For the past year I’ve been collecting information about franchises in Kuwait, a vibrant franchise market. However, without a local franchise association it’s difficult to study franchising in Kuwait and all the more difficult just to get franchisors and franchisees together to share information. I am hoping this list will help start an ongoing franchise dialogue in Kuwait.

Thanks for your help!

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Join me for the A to Zs of Buying a Franchise at the International Franchise Expo in Washington, DC! This symposium is sponsored by United Franchise Group — meet members of UFG at the IFE!

You can also join me for the free workshop: How To Buy A “Hot” Franchise And Not Get Burned!

Looking forward to meeting with you in Washington, DC. The IFE is the most important annual meeting for prospective franchisees around the world.

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And that’s a problem.

It’s a disservice to the people who buy franchises, and it ultimately gives franchising a bad name. Doesn’t do any good for franchisors, either!

It’s not about the business

Typical scenario: A prospective franchisee say she likes selling services to consumers, or he says he wants to sell products from a retail location . . . and from there it’s easy enough for a development agent, or a franchise broker, or a matchmaker to suggest (or even emphasize) one or more franchise businesses to buy. Good businesses, too (except it’s not about the business).

In other words, the prospect gets “matched” to a business.

That seems to make sense, but why doesn’t it work? (And we know it doesn’t work because there are too many franchise failures).

Typical scenario: After a year in the business, the franchisee says: “I had no idea it would be so difficult to sell my services to consumers. Or that consumers would be so nasty!” Or, “I’m not used to waiting for business to come to me. It’s boring. I want to get out there and make things happen, but I’m stuck in this store.”

It’s about skills, values

All too often, franchisees discover that even if they had the interest in a particular business, they don’t have the skills to build that business successfully. Or they don’t have the talent. Or they don’t see eye-to-eye with the franchisor’s philosophy for developing the business. They don’t share the franchisor’s values.

What now?

That’s when dissatisfaction creeps into the franchisor/franchisee relationship. And from there things usually get ugly.

Typical scenario: The franchisor (or sales representative) tells the franchise prospect, “We can teach you everything you need to know to succeed in this business.”

Generally, it’s not true.

Not everyone is capable of learning every skill

Even the best franchisors can teach skills only to the degree that a franchisee is capable of learning those skills. Some franchisees can attend sales training every week for a year and still won’t be able to sell successfully. Some people – in spite of education, charm, money – won’t ever be able to master the skill of selling. Or the skill of negotiation. Or the skill of people development. Or whatever skill may be required to succeed in a particular franchise.

Similarly, franchisees and franchisors don’t always share the same values. When the franchisor’s motivation is profit first (for the franchisor) and the franchisee’s motivation is profit first (for the franchisee), that’s going to get ugly, too!

Match to the people, not to the business

The shame of it all is that skills and values can be identified upfront, but usually they’re not. And that’s how franchise prospects are matched to businesses, not to other people in those businesses.

Atypical scenario: Franchisor knows the personality profile of the chain’s top performers. The profile denotes specific skills and values. The franchisor then seeks and approves only franchise prospects that satisfy the profile of the top performers.

It’s not hard to do!

In fact, it’s common sense, but many franchisors pay no attention to it, which is one reason why critics say franchisors really don’t care about the long-term success of franchisees; they care only about collecting franchise fees.

Get personality insights upfront

“Why not find out in advance if the franchise prospect’s skills and values match the skills and values that are required of people who operate a specific business successfully?” asked my colleague, who specializes in personality profiling.  ”Why not get that information before selling a franchise?”

In other words, match the people to the people, not the business.

Instead of selling a franchise to someone just because he says he has the desire – and, of course, the money – why not dig a little deeper? Find out if the prospect possesses the skills and values of the already successful operators within the franchise network.

Sell to those people!

What’s so difficult about that?

Meet Franchisors That Agree

Many franchisors do indeed seek to find prospects that they can match to the people who are already successful in their franchise networks. I’ve written about several of these franchisors and you’ll find their stories at FranchiseCentral.com/blog. If you’re a franchisor and you don’t know how to identify the skills, values and behaviors of successful franchisees in your network, or you’re a franchise prospect and you’d like to know more about your own skills, values and behaviors before you buy a franchise, let me introduce you to my colleague, Craig Slavin, founder of Franchise Navigator. He can help you!

