Strategies: advice for new franchise owners.
While often imperfect, the marriage between franchisor and franchisee usually works. This is borne out by the franchising boom of the past decade. However, when it doesn't work, the relationship can get messy. In franchising relationships, as in most marriages, a hotly contested divorce can be more costly than the most lavish of weddings.
The best way to avoid such a fate is to establish a good relationship with your franchise company-well before the honeymoon ends. There are several questions you can ask yourself that will not only help you forge a working relationship with the franchisor, but help you take your fledgling business to long-term profitability. * "Have a lawyer and an accountant reviewed my franchise contract and the company's disclosure statement? A good franchisor/franchisee relationship starts before you sign the franchise agreement. It could be fatal to review a franchise's documents on your own.
A lawyer whose background is in franchise law and a reputable accountant can help you determine exactly how much you have to invest; what, according to the franchise agreement, you are getting for your money; and what, in turn, is expected of you. Pay close attention to your franchise agreement's termination clause--treat it as seriously as you would a prenuptial agreement. * "Has my company supplied me with a list of local experts who can provide services?" From legal and financial consultants to plumbers and computer repairmen, you never know when there will be a need for outside people to provide services for our franchise. Your company should provide you with a list of businesses in your area that can offer needed services. Generally, if your company has previously done business in the area, it will have already dealt with these companies and should know who is reputable. * "Is my franchise providing me with on-going support?" This is the most important question. If a franchisee is firmly backed by the franchisor, he or she can concentrate on building his or her franchise. Nadyne F. Stevens is a perfect example. Stevens, who owns and operates a Travel Network travel agency franchise in Waldorf, Md., was pursuing a large corporate account shortly after she opened her franchise in 1990. I wasn't sure how to approach this sale, so I called our regional office," she recalls.
Travel Network's regional president in Stevens' area, Jerry Wayte, traveled down to Maryland, accompanied her to the meeting and helped make the sales presentation to the client. Stevens got the account.
The lesson: Don't be afraid to reach out for your franchisor's help. Remember-you're both in this together.
Cultivating Your Market
When the hero of the hit movie, Field was told in a dream, "If you build it, they will come," he was inspired to construct a baseball field the middle of a remote rural cornfield. And amazingly, "they"--the the ghosts of the great baseball legends-came to play. Unfortunately, it will take more than just building a franchise outlet to realize your entrepreneurial dream of customers coming from far and wide to patronize your business.
A reputable franchise company should know the territory in which it has placed your franchise. It should also document sufficient consumer demand in that territory for the franchise's products or services. But it is your job to find, attract and service the customers needed to make your business profitable.
What is your market? Learning the answer to this question may be the key to a successful franchise. Knowing your customers makes all of your business decisions easier.
Most franchise companies either have an in-house marketing department or employ the services of a marketing consultant firm. For example, Travel Network has an in-house marketing department, which does an initial demographics study for its new franchisees. Once the franchise opens, the franchisee receives ad maps for local newspapers, promotional tips, direct mail and a slew of other materials to help define and reach the target market. "We do everything to make our franchisees successful," says Stephanie Abrams, Travel Network's vice president of global marketing.
However, if you aren't satisfied with your franchisor's marketing resources, don't hesitate to hire a consultant of your own who is familiar with your territory. This investment will almost always repay itself many times over down the road. Look at marketing as a process, not a fixed formula, because no onetime marketing plan can guarantee success. As your market changes, the way you promote and sell your products and services must also change.
The first thing a franchisee should examine is demographics. Who is your target customer? Knowing your customers--where they live and work, what they drive, their likes and dislikes--will help you tailor the presentation of your product or service to their needs and desires.
Once you have established a strategy for attracting customers to your franchise, your job is not over. Markets change and you must be ready to change your marketing strategy with it. It's important to keep track of the fluctuating size and demographics of your market. Take for example, a fried-chicken franchise in a neighborhood dominated by families with young children who love fast food. That could spell disaster if it becomes populated by young, health-conscious single people who want to avoid fat, red meat and salt in their diets.
Or, perhaps more important, be prepared to respond to new competiors for the customers you've cultivated in your, market area. It makes no sense to have a growing share of a shrinking market," says Wayne K. Richardson, president of Full Spectrum Management Services, a Marina del Rey, Calif.-based franchise consulting firm.
Demographics provided a valuable business lesson for Lynn Robinson, a McDonald's restaurant owner and operator in Brooklyn, N.Y. Robinson says: "I should have learned the demographics of my area better. You have to know your community."
Robinson's McDonald's is located in the Crown Heights neighborhood in Brooklyn, an area dominated by a large Hasidic Jewish population and surrounded by West Indian blacks and other ethnic groups. Hasidic Jews have strict dietary rules that prohibit them from eating fast food; therefore Robinson had to target the other groups in the area. She also had to repair the reputation of the restaurant, which had been battered by the previous owner's antagonistic relationship with the community residents. Robinson says her biggest challenge was "changing the community's perception about the store. I had to make sure that my customers knew me and could talk to me."
