Building a Foundation to Weather the Storm
In the best of times, it's easy to look forward and have no fear as to what the future is going to bring. It's also easy to forget to take advantage of the good times to build a foundation that can withstand any potential future storm that might hit. In the worst of times, building this foundation can protect all that you have built, and hopefully help you weather the storm. A great example of this is taking a look back into history.
The economy tanked in 2008-2009. The markets affected most were those that not only relied on access to lending, but those that also relied on strong brands to pull them through. If you think back to the automotive manufacturing segment, Ford was the only manufacturer that weathered the storm, practically unscathed. The automotive retail industry, one of the hardest hit, had more than 1,200 dealerships collapse. Many of these were well recognized in their communities and top performers for the manufacturer. The dealerships that survived were able to, in part, thanks to the foundations that had been built long before the storm hit.
Just like the automotive retail industry, franchise owners rely on the brand and backing of the franchisor. Looking back to the 2008-2009 dealership closings, franchisees should take some of the plays from their gamebook and start preparing for the next "what if." This starts with identifying how to build both tangible and perceived value in your franchise operations:
Relationships - These are key to any industry, but especially important for businesses that rely on a brand and product other than their own, to drive business. Maintaining strong relationships with the franchisor ensures they are in tune with how well your units are performing, why they should continue to do business with you, and provides them confidence you will be long-term partners in each other's success.
You not only have to establish and maintain a strong relationship with your franchisor, but it is also important to build strong relationships within your customers and community. The stronger your relationships, the more support and success you will have when things are not going as great tomorrow, as they are today.
Lending - Cash is king. This was a painful learning lesson for all automobile manufacturers in 2008-2009, except one. Ford did not have to rely on a government bailout or help to keep their doors open. For franchise owners, being keenly aware of how well your franchisor is funded to ensure you are able to get product is important. Equally important are the relationships that you build with your local lenders and banks. What we learned in 2008-2009, is personal relationships with bankers are not enough. History, performance and the amount in which you are leveraged are all important pieces to the lending game when things get tough.
Operations - Don't just meet performance benchmarks; exceed them as much as you are able. Analyzing how your units are doing individually, as well as aggregately, is an important piece to the puzzle. The more you are consistently out-performing, the better the chance you have to not only survive a downturn, but also be awarded more opportunity for growth as the franchise looks to expand.
Leadership - Hiring just to be staffed is not good enough. Being strategic about the team you want in place is important to the mix. You want a team that is owner-minded and wants to grow with your organization, while buying into your mission, goals and vision. In addition, having the right team in place helps you to be more flexible and accessible as the franchisee.
The underlying key performance indicator for your organization is the value in which you bring and bear. The value you bring to the franchisor, the customer, and the community, and the value you bear to your own financial security and that of your team. Value is built and determined by the key indicators outlined above and without them long-term success is much more difficult. Not investing in these areas and understanding the importance of how they drive value can be costly - too costly. Remember, back in 2008-2009 more than 1,200 dealerships closed their doors.
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