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Just ask Bob Singh. All he’s ever wanted was opportunity. That’s why he’s signed a second 20-year agreement with his franchisor, effective today.

Nowadays it’s not unusual to hear about franchisors losing their long-time franchisees. Many franchisors blame it on the economy. But the truth is, many franchisors fail to create opportunities for their franchisees. That’s one of the worst mistakes a franchisor can make.

Another 20 year stint?

Since 1979, Bob Singh has been a franchisee of Pizza Inn, based in The Colony, Texas. For the last 20 years, he’s also been the company’s area developer in Mississippi. Since he joined the company, Pizza Inn has changed its leadership – five times! That’s not been a good thing. Singh says it hindered the company’s overall growth: With only 310 locations in 17 (mostly southern) states, Pizza Inn is sometimes the forgotten brand.

So why would a 56-year-old franchisee, who could easily retire, agree to another 20 year stint as an area developer with Pizza Inn?

Opportunity!

Singh likes the opportunities recently created by Pizza Inn’s leadership team, headed up by President & CEO Charles Morrison, who joined the company in 2007, and COO Madison Jobe, who’s been on board since 2009. Both executives have extensive restaurant experience, and they understand the franchisor/franchisee relationship. “Those fellows in the corporate office get it,” says Singh.

Applause for corporate stores

When Morrison decided to open corporate stores, which previous CEOs at Pizza Inn had refused to do, Singh applauded the decision. “Now they’ve got to make a profit just like franchisees,” says Singh, who owns six units and oversees another dozen. “It’s important that (the leadership team) understands what the franchisees go through day to day, because that puts them in a better position to help us.” Which means: help the franchisees benefit from more opportunities.

Singh says that Pizza Inn is in better hands today than it was just five years ago. “Back then, this brand just didn’t know what it was in the marketplace. Franchisees built different types of units, some with carry out only, some with 100 seats, some with delivery. But now the current leadership has given us a prototype that’s a home run.” The prototype includes a buffet, 150 seats, carry out and, where it makes sense, delivery. Most importantly, some of these new units, including some owned by Singh, are producing sales in excess of $1-million annually.

A business that now works

“With our new systems in place, the business now works (financially),” continues Singh. It took some time, but “the company’s leadership has created new opportunities for the benefit of all the franchisees.” (Of course, franchisees still have to step up and do their part, which includes converting to the prototype at a cost of $75,000 to $100,000. But Singh says that’s a given. “If you want to be a successful franchisee, you’ve got to get on board.”)

Fortunately, Singh is a patient man, and patience has rewarded him repeatedly as he’s sought opportunities. A native of Punjab, India, he moved to England and studied to be a metallurgist with British Steel. However, he says England offered “a lot of job security, but no opportunity.” He wanted to go where there was “tons of opportunity,” even if there was no job security. And that’s how he arrived in Mississippi in 1974, when he was 21.

Got his start with Sonic

While other young men – especially if they’d worked at a desk as a manager – might not have thought flipping burgers for 80 hours a week at a Sonic® Drive In was an opportunity, Singh did. A friend of the family was a Sonic franchisee, and he gave Singh his start in the food industry.

“During the first two weeks on the job,” Singh recalls, “I found out (how much money) the manager was earning and it was pretty good. That’s when I decided that I had to prove myself and move up the ladder.” Gradually, Singh progressed from trainee to manager to area manager, and as his boss acquired additional franchises, including some with Western Sizzlin, Singh became a shareholder in the franchisee’s business. “I’m just fortunate that someone was there to offer me the opportunity,” he adds thoughtfully.

Three years into his career, now in his mid-20s, a greater opportunity appealed to him. “People loved Sonic, but they wanted some variety,” he explains, “and that’s where Pizza Inn came into play.” In 1978, he opened a Pizza Inn in Greenwood, Miss., and the next thing he knew he was the director of operations for 18 additional locations throughout the state. Even more opportunity!