As Robinson learned, a good relationship with the community can be the best form of advertising. Robinson keeps herself visible in the community by working in local churches and speaking at career fairs at local schools.
The presentation of your product or service can mean the difference between winning or losing a customer. Clients value attention to detail and convenience, regardless of the product or service being sold. Enter David Lawrence, who at the age of 25 owns and operates Deck the Walls, a retail art and framing franchise, in Houston's Galleria Mall. Lawrence purchased his outlet last year and expanded his store's services to attract more business, a move which has proved to be profitable. "We have established a preferred customer program," says Lawrence, and we now offer delivery within the mall." In addition, Lawrence is pursuing commercial accounts in the Houston area.
Watching your competition can also provide you with valuable ideas for marketing your franchise, and may lead you to create products or services that your competition doesn't offer. For example, Zannie Brazely Jr., a Coverall commercial-cleaning franchisee based in Akron, Ohio, created an order form for his clients that listed extra services offered by his franchise. "This detail separates me from my competitors," Brazely explains.
Nadyne F. Stevens' Waldorf, Md.-based Travel Network franchise has two competitors in the area. When she noticed that they closed at 5:00 p.m., Stevens decided to keep her business open for longer hours. Most people don't get home from work until later in the day," Stevens explains. "So I keep my office open until 8 p.m. during the week. My busiest hours are from 6:00 p.m. to 8:00 p.m."
The Value Of Franchise Councils
Should you, the new franchise owner, belong to a franchise
advisory council or franchise association? The answer is an
unequivocal yes. Membership in a franchise advisory group or
franchise association can' benefit a new franchisee
Terrian Barnes-Bryant, the vice president of research for minority and women's affairs for the Washington, D.C.-based IFA, says, "It is important for minorities to have their own vehicles for networking and communicating with their respective franchisors. Franchise associations carry out this function."
Many larger franchise companies, such as McDonald's Corp. and Burger King Co., have black or minority franchise associations. Francis Jones, president of the National Black McDonald's Operators Association, feels that it is important for black franchisees to participate in franchise associations.
"There are some unique issues facing black franchisees," Jones asserts. "For instance, most black franchisees do not have substantial financial backing. We try to share our experiences with new licensees so they will understand the finances of operating their business. The networking is priceless."
Franchise organizations take on added significance at a time when many companies feel that they are no longer responsible for tracking the progress of minorities within their firms. The primary benefits of such groups, according to franchise owners and industry experts, include: * Networking opportunities. Regular contact and communication with other, more experienced franchisees can help the new franchise owner avoid difficulties and solve problems that may arise. Meeting regularly with other franchise owners can also help the new franchisee learn of new ways to market their franchise company's products and services. * Strength in numbers. When the franchisor does not perceive or is not responsive to issues facing franchisees, a group of franchise owners may be stonger than a lone franchisee. Councils and associations can help educate a franchise company that seems out of touch with challenges plaguing franchisees, such as operating an outlet in an urban area. A well-organized group can work with, not against, the franchisor to solve problems.
It's important to know the difference between a franchise advisory council and a franchise association. A franchise advisory council is usually created by the franchisor and is used to enhance communication between the franchise company and its franchisees. A franchise association is usually organized by the franchisees to carry out the role of a franchise council and functions as a networking vehicle for the franchisees.
The size of your company will usually determine the role of your franchisee group. The larger your company, the more important a council becomes in communicating with your franchisor. Members of a council may be appointed by the franchisor or nominated by the franchisees.
Franchise groups are usually divided into five standing committees: operations, marketing, products and services, finance and grievances. These committees often help to determine in what direction the franchisor takes the company.
What if your company does not have an advisory council or association? Then take it upon yourself to establish one. Deck The Walls franchise owner David Lawrence is planning to form a black franchisee council as "a way of making the process easier in getting loans and suppor for black ranchisees who are new in our company."
To launch a frachise group, industry experts recomment the following steps:
First, inform your franchisor that you are planning to establish a group, and ask for the names and addresses of fellow franchisees. Remember, always keep your franchisor abreast of what is going on. Then plan a meeting with your fellow franchisees. At this meeting, you will need to establih bylaws, elect officers and create an agenda based on the five committees mentioned earlier.
You may also want to create a franchise newsletter to keep franchisees up to date. After the first meeting, plan regional or local quarterly meetings. Your organization's national advisory council should meet at least once a year with the franchisor.
Building A Team
The most difficult challenge of franchise management, according to most franchisees, is making the right personnel decisions. Once you and your franchise company have established a business plan, you will need competent, reliable employees and managers who can implement the plan and carry it out. Employee turnover can make or break your business; hiring the right people for the job and giving them the tools and incentive to do their jobs well is your best defense. When asking yourself "Who should I hire?" you should keep in mind the type of business you own, the requirements for the position and the potential candidate pool.
