Grow

In previous articles we looked at the basics of taking your franchise global, how technology helps you succeed globally, and how U.S. franchises are growing around the world. So if you have decided to "Go Global" with your franchise, the next question is, "Now what?"
Recent reports by both McKinsey and the Economist indicate that global executives in many regions of the world are more bullish about new investments than in recent years. More countries are expected to see more investment in new projects in 2014. This is good news for U.S. franchisors seeking international licensees.
What qualities does your franchise need to succeed globally? Experience across more than 50 franchisors shows the following to be critical to success:

When it comes to franchise sales, it seems the more things change, the more the development practices of many franchisors remain the same.
This was a key finding of Franchise Update Media Group's annual Mystery Shopping survey, unveiled at the 15th annual Franchise Leadership & Development Conference in Atlanta in October. Across the board, our expert team of mystery shoppers found that, despite technological advances that make it easier than ever to connect with qualified prospects, franchise sales and development teams don't always pursue promising prospects with the fervor, immediacy, and persistence they would in a world of best practices.
"The constant frustration in the mystery shopping results is the failure of franchisors to respond to qualified inquiries," says Steve Olson, president of Franchise Update...

"How do you set standards and measure performance in your brand's sales and development department?"

Taylor Wiederhorn
VP, Franchise Marketing & Development
FatburgerFatburger sets development standards based on a variety of different types of target markets and development standards designed specifically for those markets. In domestic markets where Fatburger already has a footprint, the criteria are based on a calculation of factors including the existing number of units and how much room there is in that arena for new restaurants to develop.

In existing domestic markets, Fatburger allows single-store and multi-unit operators to develop new units after determining that market's ability to handle additional units...

Tom Wood, president and CEO of Floor Coverings International (FCI), served as Conference Chair of the 2014 Franchise Leadership & Development Conference in October. Based in Atlanta, FCI has been franchising since 1989. We asked Wood for his own opinions on many of the topics that came up at the conference.

What are the most important factors and characteristics you look for in assembling a successful sales team?
Sales people who understand what they are doing in the role: "selling." While we are only looking for the best franchisee candidates, the right people will still need a sales professional to guide them through the process and keep the process on track. Characteristics include goal orientation; a realistic outlook on the business and a strong communication style to communicate it; and an ability to manage by the numbers...

The findings from the 2014 Annual Franchise Development Report (AFDR) were unveiled this October at the 15th annual Franchise Leadership & Development Conference in Atlanta. In keeping with past years, Steve Olson, president of Franchise Update Media Group, presented the findings during the first general session of the conference. This year he was joined by Conference Chair Tom Wood, president of Floor Coverings International, and Greg Vojnovich, chief development officer at Popeyes Louisiana Kitchen for a discussion of the results.
This year's AFDR is based on responses from 101 franchisors representing 34,509 units (31,047 franchised and 3,462 company-owned). The participants were franchisors who pre-registered for the conference and completed an in-depth survey online in advance...

Franchise Update mystery shoppers posing as qualified prospects identified a stellar group of franchise companies for best practices in lead generation, follow-up, and recruitment. Scoring 152 registered companies on telephone response to prospects, and 127 franchisors on recruitment websites and response to website prospects, mystery shoppers judged how well--and how quickly--franchise sales and development staff replied to inquiries. In addition, online experts evaluated franchisors' recruitment websites and their use of social media.

The resulting STAR Awards (Speaking To And Responding) were presented at a special dinner during the annual Franchise Update Leadership & Development Conference, which took place from Oct. 9-11 in Atlanta...

While many U.S. franchisors are now expanding into other countries, seeking new growth and less competition, international franchisors are finding the world's largest economy a target too good to pass up. But are the streets of the USA still paved with gold?
"Many international franchisors salivate at the prospect of entering the United States, the world's largest consumer market," says Ray Hays, senior director of EGS in a recent Entrepreneur magazine article. "Perceived barriers to entry for non-U.S. franchisors include a litigious and highly regulated legal environment, complicated multi-cultural demographics, fierce competition, and high investment requirements. In short, the U.S. market is often viewed as too expensive, risky, and complex, but many of these perceptions are overblown myths...