Opportunity to be a franchisee

But the best opportunity was still to come. By 1980, he had saved enough money to buy his own franchise. “I decided to risk everything on a restaurant of my own,” he explains. “I told myself that if I didn’t make it, I could always go to work for someone else again.”

He shivers remembering how close he came to that reality!

“Three months into my own business, I almost went broke,” he recalls. “We started out great, but then all of a sudden the (restaurant’s) newness wore off and sales hit rock bottom. I remember writing a check to pay my utility bill on a Friday, knowing I wouldn’t have the money in my account to cover the check until after the weekend. I came close to losing it all.”

All was $80,000. Every penny he could spare.

Advertising creates opportunities

Fortunately, he had a franchisor to lean on. “I called and got some advice from the marketing department, and they told me I needed to advertise. They put me in touch with a (direct mail) company, and then they designed a mailing piece for me. It helped to be part of a franchise network.”

Except there was one problem: He had no money!

Importance of track record, brand

But he had a track record, and a brand behind his name, and that was good enough (at the time) for a local bank to give him a $10,000 loan. “Without that loan,” he emphasizes, “I was out of business.” He used the money to launch a direct response campaign, which immediately bumped sales. He repaid the loan and 60 days later launched a second campaign. “I doubled my business in 120 days,” he explains. “We got (sales) to $8,000 a week, and at the time that was enough to pay the bills and make a profit.”

Nearly going broke taught Singh an important lesson: Franchisees must advertise consistently! “The franchisor may have told me that when I bought my franchise,” he admits, “but when you don’t have the money, you’re stuck. Today, we look for deeper pockets to open our restaurants. When you’re a franchisee, you need money to advertise.”

Why area development?

By the late 1980s, Pizza Inn had developed nearly 30 units in Mississippi, but one day a competitor (also keen to opportunities) bought 25 of the locations. Shortly thereafter, former customers started calling Singh, asking, “When is Pizza Inn coming back to our town?” That’s when the young entrepreneur saw yet another opportunity: area development.

“When we lost those locations,” he explains, “customers still wanted their Pizza Inn. These are small towns, and people appreciate our way of doing business” which means serving high quality, innovative products (have you tried a “pizzert” pizza for dessert?) and personal customer service. So Singh decided to replace those units by recruiting franchisees who would restore the company’s presence in Mississippi. As an area developer, he pledged to build 12 units in five years. He did it in three!

And now he’s going to do it again. Or something similar. “I’ve got two sons who like the business,” he explains. And even though Pizza Inn can’t take credit for his sons, they create yet another opportunity for Singh! “I want to pass something on to them,” he says, “so I’m going to help them get up to speed and eventually take over the business.”

What happens after that he’s not certain. But as long as Pizza Inn continues to lead him to opportunities, the Singh family will likely continue to be part of the Pizza Inn network.

Creating Opportunities For Multi-Unit Franchisees

Texas Franchise Leadership Forum will help franchisors create opportunities for their multi-unit franchisees at the next forum session, Thursday, Sept. 30. Details here. The topic: What Multi-Unit Franchisees Expect From Their Franchisor. Two multi-unit franchisees will tell their stories and explain how they benefit from interaction with their franchisors.

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Not so long ago there were more than 6,000 smoothie outlets in the USA generating $2-billion in annual sales. Consumers created a thriving smoothie industry, and during a 5-year period market demand increased by 80%. No wonder so many people wanted to buy a smoothie franchise!

Smoothies on every corner

But suddenly it’s a different story. In July, McDonald’s increased the number of places where a consumer can buy a smoothie by 12,000 units – twice the existing number! Surely McDonald’s advertising will help expand that $2-billion market, but will it be enough to support 18,000 plus units? Or has the smoothie industry become over-saturated?

As the story continues to unfold, I can’t help but recall what happened when McDonald’s entered the frozen yogurt industry.

Starting in the 1980s, it seemed that everyone wanted to buy a frozen yogurt franchise. They were relatively inexpensive to open, and easy (and even fun) to operate. A dozen franchisors quickly emerged to build the industry as health-conscious Americans frequently chose frozen yogurt for their dessert of choice.

