How to Be a Successful Franchisor

I'm often asked, "What factors most influence the success of a franchise company?" My answer is invariably the same: concept, capital and management.

Of course, the concept has to work to begin with. The franchise concept has to be replicable. It has to provide adequate returns. It has to be differentiated from competing concepts both at a franchise and consumer level. And it has to have "sizzle."

While franchising is a low-cost means of expansion, it's not a "no cost" means of growth. You will need to develop a strategic plan, legal documentation, marketing materials, operations manuals and training programs. You'll need to spend money on advertising. You may need to hire staff. All of this takes capital.

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But of all the criteria for success, by far the most important is management. Good management will improve the concept, differentiate the concept and ensure that the concept provides adequate returns. Good management won't begin franchising undercapitalized, and--if necessary--will raise the capital needed to grow. But there's no cure for bad management.

No business, no matter how simple, is foolproof. Bad management can (and will) find a way to ruin even the greatest business. So what separates the great managers from those that fall by the wayside?

It Starts with the Vision
Virtually every successful franchisor starts with a vision of the future and the role their company will play. A successful franchisor understands the dynamics of the marketplace, the competitive situation and where they fit into the marketplace. More important, the franchisor will have an intuitive grasp of where the marketplace is heading and how that'll provide the company with an opportunity for growth.

Not all visions are grandiose. We've worked with numerous entrepreneurs whose vision extends only to their local market. The key isn't in how big the vision is, but what the viewer sees.

The best entrepreneurs seem to have an uncanny ability to see the chinks in the armor of their competitors, and see these chinks as an opportunity. In fact, many of the entrepreneurs I've met began their businesses after first having a bad experience as a consumer at one of their competitor's places of business. To the visionary entrepreneur, the service or product flaws that cause most of us to mumble and grumble looks like a gaping hole through which he can drive a new business model. They see that hole and they ask, "What if...?"

Of course, vision without execution is simply a dream. And this is often where the marketplace will separate the wheat from the chaff.

Entrepreneurs, by their very nature, never stop. They can't stop. Their minds are almost ceaselessly churning away at how they can improve their business and gain a competitive advantage.

Unfortunately, for some, that translates into idea overload. These overloaded entrepreneurs will find themselves chasing every new idea, usually to the detriment of the few great ideas that deserve execution.

The best franchisors compliment their vision with a laser-like focus on making their vision happen.

It's All About the Sale
Vision alone is never enough. You must translate that vision into reality in order to achieve success. And that starts with the sale.

Regardless of whether you'll be selling franchises, you must be a good salesperson, as there are many other sales to make along the way.

First, you'll have to sell your family, spouse or significant other on a venture many will view as speculative at best. After all the struggles associated with building the business, you will need to go back to these same people again and sell them on the merits of investing $100,000 to $200,000 or more in the development of a franchise program before selling a single franchise.

And of course, along the way, you'll need to sell customers, bankers, investors, lawyers and others on the merits of the business that'll be franchised. You'll need to sell key employees on why they should join a fledgling company rather than one of your better-established brethren--which probably offers a better salary, benefits and job security. Most important, as a new franchisor, you will need to sell franchises.

To some extent, the early franchises are actually the easiest to sell. Often there's pent up demand for the franchises. And there's the allure of being among the first one in on an exciting new concept and the opportunities to get the prime territories.

But, in selling the first franchises, you have to overcome a number of significant objections, including the lack of size, capitalization, buying power, name recognition, significant staff and a long-term track record. There are ways to overcome all these objections, and the skilled salesperson should have no problem getting past them, but even the best salesperson can't fake passion.

The best salespeople are passionate about their concepts. You must start with a deep-seated belief that what you're offering is truly the best alternative. And you must be able to sell your vision of the future to many diverse audiences.

An Unquenchable Thirst for Perfection
Ultimately, the development of any great franchise is about the development of a great brand. And great brands are a result of consistency in execution.

Ray Kroc, who first led McDonald's franchise efforts, is said to have picked up trash in his franchisee's parking lots. His message came through loud and clear.

The best franchisors are passionate about quality. While they may be open to innovation, the best franchisors are uncompromising when it comes to brand standards. They set these standards and are willing to spend the time and money to ensure these standards are strictly enforced.

Great franchisors go beyond being detail-oriented. Often they border on compulsive. They know instinctively that their most important job is to duplicate a successful business model. And they take the task of "duplication" very seriously.

They also know that to be successful as a franchisor, they need to be certain that their franchisees succeed. Successful franchisees help to sell franchises, cost less to support and pay more in royalties. Successful franchisees also help establish the "buzz" that surrounds fast-growing franchisors and can help propel a franchise to the next level. So scrutinize the myriad details necessary to be sure the franchisee values the brand as highly as you do.