Franchise Articles

Building a strong franchise system through unit growth is a team effort requiring participation from the entire organization. To succeed more often in attracting and capturing the best possible candidates for your system, it is essential that all departments contribute.
Most franchisors don't take the time to educate and involve all their key department heads in the development process. But without this interaction, conflicts can arise about the capabilities of new franchisees, with blame for any failures placed on the franchise development department--even though operations didn't want to be involved in the selection process. These conflicts usually occur when a new franchisee is struggling after a few months and the discussions start focusing on whether the franchise was granted to the right person...

Four years ago David Griffin had just purchased 25 Jiffy Lube stores in Colorado. The stores were underperforming, some were dilapidated, and the U.S. economy still at one of its all-time lows. Those factors created a perfect storm for Griffin to expand--but it wasn't a walk in the park.
"We've spent the last three years reviving those units, and it has been a monumental task," says the 56-year-old today. Griffin says it took millions of dollars to turn around those 25 struggling locations--and the process tested both the company and his family, which is deeply involved in the business. "I'm still working right alongside my wife Joye and my three sons," he says. "We are today's family farm."
The effort paid off, says Griffin. "Sales at those 25 stores had been in a double-digit dive prior to us taking them over...

Retail traffic is an important indicator of shopper behavior and a bellwether for retail sales results. If more people are visiting stores, there are more opportunities for retailers to convert shoppers into sales. When traffic is down, retailers have fewer opportunities, thus, typically, fewer sales. More traffic doesn't guarantee more sales, but store traffic and sales are correlated.
But traffic is notoriously difficult to measure. If you scanned the headlines about retail traffic during this past holiday season, you would likely have been more confused than enlightened. Depending upon which index you referred to, retail traffic was either significantly down, somewhat down, or up.
Why are there such discrepancies in these indexes - and whom should you believe?

Is retail traffic up or down?
The answer depends on where your numbers come from...

Every successful franchisor reaches a certain point where they must decide what the next step will be in expanding their business. Growing the franchise locally, then nationally, is the logical progression for domestic growth. But to fully capitalize on potential growth options, and to avoid over-saturating domestic markets, franchisors may want to think about international expansion.

The growth of a brand at an international level can pay huge long-term dividends to the franchisees, the franchisor, and shareholders alike. Global brand recognition, increased brand footprint, and global accounts programs all benefit the business. Revenue streams from new franchise sales will combine with ongoing royalties for the franchisor, and all of these factors build a larger family of satisfied franchisees...

This is Part 3 of a series on why new and emerging franchise brands fail. In the first two parts, we discussed 8 reasons they fail. The remaining installments will cover what they can do to succeed.


Doing It Right from Day One

During a recent IFA convention, we approached several franchisors in different industries that survived the start-up phase and had growing franchise systems with happy and profitable franchisees. They had all crossed the threshold where they were royalty-sufficient, meaning their existing royalty stream sustained the business. Their business could sustain itself if they failed to recruit another franchisee.

We asked them, "Knowing what you know now, if you wanted to launch your concept right and not be undercapitalized, how much should you have started with?" Their answers were consistently between $1 million and $2 million...

We live in a world where law firms commonly have billable hourly quotas that their attorneys must meet, and substantial hourly rates as well. Yet, franchisors have a goal seemingly inconsistent with this framework: to minimize outside counsel fees. Can these seemingly opposite purposes be reconciled? Yes, and the way to do so is for franchisors to ask outside counsel to assist them in those areas that can competently be handled by the client after being set up by outside counsel. Here are some of those areas.

• Ask counsel for the templates to do the Michigan and Utah annual filings.
Perhaps it makes good sense for outside counsel to file the annual Michigan and Utah Notices the first time a franchisor intends to offer or sell franchises in those states...