Frozen yogurt for a buck

I was fortunate to land the best of the frozen yogurt franchisors as a client (and served briefly as the head of marketing) and helped the company expand internationally. But the fun came to a sudden halt when McDonald’s, overnight, installed frozen yogurt machines in 10,000 stores!

Now, instead of paying $3 or more for a serving of quality frozen yogurt (in ICBIY’s case, the product was shipped frozen to every store – no powders, no mixes), consumers could buy a cone of frozen yogurt at McDonald’s for a buck.

Ouch!

Set aside the dispute about whether or not the McDonald’s product was really frozen yogurt. The mom and dad that used to take the kids to McDonald’s for dinner and then afterwards to ICBIY (or TCBY, or any number of other outlets) for dessert suddenly saw the opportunity to save a chunk of money. The kids seemed just as happy with McDonald’s frozen yogurt – even if it only came in vanilla, and without toppings – and mom and dad enjoyed the savings. So what if McDonald’s lowfat frozen yogurt wasn’t the real thing (with live, active cultures)? The consumer said it was good enough!

The end of the frozen yogurt franchise

And that’s when all the frozen yogurt franchises started cleaning their spigots for a final time. The market now belonged to McDonald’s.

Jim Amos, who served as president of ICBIY in the mid-1990s, remembers it as the “great yogurt meltdown.” After joining the company in the late 1980s to sell franchises domestically, Jim discovered a beckoning international market. It wasn’t long before ICBIY’s founders recognized his leadership skills and turned the company over to him and his capable leadership team. And during several years of dramatic growth, no one even thought about McDonald’s entering the scene. (Or maybe they did and preferred not to!)

“When McDonald’s began offering frozen yogurt,” Amos remembers, “the result was essentially commoditizing the product and dis-intermediating any system that was a higher priced destination based on the quality of their offering, such as I Can’t Believe It’s Yogurt.” Jim and cohorts predicted that consumers would not pass up a McDonald’s to go to a “destination” that sold a higher priced product for what was perceived to be essentially the same product. Not even if the destination sold its product in a variety of flavors!

“The result was almost immediate and it accelerated very quickly,” Amost recalls.

Most of the franchise networks would not survive – not only did their store sales decline, but they could no longer sell new franchises. Some, including ICBIY, were sold to private equity or synergistic buyers.

Will McDonald’s repeat history?

So is there a lesson here for smoothie franchises?

“There is little question that if McDonald’s wants to intermediate almost any segment they can do so based on the number of access points they have and the amount of marketing support and PR that can be levied,” says Amos, now CEO of Tasti D-Lite, which is expanding via franchising and sells “guilt free” frozen dairy desserts in more than a hundred flavors. “Further, the segment is already vulnerable as a single product purveyor and (smoothie companies are) adding line extensions to off-set same store sales declines.”

Time will tell if there will be the “great smoothie meltdown.” Meanwhile, customers seem to like McDonald’s newest line extension, even though it comes in only two flavors. Customer Darnell Richard told USA Today that he used to stop at a convenience store to quench his late-night thirsts, but now he buys smoothies at McDonald’s. “It’s a buck cheaper,” he said, “and it tastes better.”

And after all, consumers’ opinions – and 12,000 plus McDonald’s – ultimately make or break a market. As well as create meltdowns.

My personal opinion . . . I’m a frequent smoothie consumer who has rarely stopped at a McDonald’s in the last 25 years (since I had small children), but I’ve already enjoyed a half dozen McDonald’s Smoothies in the last month! My wife, too! I don’t like that they’re not made with real fruit (they’re made from a mix), but they’re better than good enough. And yeah, cheaper, too.

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“Three times I’ve been a franchisee, and in all three instances the franchisor didn’t seem to know that I was the customer! It’s like an abusive husband who beats his wife but expects her to be good to their children. Franchisors want their franchisees to take care of the customers – the people who buy the company’s products and services – but many franchisors don’t seem to understand that their customer is the franchisee! My philosophy is this: Take care of the franchisee and the franchisee will take care of the customers.”

Well said!

