October 2014 Archives

Evaluating a franchise opportunity today can be a difficult task.

With all of the different rankings, ads, and other franchise claims, identifying the right opportunity requires careful study of the FDD as well as talking with current franchisees.

Some words of advice to those looking to find their passion and work for themselves in Franchising:

When you get to the point in your due diligence where you see the Franchise Disclosure Document (FDD), certainly evaluate the costs associated with the franchise as well as the roles and responsibilities of both the franchisee and franchisor.  This is valuable when you talk to franchisees during your validation to make sure that the roles stated are actually experienced by existing franchisees.

Most will have what is called an Item 19 (Financial Performance Representation) and it is really important that you understand the unit economics of the system you are evaluating, as this will again aid you in your discussions with existing franchisees.

One area that is frequently overlooked is Item 20 in the FDD (Outlets and Franchisee Information).

This is a critical area to review, as it will provide insight as to how many stores were transferred, closed, and not renewed.

For example, at Sport Clips we are very proud of the fact that with over 1150 stores open, we have had only three closures in the past three years.

This provides insight as to how the brand you are evaluating supports its franchisees; how discerning the brand is in its selection of franchisees and real estate; and the overall viability of the model. Are a lot of units closing due to low sales? Is the Franchisor terminating an inordinate number of locations?

Is the Franchisor not renewing franchisees? Item 20 can be one of the most important considerations when evaluating a franchise and probably one of the most overlooked by those looking for their "fit."

This type of research should help guide you in the questions you ask existing franchisees in your due diligence.

One result you are very likely to gain by paying attention to Item 20 in the FDD, and factoring this into your due diligence, is a clear idea of what the values of the Franchisor truly are...not just what the plaque says on the wall, but the values the franchisor lives by in its service to its franchisees.

Nowadays in almost every mainstream magazine there is an article about the brain. The newfound popularity of neuroscience is helping us learn and explain how and why we do the things we do. New brain paradigms are transforming the way we see ourselves and others, and also opening up new frontiers for our growth and learning.

And, good news comes with this new knowledge, especially for the world of franchising.

Intuitively and experientially we know the franchising model works; after all, it has been proven many times. Today, however, brain science helps us explain scientifically why franchising is such a successful model and shows us how many of its premises may have been ahead of its time. Here are few examples:

Franchising and Neuroplasticity

Neuroplasticity is the ability of the brain to create new connections that allow us to change and learn regardless of age. Neuroplasticity is a fairly new concept-a paradigm of the 20^th century. Only in the last 20 years or so has this concept become a hot topic and replaced the long-held belief that after a certain age our brains couldn't change.

The idiom "You can't teach an old dog new tricks" arose from the conviction that we all reach a point when our brains became rigid and start to decline; and, that meant we couldn't learn new things. Franchising didn't buy this now outdated belief. In fact, franchising is based in the idea that we can take people of any age or background and teach them how to operate a successful and proven business. Furthermore, the average age of most people buying a franchise coincides with the decline of the brain under the obsolete paradigm.

Standards of Operation and the Brain

One key to successful franchising is the use of standards of operation as the foundation of the system.  As it turns out, there are many brain-based reasons why this element of franchising produces such positive results. We'll cover two here; one relating directly to franchisees and their staff, and the other concerning customers of franchise outlets.

• The Hebbian Axiom states that neurons that "fire together wire together"; this simply means that, when we repeat a thought or an action, we strengthen those particular brain cell connections. We create superhighways that make tasks easier and easier to accomplish every time we do them. In other words, repetition creates brain speed and efficiency which are beneficial in any business venture. There are many ways to make a burger, to serve a customer, to tutor a child, or to cut hair, but for each franchise system offering these products or services, there is only their way-their standard. Having consistent procedures for every activity of the business helps franchisees and staff members replicate successful results.

• Standardization is perhaps not the preference of more artistic or creative people, yet for the rest of us our brains crave it. In fact, when something changes in our environment or when our expectations are not met, the discrepancy is processed by our brains as an error, generating a stress response that is unpleasant. The opposite is also true. The standards of operation and consistency of franchising produce a pleasant feeling of safety since no error is detected by the brain. All is good when things are the same; at least, as far as the brain is concerned. This feeling keeps customers going back to those franchise locations and produces the brand loyalty experienced in franchising.

Being in Business for Yourself but Not By Yourself and the Brain

Franchising is often defined as "being in business for yourself, but not by yourself". This definition has two powerful brain implications. First, as David Rock has reported in his books and articles,  a sense autonomy activates our brain reward center. Avoidance and disengagement occur when a lack of independence is perceived by our brains, triggering the danger-avoidance response.

On the other hand, a sense of autonomy helps the brain to more easily engage in cognitive functions and results in higher performance levels and a sense of happiness and satisfaction.  Franchising provides a level of self-sufficiency and autonomy not found when we work for someone else. Even when there are operating guidelines to follow, franchisees have the power to make daily business decisions which provides them with the level of autonomy that allows their brains to focus on meeting their goals and objectives.

The second part of the previous definition speaks to the sense of community and family inherent in franchising. Franchisees are not alone; upon joining a franchise company, they gain a new social network that is unlike any other business relations. Franchisees quickly find that other franchisees are not competitors but allies; they care about each other's success; they are supportive and giving.