Objective: Grant the franchise to qualified buyers on Discovery Day or soon after
Length of meeting: 30 minutes to 2 hours



Overcoming buyers' cold feet

Feeling butterflies in personally uncomfortable situations is a human condition. We all know and have experienced this. It means we care and really want to do something right - whether it's our first step on stage in a community performance, preparing for the city league tennis championship, addressing an audience of 500 people, moving to a new city, taking on a new job... or getting Discovery Day approval to buy a franchise business!

Why am I bringing this up now? Because when closing time starts "closing in," reality hits some buyers like a sledgehammer...

John Sullivan is a Midwesterner with a background in retail and corporate America. He moved to St. Louis following college and began his career with Macy's department stores. He went on to work in the plastics industry for companies like Dow Chemical and Rohm and Hass over the next 12 years. But it was when his executive level position required extensive travel that he began to reassess his career. He began looking for a way he could be at home more with his family. Franchising proved to be the perfect solution.
Three years ago Sullivan became a ProTect Painters franchisee and has loved every minute of it. He says he has a much more flexible schedule and that much of what he learned in the corporate world has helped him become a successful franchisee...

Fast on the heels of its recent legal challenge to a new minimum wage law passed in Seattle, the International Franchise Association (IFA) has now set its sights on the city of Chicago.
Steve Caldeira, president and CEO of the IFA, wrote a letter to the Chicago City Council and Mayor Rahm Emanuel last week urging them to remove a provision in a bill to raise the minimum wage that would discriminate against franchisees.
Caldeira and the IFA have been clear in their assertion that franchisees are locally owned, small businesses and not large, national businesses as the legislation suggests. Giving non-franchise small businesses extra time to increase their wages, but forcing franchisees to raise their wages along with large companies is unfair and unconstitutional, says Caldeira...

There are rules for a reason: they work for most people most of the time. Often, scientific evidence backs them up. But as with almost any other endeavor in society that doesn't involve criminal activity, rules can sometime be broken - or at least bent - without the world coming to an end.

This is especially true in business. Company owners and top executives give a lot of thought to winning and keeping customers, and they spend a lot of time and money on things like PR, leadership training, social media campaigns etc. But the real front lines of building a business are in the daily interactions employees have with customers.

One of the major roadblocks to customer service excellence are the policies and procedures most companies have in place to make sure that 1 percent of their customers don't take advantage of them...

The benefits of tracking traffic and measuring conversion rates in retail stores have long been established and are now widely considered fundamental in retailing. Not only have retailers been doing it for decades, but the retailers who leverage the insights effectively have an "insight edge," and consequently a competitive advantage over retailers who do not.

Over the course of the last 10 years, I have worked with a multitude of franchise and dealer networks including those in wireless, general merchandise, electronics, home improvement, and automotive segments. Regardless of the type of franchise network, I see a consistent disconnect between franchisors and franchisees when it comes to analytics, especially store traffic and conversion analytics...

Every marketer thinks about their ideal customer - where they live, what they like, what they buy, where they buy it, and why. Creating a picture of that perfect customer goes a long way in helping consumer marketers determine where to spend their own money. A free, customizable template from HubSpot, "How To Create Buyer Personas for Your Business," provides a way to answer those critical questions about your ideal customer.

The report is divided into five sections, including a set of blank PowerPoint templates to create three customized buyer personas for your business. Here's an overview of what's inside, with excerpts from the report:

1) What are buyer personas?
"Buyer personas are fictional, generalized representations of your ideal customers...

Is That Why it Says "Ad" On it?
Research shows that 36% of people tested still don't realize that Google's Adwords ads are actually advertisements (down from 41% in 2013). In fact, the study found, one in four tested don't know that Google has ads at all! In 2013, 91% percent of Google's revenue was attributed to advertising. It must be nice to be a company whose customers don't know that they're the product you're selling.

Don't Trust Google? Try DuckDuckGo
DuckDuckGo, the small search engine that distinguishes itself from Google and the other large search engines by its guarantee of user privacy, has added a number of new features to make itself more attractive. Now DuckDuckGo users get auto-suggested searches, maps (using OpenStreetMap) and local search, and weather, image, and recipe search...