Zig’s secret to success in business

It helped, of course, that this gentleman had read Zig Ziglar’s books and on one occasion had an opportunity to meet Zig. “Mr. Ziglar,” he said, “What’s the secret to success in my business?”

Zig didn’t hesitate and said, “You can have everything in life you want if you will just help enough other people get what they want.”

Defining franchising

That’s not only the golden rule, paraphrased by Zig Ziglar, it’s also a good definition for franchising.

During the last 30 years, working closely with more than 100 franchisors (and with many of them for at least six to ten years), I’m happy to say that most of them understood that the franchisee was their customer. But I worked with some of the best-known names in franchising. It’s not unusual to hear about franchisors – including some with large franchise networks – that are not in business to help anyone but themselves. Most of them don’t make it, but in the process of failing many good people fail with them.

Fortunately, this three-time franchisee was able to survive his failed attempts, but I was at least curious to know how a smart guy gets himself into three bad franchises. If I told you the names of the companies you wouldn’t recognize them, and that was part of the problem. They didn’t have enough traction to produce experiences that existing franchisees could share with prospective franchisees. But even then – even if he had been told the franchisors were confused about their relationship with franchisees – chances are he would have invested in all three businesses because he liked the products and services.

Must you love the product or service?

Which raises an interesting question: How important is it to like a product or service before you buy the franchise?

I’ll have more to say about that later – let me know what you think. Meanwhile, it’s far more important to find a franchisor that understands that the customer is the franchisee! Or, to be one if you’re the franchisor!

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You can improve the odds of being in your ZONE by matching jobs, challenges and goals to your skill level. You can also get into your ZONE by increasing your skill level.

Hmmm. The message was particularly interesting to me at the time because I was waiting to hear from the folks at Potbelly franchising for a blog article about why they use profiling (via the Franchise Navigator) to select franchisees.

Will the franchise meet the franchisee’s capabilities?

Rex also wrote:

People can be described as being in their ZONE when they appear to be working effortlessly and getting optimum results. When a task or job challenges a person’s abilities, the opportunity to be in the ZONE exists. When challenge is low and ability is high, the person may become bored, distracted, and have a tendency to be sloppy or make mistakes. When a challenge is above a person’s skill level, it can cause stress, frustration and tension, which leads to poor performance.

Wow, I said to myself. All that explains why franchisors use (or should use) profiling to select franchisees.

In every franchise system, the most successful franchisees – the best franchisees – work “effortlessly” and they get “optimum results.” The problem is, in every franchise system there are always too few of those franchisees. And invariably franchisors are asking: “Why is that so?”

Who Gets It? Most franchisees don’t

If some franchisees can work “effortlessly” and get “optimum results,” how come all franchisees can’t do so?

That question kept me awake for many nights while I was the CEO of a major franchise company and I eventually wrote a book called Get It! in which I explained that the “best” franchisees “get it” (that is, they understand what they have to do, when to do it, how to do it, and they’re prepared to do it) and all the rest do not – even though they could if they wanted to.

Now I’m not so sure that I knew what I was talking about. Because now I’m thinking that all the rest could not necessarily get it even if they wanted to.

Rex wrote that problems occur when “challenge is low and ability is high,” and also when “a challenge is above a person’s skill level.”

If only franchisees were all alike

There’s the rub! Not all franchisees are created equal.

Many (and in some franchise networks, most) franchisees are not prepared to be franchisees. They love the idea of self-employment. They’ve got a dream (even though I’m pretty much sick and tired of hearing about the importance of dreams). They’re ready to be entrepreneurial. They’re ready to build their own business. And so on and so on and so on . . . and they buy a franchise and the next thing you know they’re miserable. They’re working 24/7. No one wants to be around them because they’re negative and grumbling all the time. They’re almost out of money. The business isn’t what they thought it would be. The franchisor isn’t all that helpful anymore. And life sucks.

What happened?

Rex told us what happened: Either the franchisee is bored, or the franchisee is in over his head.

The better question is: Why did that happen?

Rex answered that question, too. The franchisee is not working in his ZONE. (And — I’ll add this — the franchisor isn’t doing anything to help the franchisee understand how to work in the ZONE).

Three reasons explain why it’s so

Which begs the next obvious question: How come?