Have you ever noticed over the years that you come across a candidate who seems to be a perfect fit for your franchise opportunity, and all you have to do is lead them down a mutual exploration process to the sale? What do you think caused that to happen? Is it just a "bluebird" candidate who would have invested in the first franchise they looked at? Or was it a candidate who truly understood your concept and believed there was a market for the product or service in their area?
There are great lessons to be learned from a candidate who profiles so perfectly for your business. So how do we use this knowledge as professional sales consultants to facilitate a lead generation program and a sales qualification process that attracts the right candidate, along with a sales process that allows them to discover there is a good match for their personal and business goals?
Profile, profile, profile...

How many strategic initiatives has HR brought to the "C level" in the past 12 months? Your answer to this question tells us if you have a tactical or a strategic thinking HR person. Perhaps the more important question is, what type of HR person does the position require? A strategist can think and handle tactical application, whereas a tactician really struggles with strategic thinking. If your company has one HR person, it is better for that person to think big picture.
That person also should report directly to the CEO and, in my opinion, be part of the executive team. Given the expense associated with people, the impact this position has on your clients, and the need for continuous improvement, HR should not be the responsibility of a person lower on the food chain...

Support Pays Off: Fewer Closings, Higher Royalties

By Darrell Johnson

On average, 43 percent of franchisor G&A--money and human resources--is spent on functions that directly support franchisees. These include franchise development, site selection/pre-opening activities, training, field operations, compliance, marketing, and legal. The question franchisors and franchisees both should be asking is how effective these resources are. We know we get what we measure. Let's start with what might be good objectives to achieve. First, the franchisor perspective.
Having a franchisee who opens a unit more quickly will generate more royalty revenue. If that franchisee also gets to breakeven cash flow more quickly, they will be a higher performer and require less downstream support...

Have you ever noticed over the years that you come across a candidate that just seems to be a great fit for your franchise opportunity and all you have to do is lead them down a mutual exploration process to the sale? What do you think caused that to happen? Is it just a "bluebird" candidate that would have invested in the first franchise they looked at? Or was it a candidate that truly understood your concept and believed that there was a market for the product or service in their area? The answer is most likely all of the above except for the "bluebird" statement.
There is a great lesson to be learned from a candidate like this that profiles so perfectly for your business. So how do we use this knowledge as professional sales consultants to facilitate a lead generation program and a sales qualification process that attracts the right candidate along with a sales process that allows them to discover that there is a good match for their personal and business goals...

"In an era of increasing automation (CRM, etc.), how do you maintain a personal, one-on-one touch with prospects?"



Jennifer Durham VP of Franchise Development,Checkers
At Checkers and Rally's, we've been in the business of Big, Bold Flavor for more than 27 years. But there is one aspect that sets our guests, our restaurant teams and our support teams apart - and that's Passion. We offer crazy good, one-of-a-kind menu items at a great value to our guests, which are also easy to execute operationally for our franchisees. Our unique buildings and restaurant designs stand out from the pack and provide a retro feel with a contemporary edge.
The same passion holds true with franchise prospects interested in a Checkers/Rally's franchise opportunity...

For years franchise lenders have used SBA failure rate data as an initial screening tool to determine whether they should consider a loan to a prospective or existing franchisee. Many lenders have inserted failure rate limits into their credit policy guidelines. They do so even with the clear SBA disclosure accompanying these data that SBA failure and loss information should not be relied upon for credit decisions because of data quality issues.
In most of the brands we have evaluated, SBA data overstate, sometimes by multiples, actual loss unit experience in those brands. The result is that most brands are adversely affected when it comes to capital access. And that needs to stop.
The right way to assess a franchise system's risk profile is to look at how all the units of a system perform over time, not just those associated with SBA loans; the risk profile of a franchise system is not dependent on whether the franchisee has an SBA loan, a conventional loan, or no loan at all...

