen some business opportunities that are better than £50k franchises too so keep an open mind if you’re choosing a franchise – just don’t skimp on your due diligence. If they are a BFA member at least you know they’re on the right track and have attained a certain standard that’s been judged by people who know about franchising. But you still need to satisfy yourself of what’s on offer. When franchisors run their own areas you have the luxury of seeing it with your own eyes …. You just can’t beat seeing a franchisors own shop/outlet/area as evidence of success. They are practicing what they preach.

Once a franchise system is launched then it may be the case that the franchisor sells their own trading units or areas but when this happens, and I’ve done this myself, it’s a little harder to keep totally in touch with the reality of the business model. When Franchisors get out of touch then the network starts overly influencing the company direction because the management can become unsure of exactly what is happening at the sharp end and bow to network pressure. The tail then wags the dog and sadly the most vocal franchisees are usually the ones that aren’t best to listen to for the benefit of the network as a whole.

So, when choosing a new franchise remember that mature brands might have sold off their own areas, that’s not necessarily a bad thing, but newer brands are likely to be more in touch with the reality of what exactly is needed right here and now – today! .….. and that might be what you really need the most.

www.limelicensinggroup.co.uk

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Lime Licensing Group

Recruitment

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