• Because neither franchisor nor franchisee realized the importance of aligning talents and values and skills with operational challenges. Not all franchisees want to do, or can do, the same type of work! And not all franchisors do a good job of helping franchisees improve their skill sets.
• Because the franchisee didn’t realize – or didn’t want to hear – that he can’t do everything or anything he wants. There’s that dreamer again! It’s a lie to believe you can be anything you want to be. Thank God my father didn’t tell me that I could be a jockey. And I never dreamed that I could, either! Some people are better than other people at doing some things. It turns out it’s important to know what you can do well and want to do well.
• Because the franchisor didn’t realize that not all franchisees are created equal – they’re not all going to perform exactly the same way unless they’re all exactly the same way! And they never are. However, some of them are, and it’s the franchisor’s job to find those people (and continually help them to improve their skills). Find the franchise prospects who can work in the franchise ZONE and the franchise network will include more people who “get it” and fewer that don’t.

Pretty simple stuff.

If you’re buying a franchise, find out first if you can work in the ZONE of that franchise business. If you’re selling franchises, it’s your job (and responsibility) to identify the ZONE, then find (and prepare) the franchisees who will prosper while working in the ZONE.

That’s why profiling is important (and I’m still eager to hear what the Potbelly folks have to say).

And that’s how you can develop personal leadership.

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Two major reasons. Franchisors say:

• “We tried it, but it doesn’t work.”
• “We don’t have the budget for it.”

And neither reason makes sense.

Obviously public relations works – just ask franchisors that have been using it successfully for years. As for not having the budget for it – that’s not possible, unless the franchisor isn’t spending any money to generate leads, or has discovered a unique and guaranteed lead generation process.

What’s your company’s PRP?

Based on my 30 years of experience, I’ve found that franchisors don’t use public relations because they don’t know how. They haven’t developed their Public Relations Potential (PRP), and consequently they miss out on the second best means of lead generation. Without PRP no PR campaign works! (And in that case it’s better that you don’t spend any money on it, but don’t tell yourself that PR doesn’t work, or that you don’t have the budget for it).

I learned about the value of franchise PR early in my career when a franchisor called me with a problem: “We need to sell more franchises,” he said. “What can we do to find more franchisees so we can expand our franchise network?”

The short story is that I wrote a book for that franchisor (Franchising: The Inside Story) and it generated leads for years thereafter. (I’ll write about using books and eBooks for lead generation in future blogs).

Most franchisors won’t write a book (which is usually a mistake, and I’ll explain that in future blogs, too), but there are many other ways to take advantage of PR. However, nowadays it’s important to put the cart behind the horse. You can’t take advantage of PR until you create an opportunity to do so. Which means you must develop your PRP. Make a case for why your company deserves PR.

Who cares about your franchise?

“Why would anyone care about your franchise?” I’ve asked many franchisors through the years. If you can’t answer the question intelligently, you don’t have any PRP, and a company without PRP isn’t worthy of PR.

Another question: “What differentiates your franchise opportunity from all the others?” Once again, you’ve got to answer that question meaningfully. And the truth is, the answer is usually, “Nothing,” or “Not much!” (That’s where a good PR person earns his or her money).

Why would the media care about your franchise?

It used to be that most franchise companies could get some PR just because they were franchises. But that’s not the case today (although social networking makes it easier, but it’s not often effective). It’s as though the traditional, mainstream media have burned out on franchising. Nothing new about it. Nothing unique about it. Many of the media have even tired of writing negative stories about franchising, which goes to show that “franchising” is no longer a hot button. No one seems to care, especially not in the current financial environment.

And yet, of the franchisors selling franchises today (with the exception of the mega franchisors), the majority will report that PR produces a large percentage (sometimes more than half) of their franchise sales annually. And, on closer look, it’s easy to understand why. Those franchisors have developed their Public Relations Potential and hired someone (internally or externally) to exploit it.

If no one’s exploiting your PRP, why not? (You’re fooling yourself if you say PR doesn’t work, or you don’t have the budget for it).

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It’s a debate that never ends.

My point of view? No!

