,

What Really Makes a Franchise Successful?

By Joe Tagliente

There are many entrepreneurs out there who have the desire, work ethic, and cash to start their own business. The only thing they lack is an original idea that they’re confident enough to put capital behind. For people like that, buying a franchise can be a great formula.

A franchise is a proven concept. All you have to do is invest your capital, your time, your sweat equity, and your intelligence, and you should be very successful. But as with any business, buying a franchise isn’t a guarantee of success. Here are a few factors that determine whether franchisees (and franchise businesses) succeed or fail.

Does the Corporate Leadership Have Your Back?

The companies and brands that successfully launch and grow franchising programs all have one thing in common: They are obsessed with the success of their franchisees. They want their franchisees to get rich operating their business, and tell all of their friends about how rich they’re getting so that they can promote the sale of additional franchises to other people.

The really successful franchising companies commit to having a great training program and manual of operations. They commit to having a real estate department that helps franchisees analyze great sites to build new stores, and they commit to having wonderful marketing people that will help the individual franchisees at a local level while they’re developing brand exposure programs on a more global level. The successful franchises invest the time, people, resources, and energy to get those things done.

When you have franchisors that have an “us against you” relationship with their franchisees, they tend to have either stagnant growth or no growth at all — and then they’re surprised why their franchises aren’t taking off. I think the most egregious example of that is Quiznos, which was a successful sandwich concept that people seemed to love. They were having no problem selling franchises and ramping up new stores, but at some point, the Quiznos corporation decided to mandate that their franchisees buy all of their supplies directly from Quiznos. Once they controlled the supply chain, they increased the prices of those supplies in a very aggressive fashion and gouged their franchisees. Although Quiznos as a corporation was making money, their franchisees were suffering, and a number of them went bankrupt.

On the other hand, really good franchisors work very hard to support their franchisees. Having been a Burger King franchisee, I know that when sales for the chain were slumping, Burger King committed extra dollars towards promotions and national marketing programs in order to increase sales. They reengineered and retooled the kitchen layout and equipment so that restaurants could be operated with fewer employees, and on smaller footprints, thereby reducing operating and development costs which lead to increased profitability.

Do You Have a Network of Support?

The best franchise systems have a strong franchisee network and community that supports each other. If there’s a franchisee who is struggling in New England, and he’s hearing stories about a franchisee in Arizona who’s having a lot of success with a program for hiring better employees or driving top line sales or cutting costs, he can pick up the phone or e-mail that other franchisee and say, “Tell me about your business.” They can share a multitude of best practices.

In the old days, we used to pick up the phone and call each other. Now there are message boards and Intranets and other communication tools. There are regular training programs and training facilities in various locations, and conventions that franchisees can attend. Ongoing education is a huge part of the equation.

Successful franchise organizations want their franchisees to partner with each other. In return, they want their franchisees to be partners with the corporation, and then the corporation as a whole builds strategic partnerships with their vendors. The end result is this super-community that works together to drive the brand forward.

Are You Fully Committed?

Being successful in the franchise industry requires you to expend a certain amount of energy, passion, and time. It’s not an industry where you can just stick your toe in the water and try it out.

I have a good friend who’s a software executive on the West Coast. He has done very, very well throughout his career, but he’s had to change companies a few times, and didn’t want to keep doing that. So, a number of years back, he asked me about purchasing a particular franchise. He said, “Joe, if I buy this, how much time do I have to put into it?”

I told him, “If you really want to be successful at it, you have to be full-time. You have to commit yourself to it. You have to decide that this is a real business.”

“Well, what if I don’t want to be the guy who operates the franchise?” he said.

“Then you’re going to have to find yourself an operating partner,” I said. “You’ll invest the money, your partner will operate it, and you’ll have to make sure that he or she is well-compensated and gets a significant portion of the equity, because they’re going to be putting their blood, sweat, and tears in there, and you’ll just be trying to harvest the cash.”

After considering my thoughts, he decided to pass on the idea of franchising.

But there are some really wonderful companies out there that have dedicated themselves to being professional operators of franchises. Some of them are billion-dollar companies. Former NBA star Junior Bridgeman purchased his first Wendy’s franchise in 1987 while still playing for the Milwaukee Bucks. Twenty-eight years later, Bridgeman now owns 195 Wendy’s restaurants, 100 Chili’s restaurants, and a number of other franchises, and has amassed a net worth of over $400 Million. That’s how big of an empire you can build if you fully commit and dedicate yourself to being a top-notch franchise operator.

Stay tuned for more franchise business tips from Joe Tagliente

1 reply

Trackbacks & Pingbacks

  1. […] colder weather affects crops, your costs will go up. If you’re part of a larger franchise, they should hopefully be operating with your (and their) best interest at heart, working to buy […]

Comments are closed.