Enter the Relationship with Your Eyes Wide Open

Having sat through so many franchise recruitment interviews, I’d tell you they’re just like a first date (or at least from what I remember having been married for over 20 years). Everyone’s spruced up and focused on putting their best foot forward. More than anything both the brand and the potential franchisee want to like and trust each other; they want to believe there’s an opportunity for a long-term relationship.

So, what could go wrong?

When potential franchisees are at their final interview with the brand, you know they’ve leapt through enough hoops to prove their viability. They’ve shared their financial capability, operational experience and potential organizational structure. They’ve passed background checks and they’ve demonstrated their belief in the brand. They’ve shown the stamina required to advance, and they’re excited to reach the final steps of the process. At this point, it seems it would be an easy decision for a franchisor to simply harness the franchisee’s passion and welcome them in.

In reality, this is the most critical step within any recruitment process.

As a franchisor, now is the time to find a balance between supporting and challenging. A time to dig deeper and ensure there’s a common understanding of the share of responsibilities across franchisee and franchisor.

Within this interview of course it’s important to support the franchisee’s belief in the brand and maintain their excitement, since you really don’t want to rain on their parade. Additionally, as a part of putting your best foot forward, it’s necessary to demonstrate the fantastic organizational support you’ll be providing. 

But it’s equally essential to challenge their perspective and ensure they’re willing and able to invest the capital and resources your brand needs. You need to explore their resilience and understand their short and long-term goals. More than anything, it’s your role to give them a reality check and make certain any rose-tinted glasses are removed. 

Admittedly, you may not have or may be limited in sharing all the data they need to make the most educated decision (especially when a franchise resale is involved). Regardless, you can highlight the data they should be requesting and where it could be found. You can stress the questions they should be asking and challenge any misdirected logic. 

The primary goal should be to have new franchisees join your brand with their eyes wide open with no misunderstandings about the road ahead. For you as the franchisor, the goal is to know the capabilities and motivations of everyone involved in driving the growth of the brand. If there are any misconceptions about the franchisor/franchisee relationship, the support available or underestimations of the capital and resources required, the chances of success become severely limited.  In addition to ongoing angst and a loss of trust, there’s ultimately the risk of a very short-term relationship or significantly limited growth.

This reality check between the franchisor and franchisee may result in a potential franchisee walking away, but considering the alternative consequences, this is truly a win and not a loss.

One of the exercises you can do with new franchisees is paint a worst-case scenario and ask them to answer a few key questions. For example, should sales decline over the next year, leading to losses…

What would you do?

Who else would be involved in your decision making?

What would be at risk for you?

Look for a tendency to take personal ownership for resolving any issues and a willingness to double down on a belief that they control their own destiny. Ultimately, look for an ability to maintain focus and weather any storms emotionally, financially, and organizationally. 

A new franchisee investing their life savings and relying on their success as their family’s sole source of income indicates emotional risk.

A franchisee backed by a private equity company with ambitious short-term return goals is a financial risk. What happens if the goals aren’t achieved in the necessary timeframe and further investment is required?

A potential franchisee who has multiple other business interests must be vetted to ensure they have the necessary organizational resources to focus on overcoming any challenges in your specific brand.

In summary, dig deeper to fully consider the potential health of your future relationship. (Remember my tendency towards interrogation and recognize you won’t take it that far). A true understanding of each other is going to drive the growth of your brand far more than a recruitment decision purely based on well-dressed first impressions.

Development Expertise and Focus Can Make or Break Your Dreams of Growth

Many franchisors focus their franchisee support and training on operations and marketing. We’re not debating these elements are essential. Without them you have no brand.

If growth has been identified as a priority however, increasing knowledge and resources against development is also going to be crucial.

The development resources within franchisee organizations can vary significantly based on their size and development commitments. When development resources are limited, their specialized knowledge and fractured priorities outside of development can severely impact the long-term growth of any brand.

It’s not uncommon for franchisees to have their CEO responsible for capital investment decisions; they often lead negotiations, not only with the franchisor, but also with brokers, landlords and general contractors. This can be a challenge if they don’t truly have the time to focus and ‘drive’ unit growth.

A franchisee may also use local operations leads to identify and qualify potential sites and manage the construction process. Although they are certainly closest to consumers, have strong opinions of their markets and have the greatest visibility to the progress of any construction while out in the field, they may not be fully educated in trade area analytics, critical site requirements or the construction process. Ultimately though, in order to ensure the current units continue to be strong, operators really need to prioritize operations rather than get sidetracked by development.