It’s an ops issue

But that doesn’t mean anything because the debate isn’t about how much money the development people earn as much as it’s about how much money the operations people do not earn!

And it’s the ops people who keep the debate alive (because the sales people, understandably, don’t want the focus to be on their compensation).

It’s also understandable why the ops people keep the debate alive. They are often the folks who have to “clean up” after the sales person’s work is done (and the money collected) and that’s not what they’re really paid to do.

Problem begins with the need to sell

The problem begins with the franchisor’s need to sell franchises. Many franchise companies rely on new franchise sales just to keep the lights on in the corporate office. It’s not the ideal, but it’s reality. I’ve got a collection of fascinating stories from franchisors who told me about their early franchise sales – sales they later wished they could take back. They realized, sometimes even as they signed the franchise agreement, that they sold the franchise to the wrong person, but . . . they needed the money to make the payroll.

It’s not unusual for franchise companies to sell franchises to the wrong people for the wrong reasons, and for a development person justify this by saying: “We never know who will turn out to be a great franchisee – sometimes the guy we thought would be a winner turns out to be a disaster.”

True enough! I’ve seen that happen many times through the years. But it doesn’t help the debate.

Cleaning up after the sale

In fact, it exacerbates the debate because it’s the ops people who have to clean up the disaster!

I’ve heard the horror stories from ops people. “I met this franchisee for the first time and even though he’d been through our training there wasn’t any possible way that he could succeed as a franchisee. His first question was: How do I turn on my computer? . . . What were they thinking when they sold this guy a franchise?”

Well, Mr. Ops Guy, they may have been thinking about how they were going to fund their next payroll, including your paycheck! . . . Or, how they were going to hit their sales quota. Or . . . any number of other issues.

Getting to the crux of the issue

That doesn’t help, either! Because now Ops Guy is faced with the delicate and frustrating job of helping the franchisee succeed when, in fact, that may not be possible. Or, if it’s possible, it won’t happen without a lot of extra effort on Ops Guy’s part. There’s the rub!

“I love doing my job,” Ops Guy recently told me. “I love supporting franchisees and helping them tweak our system so that they can succeed. That’s how we’re building a brand, and that’s what my job is all about. But I’m not a magician! I don’t know how to help someone who’s not suited to succeed as a franchisee. And frankly, I don’t want that job. But on too many days that’s the job I’ve got. Why? Because they sell franchises to the wrong people.”

Here’s what’s worse: “And what I really hate is that the reward for selling franchises to the wrong people is every bit as generous as selling franchises to the right people. Makes no sense, and it’s an insult to the operations people. We’ve got to work harder to help those franchisees — which costs the company more money – and we’re not going to succeed anyway. So franchisees fail and that hurts our brand. But the sales guys? They got their money and ran!”

Sell to sell, or sell to fit?

No one can argue with Ops Guy. He’s right! But that’s not to say Sales Guy is wrong. There are bad Sales Guys, no doubt about that. They think their job is to sell, no questions asked, and they don’t worry about the “fit.” But that’s not the majority of the franchise development people. They strive to make good sales if for no other reason than they want the referrals. It’s difficult to get a referral for a new franchise sale from a franchisee who has failed! Plus, many franchisors rely on a selection committee to approve new franchises, so Sales Guys aren’t working in a vacuum.

Recently, this debate appeared on Linkedin, and I was happy to read the comments of Jamie Davis, executive director of business development at Donatos Pizza. Here’s a Sales Guy who asked his franchisor to pay him on an “asset basis” rather than a “transaction basis.” In other words, pay him something for making the sale, but pay him more based on the franchisee’s success.

Davis suggested that his bonus reflect “the success of the system” so that he and the Ops Guy would be paid on a similar scale.

Good idea?

It’s got merit. Now it just needs Compensation Guy to figure out a model. If you’ve got one, please share it!

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He said that while consumers love the Fuddruckers brand, management botched up the business. Among other things, “they didn’t get along with the franchise owners,” he clarified.

Who’s managing the franchise?

“Fuddruckers was managed by bankers, accountants and Wall Street types,” he added. But now that the Pappas brothers have acquired Fuddruckers, he said, “(they) know how to manage a restaurant and I think they will listen to the franchise owners.”