The type al franchise you own is the most important factor affecting personnel decisions. No one job description will fill the needs of every franchise owner. A manager's position in an Auto Broke Shop is different from a manager's position in a McDonald's franchise. Therefore, it is extremely important to know your business so do you may attract the right candidates for the job.
Next, you must define the requirements for the position. This is where your franchise connections come into play. Ask your franchisor to provide you with a thorough job description and contact other franchisees to see how they filled that particular position. is it a part-time or full-time position? is previous experience with the franchise product or service required? is a specific degree (high school or college) or special licensing real estate) or certification (tax preparation) required? is the job simple and repetitive or is the position a multifaceted one that requires proficiency in a variety of tasks? Of course, a good franchise company should provide ample assistance in training your staff, especially your managers.
After defining the job position, you must locate and define your potential candidate pool. For the franchisee just starting out, employing family members has several advantages. One, it usually ensures that you have reliable employees that you feel comfortable working with. More importantly, it can be an effective measure to keep your overhead costs low by pooling the family resources together. You might also consider hiring retirees and the handicapped. They are an attractive hiring option because of their reliability.
According to Zannie Brazely, owner of a Coverall commercial cleaning franchise in Akron, Ohio, the most unpredictable employees are students, particularly high school students. "They will work hard when they first get the job," he says, "but if a concert comes to town or if it is Friday night, they don't show up. So I try to avoid hiring them."
In contrast, Lynn Robinson has been successful in employing students as part of her Brooklyn, N.Y.-based McDonald's staff. "I work with the kids," she explains. i offer academic scholarships and help them with their financial aid papers for college. We attend sporting events, picnics, amusement parks and crew parties."
The location of your franchise can also play a role in who you can and cannot hire. is your business easily accessible by public transportation, or do your employees need a vehicle to get to work? Job agencies, from those run by nonprofit organizations such as the Urban League to professional employment agencies, can also provide you with a pool of potential candidates. Tailoring your staff to reflect your community will benefit your business.
Once you've hired your staff, you have to shape your management style to that of your employees to create a productive work environment. David Lawrence, owner of a Deck The Walls retail art and framing franchise in Houston, summarizes his style of management: "I went my employees to know that we're working as a team."
To enhance the comfort level of his employees, Lawrence tries "to incorporate employee goals and skills into their jobs." While this type of management may not work for you, it is important that you talk to your employees to ensure that they are comfortable with their position and their workplace environment.
Besides creating a comfortable environment for your employees, you should offer incentives to further inspire good performance. Robinson of McDonald's has aggressively promoted her staff from within, a measure that has proved successful: All seven of her managers were formerly crew members in her store.
Brazely of Coverall plans on taking this one step further by offering the ultimate incentive to his employees: the opportunity to own their own franchise. "I have a couple of employees who have been with me since I started," says Brazely. "I am encouraging these employees to start their own Coverall franchise, and once they get started, I plan to turn a couple of my accounts over to them to help them get established."
Franchise Information Source List
The following organizations and publications can provide further information for individuals interested in looking into the franchising industry. * The international Franchising Association (IFA), 1350 New York Ave. NW, Suite 900, Washington, DC 20005-4709; 202-628-8000. The IFA has several publications that can provide a wealth of information on opportunities in the franchise industry. One is Franchising World ($12 for a one-year subscription), a magazine geared toward potential franchisses. Another is The Franchise Opportunity Guide ($15), a book, published annually, that gives thorough profiles of franchise companies. * FRANDATA, 1155 Connecticut Ave., Washington, DC 20036; 202-659-8640. FRANDATA publishes The FRANDATA Termination and Relationship Reports, a study that gives complete profiles and ratings of industries that take part in franchising. * Women in Franchising inc. (WIF), 175 N. Harbor Drive, Suite 405, Chicago, IL 60601; 800-222-4WIF. WIF is a marketing and consulting firm that provides women with information and support throughout the whole franchising process. The firm also holds franchising seminars targeting potential minority franchise owners. * For information regarding the sales and disclosure materials of franchises, contact the Bureau of Consumer Protection, Federal Trade Commission, Sixth St. and Pennsylvania Ave. NW, Washington, DC 20580.
Three of the most reliable and up-to-date publications on franchising are: * The Sourcebook of Franchise Opportunities, 1990-1991 edition by Robert and Christopher Bond (Business One irwin, Dow Jones Books, New York, $27.95). * Owning Your Own Franchise by Herbert Rust (Prentice Hall, Old Tappan, N.J., $14.95, paperback). * The Franchise Bible: A Comprehensive Guide by Erwin Keup, edited by Virginia Grosso (Oasis Press, Emeryville, Calif., $19.95, paperback).
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|Author:||Harris, Jason T.|
|Date:||Sep 1, 1992|
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