As a franchisor focused on growth you could insist on a dedicated, experienced development team within the franchisee’s organizational structure. This can be a hard sell to franchisee organizations though due to the financial G&A weight involved.

Alternatively, the need for development resources and expertise could be met by one or two mid-level franchisee resources focused on development, combined with support from the franchisor and third-party organizations.

Franchisors with the greatest chance of success provide consistently implemented development standards and processes to their franchisees along with an education on the keys to success for development. Franchisees can also often benefit from access to third-party organizations, recruited and educated by the franchisor, to support their efforts (development consultants, real estate brokers & developers, financial lenders and construction management organizations).

Lastly, it’s essential to have a strong franchisor development team to provide ongoing support. Expanding on the franchisor development team, it’s important to recognize this will be the department within any brand organization critical to realizing dreams of growth. The skill set of the development team needs to be far broader than real estate expertise and an ability to communicate with franchisees. The development team should consist of client managers able to analyze data, share insights, provide expertise on all things development, talk to the franchisees in their own language and understand the financial implications of their recommendations. To support the breadth of franchisees (and the breadth of their development experience), the strength of the brand’s development team is going to be vital.

As a franchisee, understanding the development requirements expected of you each year and the amount of support provided by the franchisor will lead to determining your specific development resource needs.

Whether you’re a franchisor or franchisee, if you feel you’re lacking in expertise or development focused resources but don’t have the need or capacity to hire the necessary team members full-time, BDG can help by providing support to fill the gap on a part-time or project basis.

If you’d like to raise the overall development knowledge and focus within your organization, BDG can spend a day or two with your team on an online seminar customized to meet your needs.

Please explore our website further www.beyonddevgroup.com to see the services we provide.

We look forward to hearing from you at info@beyonddevgroup.com to explore how we can work together to help you make your dreams of growth come true.

Data…Your Most Effective Guiding Light

There are long-term real estate experts who will stand at a site within a market under consideration and just ‘feel’ whether it would or wouldn’t work. At the other end of the spectrum there are finance experts looking for a model to perfectly forecast the sales and returns for each potential location. Admittedly these are the extremes and I genuinely believe real estate development is both an art and a science as has often been said.

When emotion-filled debates occur as each person’s gut is telling them something different, you know there must be another way; there must be the potential to reach a more fact-based decision. For those of you who tend to be more science-based, whilst modeling solutions continue to become more sophisticated, I challenge any forecast model able to consider absolutely everything affecting the success of a specific unit and subsequently predict a future unit’s sales and returns perfectly.

In my experience, even if forecast models don’t provide the exact answers, the chance of success is far improved when franchisors and franchisees arm themselves with all available data and models and assess the resulting insights against their gut feelings.

For this to occur, all measurable performance-impacting factors need to be tracked and taken into consideration for each location. Each factor needs to be tracked consistently and collated across as long a timeframe as possible. With COVID impacting consumer behavior as much as it has, and with the uncertainty around future consumer behavior, I’d recommend considering data from both pre and during COVID times and ensure the ability to update analyses frequently over the next year until a new norm is reached.

As a franchisor, the first step in the process of assessing a new location is ensuring you have solid alignment on development and financial goals (internally and with your franchisees). You also have to identify the questions you need to answer to help achieve those goals.

Next, you need the right tools, funds, and resources to answer those questions, to:

• Collect and collate a plethora of data consistently and longitudinally

• Analyze the data and correctly draw out insights

• Understand the limitations of those insights (and watch for potential false inferences)

The last step, without which all the data and analysis in the world is worthless, is to ensure you have a team with a trust-based relationship with your franchisees. This team needs to be able to share, collaborate and discuss the findings and subsequently agree on next steps. With the right franchisee/franchisor relationship, franchisees will not only listen to the insights and your perspective, but also add to them by sharing data and information only available to them. Once you have achieved this level of engagement, the ability to align on the path forward is far more straightforward. Collaboration and fierce alignment provide the quickest path to action and hence growth of your brand.

Remember there are no guarantees, and there will always be factors able to impact results you’re unable to fully measure. A struggling store manager can cause a great site to underperform, and a strong manager can make a marginal site incredibly successful. It’s important to evaluate and understand any unpredictable and unmeasurable factors and refine your perspective over time. With those additional learnings combined with solid data analysis, you’ll be in a far stronger position to make informed and reliable decisions.

Growth is predicated on past results and an ability to predict the future. Optimizing the use of data will light your path to success across any industry and geography.