What role does diversity play in your brand's recruitment and development process?


Chris Cheek
Chief Development Officer
Toppers Pizza
Essentially doubling in size since 2010, Toppers Pizza is one of the fastest-growing pizza chains of the past 3 years. At 50 stores, we are at the beginning of a period of even more accelerated growth. Our goal, to reach 500 pizza stores by 2020, can only be realized by our focus on recruiting new franchisees that, among other things, are able to win the pizza delivery competition at the local community level.
If you look at the changing population of the United States in the last 12 to 15 years, we understand and embrace the strategic imperative that, to be successful in the growth of financially successful new stores, our franchise owners must be able to bring it with passion and build something special at the local level...

Some would say find what you do best and stick with it. If you've been successful with food franchising, then stay in that lane. But Ahmed El-Hawary doesn't see things that way.
El-Hawary, who worked in his family's restaurant as a youth, operates four Firehouse Subs. When he opened his first 12 years ago, he was the brand's youngest franchisee. Last December, he opened his first Golden Corral restaurant, a $3.5 million project built from the ground up.
But when the 34-year-old--who also worked in his father's business selling glass doors, screens, and garage doors--had the opportunity to acquire eight Sears Outlets stores, he didn't hesitate.
"It was an opportunistic choice. We're the third franchisees to come in and do the Sears Outlets, which are now outside the Sears brand but still have that strong name behind them," he says...

If you've had issues financing your franchise, you're not alone. Like any business owner, you need money to take care of everyday costs like paying property taxes, meeting payroll, or purchasing inventory and equipment. But what happens when you walk into a bank and are denied funding because of a low credit score or insufficient collateral?
This is a problem all too common for business owners these days. Following the recession of 2008-2010, government regulations forced banks and other lenders to significantly tighten their requirements. These restrictions effectively shut out many businesses from acquiring funding.
So what can franchisees do to receive the funding they want? The answer lies within alternative lending.
Since the financial crisis, alternative lending companies have begun to take the place of more traditional lending options...

Franchise development executives know that a high percentage of their future franchisees will require debt to purchase a franchise unit. Even the multi-unit franchisees that so many brands tirelessly chase will leverage their equity capital with debt. Franchisors need to 1) understand how and when the franchisee debt requirement affects the franchise development process, and 2) what actions they can take to achieve their desired outcomes: sell more units, achieve faster openings, and stop investing time into subpar prospects.

The role of financing in the development process
The franchise development process is often described as a funnel. Franchise leads enter into the wide mouth at the top of the funnel, and as the funnel narrows fewer and fewer leads remain until a limited number of franchisees emerge from the its narrow end...

U.S. franchisors are increasingly looking abroad for opportunities, setting up operations in franchisor-friendly countries. But an increasing number of franchisors are now looking overseas for franchisees to open new units in the U.S. Chalk it up to increasing awareness of the federal EB-5 visa program. And for foreign nationals seeking U.S. citizenship, the EB-5 program offers a way to obtain a green card - if certain conditions are met, most notably providing 10 or more full-time jobs within a 2-year period.

What is the EB-5 program?
The EB-5 Immigrant Investor program was created by Congress in 1990 to stimulate the U.S. economy by creating jobs and attracting foreign investment. It is administered by the U.S. Citizenship and Immigration Services (USCIS)...

This is Part 2 of a series on why new and emerging franchise brands fail. In these first two parts, we discuss 8 reasons they fail. The following installments will cover what they can do to succeed.

3. Selling franchises to survive
When a franchisor is selling to survive, they make poor recruiting choices and accept franchisees who may be operationally unsound or a poor cultural fit for the business. Some unprofitable franchisors start selling profitable company stores or territories. All these add strain on cash flow and operations and diminish the franchisor's likelihood of success. While this vicious cycle is predictable, these franchisors either fail to see it coming or break from its clutches. After a couple of years, if franchisees aren't making money, they will start listing their businesses for sale...