Through the years, I’ve had some experience with franchise companies changing hands, and all too often a good brand, even though it may have been struggling, got “botched up” by the new ownership and/or management team. As much as I appreciate “bankers, accountants and Wall Street types,” they usually can’t find their groove in franchising. Their first obstacle is to understand that franchisees do not take orders from the franchisor, and that franchisees are investors who will (sometimes) demand to be heard (not all franchisees are bold enough to tell the franchisor what they really think). When they’re not heard, disgruntled franchisees can easily advance the demise of a franchise brand. Franchise history serves up plenty of examples.

Beware the analysts!

I was recently involved in a franchise acquisition with “analysts” (though I use the word loosely in this instance) and it didn’t go well. The last person a franchisee wants to hear from is an analyst who has never operated the business (or any business for that matter). And when the analysts start making decisions – which is rare, fortunately, because it takes them out of their comfort zone – or when they begin to control the direction of management, any brand is headed for a disaster. Often times “new ownership” sends in “analysts” to band-aid a situation where the obvious answer is better controls by a capable management team and more cash. The latter is often the problem and it can only be exacerbated by analysis, even though the ownership will claim that there’s no sense spending more money until the analysts define the “current situation.” Out come the spreadsheets — but numbers and spreadsheets tell only part of the story and do very little to describe the real issues.

Kiselev obviously knows his role (he doesn’t make decisions for brands) and I appreciate what he said for two reasons:

1. Management, first and foremost, needs to “get along” with the franchisees. It’s a requisite, and it’s not all that difficult to achieve. However, building a relationship with franchisees requires trust, and in a franchise company analysts do not stir up trust among franchisees. Analysts track numbers, but their information is often meaningless without understanding how the business operates (or how franchising works). Not all franchisees deny that they are part of the problem – but they want a franchisor that will address the real issues, not hide behind spreadsheets.
2. Leadership must be provided by people who know how to manage the business, not just build and read spreadsheets. Bankers and accountants know numbers, and generally do not know how franchises operate. Just the idea of franchising scares the hell out of many of them. I’ve seen instances where accountants torpedoed a franchise deal because they didn’t think their client should pay a royalty. The suggested opening a business independently . . . or not at all! Leaders rely on numbers, but a number has never been responsible for building a relationship.

Suggestions for franchisors

Here’s how I interpret Kiselev’s points for franchisors:

• Measure your relationship with franchisees. How good is it? And don’t expect franchisees or prospective franchisees to take your word for it. Where’s the proof?
• Make certain that the people who sell your franchises and support your franchisees understand how to operate the business successfully. If all they can do is talk about their spreadsheets they won’t get to first base with a group of savvy franchise operators. And there goes the trust.
• Listen to the franchisees. If you don’t have a Franchise Advisory Council, create one. If you’ve got one, make sure the franchisees believe it has clout. And once again, prove that you listen to the franchisees – let’s see an independent survey.

Suggestions for prospective franchisees

If you’re looking to acquire a franchise, here’s how Kiselev’s points make sense:

• Evaluate the franchisor/franchisee relationship. Ask the franchisor and franchisees how they size up the relationship. But then ask to see an independent survey that has recently measured the relationship. Franchisors that say they don’t need such a survey, or they refuse to submit to one, probably have something to hide. They’re unworthy of your investment.
• Look at the qualifications of the people who manage the franchise, as well as those who sell the franchises and support franchisees. What do these folks really know about operating the business? How many of them have been franchisees in the past? When they tell franchisees what they should do to be successful do the existing franchisees believe them?
• Who’s listening to the franchisees? Find out! Again, ask for the results of an independent survey. If there’s a Franchise Advisory Council, what has it achieved recently? Are franchisees eager to serve on the FAC? And do those who serve believe they are making a difference within the franchise network?

Franchising isn’t for everyone

Franchising isn’t perfect, which means it’s not for everyone. In fact, it’s not for most people. However, it works almost perfectly when franchisors and franchisees get along. And yet, isn’t it interesting how often franchisors seem to go out of their way to botch it up?

Photo image by: davisseal

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