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Avoiding the Big Five: The Five Biggest Mistakes Franchise Organizations Make

Just to let you know where I'm coming from when I talk about the five biggest mistakes I see franchisors making in today's tough economic times, I've been plying my trade for more than 20 years now, and well over 50 percent of my clients have been among the nation's foremost franchise organizations. I've been in the trenches with them during all kinds of economic scenarios--inflation, recession, expansion, steady-as-she-goes, and a couple of booms and busts. That said, here's my take on the missteps I see in today's marketplace:

1. Thinking you can cut costs and/or services out of your model to increase or maintain profits.

Yes, there probably is fat that can be trimmed and we need to look at every line item expense, but what we cannot do is compromise the customer experience. When you do that, you threaten the lifeblood of your business.

Here's what happens when you compromise the customer experience. My wife Roberta and I were staying in Las Vegas at the Rio not long ago. We stopped by the shop, as we usually do, about 11 a.m. looking for something to eat. Upon arrival we found the hours had been changed, from 7 a.m. to 3 p.m. to 7 a.m to noon, which you wouldn't think would be a problem since we were there at 11. However, besides finding reduced staff and hours of operation, we discovered they thought they would save even more money by offering only a menu instead of breakfast and lunch. Fine for Roberta, but I'm not a breakfast person. I was looking forward to a burger. We walked out.

2. As the old saw goes, "You cannot do more with less."

My twist on it is, "You can only do more with less if you add Hamburger Helper." In other words, instead of cutting this and trimming that, we can look at doing it better or differently. What we have to ask is: 1) are we doing the right things and, if we are, 2) can we do them another, faster, better, cheaper way? Creative problem-solving is the only way it's possible to do more with less.

When the Houston economy took a nosedive in the '80s, Allright Parking's downtown revenues dropped so drastically they could no longer afford to have an attendant on duty at every lot. The manager in Corpus Christi (whose income in part came from profit sharing) came up with the idea of putting numbers on all the spaces and a box on the lot where people could deposit their money. That's how you do more with less. Now he needed only two people per shift to check the boxes and take care of all 20 lots. Two people and some "Hamburger Helper" instead of 20 people and shrinking profits. Profitability restored, thanks to innovative creativity.

I was talking to a manager of Jason's Deli, a and bar chain in the Southwest, who told me they've saved more than two hours a day in prep time by not cutting the tops off the strawberries they use to garnish certain plates.

These cost- and time-saving measures had no impact on the customer experience. Instead of simply cutting things out of your budget or curtailing hours or services, look at doing things differently instead.

3. What got you here will not keep you here nor take you to the next level.

Judging by all current evidence, if you're not evolving, not changing, the world is going to pass you by. Circuit City is gone. Motorola once was the world's leader in cell phone technology, now it is Apple. I don't even have to mention the Big Three in Detroit.

Of the three giant retailers that were start-ups in 1961, Kmart is not even on the 2008 list of Top 100 Retailers, while Wal-Mart is #1 and Target is #6. What has made the latter two such formidable contenders, even after nearly 50 years in business? They found a niche and filled it--and then they never quit innovating.

4. Focusing on the economy and the competition instead of on the customer and your employees.

Customers do things for their own reasons, not yours. You may think your unique selling point is your special widgets, but it could be that sales are increasing because your customers like your friendly, savvy staff.

Do you know why people give you their business? Do you understand what their reasons are? Do your employees work for you for the paycheck, for the flexible hours, or some combination of both?

When you find out why your best customers shop with you and why your best employees stay with you, you can make it easier for them to keep on doing it--and attract more customers and employees just like them.

It's highly likely you have a direct competitor across the street or down the block, so it may seem natural to focus on what they're doing, and it's hard not to get caught up in the "Woe is me" of the latest economic headlines. I like to paraphrase Mother Teresa, who said something like: "Do not ask me to march against the war, but I will readily march for peace." Don't be against the competition or try to fight the economy; be for your customers and for your people.

5. Not doing everything in your power to make sure you have the best coaches and players and giving them the authority to do the right thing.

Not everyone can be a great leader, but most of us can be great coaches. A great coach knows how to pick the best players, finds out what motivates them, gives them the and practice they need, and empowers them to succeed.

Consider Zappos.com, the online retailer. I'd heard a lot about how they empower their people to deliver legendary customer service, and I'd talked about them so much that my administrative assistant, Leslie, decided to give them a try to find slippers wide enough for her 83-year-old mother. She found three pair of wides and ordered one of each, hoping for the best, but, alas, none fit. When she called to take advantage of the free on returns, not only was the process easy and fast, but the customer service rep consulted with a co-worker and suggested that she look at what was available in men's slippers. They found slippers that fit.

When great coaches empower great players, everyone wins--especially the customers.

Lots of businesses didn't survive the economic upheaval of the 1930s, but those that did:

  1. didn't diminish the customer or employee experience;
  2. found creative ways not to do more with less, but to make sure they were doing the right things in the best ways possible;
  3. didn't decide to pull in their horns and wait it out, but kept devoting themselves to what they did best and innovating;
  4. kept their focus on the customer and their employees; and
  5. kept building the best teams


They were the ones who survived and then thrived when the turnaround came. And you'd better be ready, because it will happen faster this time--everything happens faster now!

Mel Kleiman is an internationally recognized consultant, author, and professional speaker on strategies for hiring and retaining the best hourly employees and their managers. He is president of Humetrics, a leading developer of training processes and for recruiting, selecting, and retaining the best hourly workforce. He is also the author of five books, including the best-selling Hire Tough, Manage Easy. You can reach him at 713-771-4401 or mel@melkleiman.com.

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