Franchisors constantly strive to attract more franchisees who are similar to their top-performing operators. To achieve this, they must take the time and effort needed to pull together the information they can use to build a franchise development program that attracts interest, and then recruit the top candidates to sign with their concept.
Candidates today are seeking franchise opportunities that meet their financial goals and increasingly view franchising as an investment vehicle. Today’s candidates want more information sooner in the process if they are going to proceed to investigate your brand. Franchisors need to get that information to them clearly and quickly through “responsible disclosure” in the FDD.
One of the main points of resistance to disclosing financial information about the company units, multi-unit, or franchisee groups through the FDD is that will it become public knowledge...

Technology is critical today to finding, signing, starting up, and growing your international franchise network. Technology can also save a U.S. franchisor money, help grow international units faster, and help preserve your brand across the world. Today, your international franchisees may be in time zones 12-plus hours--a full half-day--away from you. If you master franchise your brand outside the U.S., the most important thing to remember is that your international masters are both franchisees and franchisors.
The really good news is that, thanks to the Internet, most U.S. franchisors already have many technology tools developed and in place that are directly applicable to international development. This helps lower the cost of international development, training, support, and brand control...

"How are you using technology tools toimprove your recruitment/development speed?"

Zeb Hastings
Vice President of Development
Quaker Steak & Lube
Over the past few years, The Lube has been able to reap the benefits of technology, using it to gather feedback from prospective franchisees and fans in real-time, which has helped further our development nationwide. In April, we completed an innovative social media promotion launched for our loyal Lubies who don't have a Quaker Steak & Lube to call home.
Using the Facebook platform, Lubies around the world voted to choose from 10 cities where we will open a restaurant. Through the "I Want My Quaker Steak & Lube!" promotion, the brand listened to the resounding cries from Lube Nation to aid in our rapid expansion...

Papa Murphy's Take 'N' Bake Pizza must be doing something right. In fact, the country's fifth-largest pizza chain is doing a lot of things right.
The Vancouver, Wash.-based pizza chain, with 1,350 units in 38 states, Canada, and Dubai, recently ranked first in two consumer surveys. Technomic's 2013 Consumer Restaurant Brand Metrics Report named Papa Murphy's the top chain overall among full-service and limited-service restaurants. Papa Murphy's also was ranked the #1 pizza chain in the 2013 Consumer Picks survey from Nation's Restaurant News and WD Partners. That follows previous awards, including Zagat's top-rated pizza chain in 2010, 2011, and 2012. The brand is doing something right with its franchisees as well, earning Franchise Business Review's Franchisee Satisfaction Award several years running...

"How does eliminating the 'silos' of separate departments help integratea brand's recruitment, development, sales, and marketing cultures and tasks?"

Jamie Davis
Executive Director of BusinessDevelopment & PizzAmbassador
Donatos Pizza
Silos are good for one thing, and one thing only: holding stuff back.
I grew up in the Midwest, so silos were a familiar site to me as a child. These huge concrete structures held enormous quantities of grain to be shipped off to other parts of the country, and they never moved. Ever. Of course, the silos were doing exactly what they were supposed to: hold stuff back and not move.

In the dynamic world of franchising, silos have no place. Franchises are complex organizations made up of independent franchisees supported by a corporate structure of marketing, operations, real estate and construction, and business development teams...

Does recent history give us a good basis for what to expect for franchise development in 2013? Certainly there is some guidance that can be taken from the past few years. After all, we're 3½ years past the technical end of the Great Recession, and we have data for the first 2½ years of the "recovery." (We're just starting to compile the 2012 results.) So let's see what the data might suggest for 2013.
Based on a sample representing more than 70 percent of all franchised units at the end of 2011, the number of franchised units increased at a compound annual growth rate (CAGR) of 2 percent between 2005 and 2011. As we know, and as the graph clearly shows, growth significantly slowed starting in 2008, the year the financial crisis hit...

Different types of international franchises are being granted today for U.S.-based education, food and beverage, retail, and service franchises. The level of franchisor investment and control for each type of franchise varies. How do you know which method to use when expanding internationally? Master franchises, area developers, company-owned stores, or joint ventures? We look at the five types in use today and the pluses and minuses of each.

Master franchise
Five to 10 years ago, the master franchise was the most common international type, used about 90 percent of the time. In this model, the franchisor grants exclusive rights for a country to one franchisee, often with the right to sub-franchise once the franchisee has shown they can operate the business correctly in their country...