Our brains are constantly scanning the environment and cataloguing people as friends or foes. That's just part of our survival instinct that kept us alive eons ago.  So when franchisees discover they have gained many new friends, it provides them with the feeling of safety needed for engagement and performance. Moreover, the social aspects of belonging to a franchise network strengthen this sense of safety craved by most of us.

In his book, Social, Matthew Lieberman explores groundbreaking research in social neuroscience revealing that our need to connect with other people is even more fundamental, more basic, than our need for food or shelter. Franchising provides a way to connect with other people who we consider friends and the support system of most franchise organizations reassure the brain that all is well.

Although franchising benefits from its intuitive use of many brain science principles, we still have much to learn. Groundbreaking research and findings are becoming more accessible every day.  This information can help franchisors immensely to improve relationships with franchisees, create higher performance levels, reduce ramp-up time and ensure franchisee success system-wise. The more franchisors learn about neuroscience, the better equipped they will be to assist franchisees achieve the success they desire which will result in their own success. Likewise franchisees who become versed in these new scientific principles will more easily achieve their objectives while becoming happier and more fulfilled.

Stay tuned for more information on how you too can use brain science to create the franchise success you seek.

Franchising is not for everyone, and unfortunately many franchisees don't know that until they sign the franchise agreement, pay their money, and find themselves struggling for survival.

Whether the struggle is their fault or the franchisor's fault is a moot point. The fact is, they were the wrong fit for franchising, or possibly the right fit for franchising, but wrong for the brand they bought. Now they're stuck, and they want to tell everyone about their misery.

Does anyone care? Not really.

Too many wrong franchisees . .

However, franchisors should be cautious about signing agreements with the wrong franchisees because too many wrong franchisees will make it difficult to sell more franchises.

Too often, franchisors are eager to make a sale (they need the money to meet the payroll, for example), and too often, prospective franchisees are eager to sign a franchise agreement (they need to replace a job, for example). And that level of impatience can lead to poor decisions.

Be curious to know if you are right or wrong

As a prospective franchisee, you should be curious to know what the franchisor is doing to separate the "wrong" from the "right" prospects. You should also ask where you fall in the mix and, either way, how did the franchisor come to its conclusion about you?

In my opinion, franchisors error by not using a personality profile that specifically matches prospective franchisees to opportunities. And prospective franchisees error by not demanding that the franchisor administer such profiles.

Free ebook download

In 12 Amazing Franchise Opportunities for 2015 I've written about two free franchise personality profiles with links to access them. You can get a free download of this e-book by clicking here.

When Washington Capitals defenseman John Carlson scored the first goal for Team USA at the 2014 Sochi Olympics this February, he did so with a blazing slap shot. As proud father Richard Carlson looked on, he knew that scoring goals had truly become a family affair.  

Though the arena in which the elder Carlson works lacks the manicured ice, vocal beer vendors, and rowdy fans that populate John's workplace, his game is one that nevertheless requires the tenacity and drive of a hockey player. 

When the former corporate healthcare worker was laid off due to restructuring and budget reductions, Carlson took time to reflect and weigh his options. He had, after all, many of them. With almost ten years of experience in health care, Carlson could have rejoined the system in which he had for so long achieved success. Yet it became apparent to Carlson that it was time to do some restructuring of his own and play a different kind of game.  

Ultimately, Carlson decided that it was time to realize a dream he had long held. "I always wanted my own business, so I was determined to see the loss of my job not as a setback, but as an opportunity," says Carlson. After a thorough search for franchises which met his demands, Carlson came upon Window Genie. "I gravitated towards franchising so I didn't have to start with a blank page," Carlson explains. "I looked for a business that was service-related and straightforward. After years of dealing with the complicated rules and regulations in healthcare, I wanted simplicity. Window Genie was the answer." 

In July, 2013, Richard opened a Window Genie location serving Ocean County and Southern Monmouth County in New Jersey and he hasn't looked back since. 

Window Genie is a mobile cleaning services company focused primarily on its "big three" services: window cleaning, window tinting and pressure washing. The company also offers, among many other services, dryer vent cleaning, tile and grout cleaning, chandelier cleaning and gutter cleaning and re-securing. Window Genie services residential customers, small offices and commercial spaces. 

As is the case with any NHL team's arduous 82-game season, Carlson faced challenges as his business grew. Yet just as any good hockey team perseveres from those challenges thanks to veteran teammates providing assistance, Window Genie was able to help Carlson block all the shots he faced. "I needed to learn how to market and advertise," says Carlson. "Management, hiring, those were things I had experience with, but I had to learn not just how to perform the excellent services we offer, but how to make this business an extension of myself. Window Genie was able to help me with those issues and get the word out about all that we could do." 

Carlson's primary clients are residential, either dual-income home owners who have neither the time nor the desire to maintain the exterior of their homes, or retirees who are unable to maintain their homes by themselves any longer. Carlson's Window Genie business has been very well-received by his community. His phone, he says, is ringing constantly and his services are well known throughout the territory he serves. 

"In today's corporate environment people like me are forced out of their jobs quite frequently," says Carlson. "I decided to take control of my career, and it was the best decision I've ever made." For Carlson, repeat business is the driving force that inspires his work at Window Genie. "Every day we're committed to providing quality services at reasonable prices so we become customers' preferred home services provider." 

About Window Genie

Founded in 1994 by Richard Nonelle, Cincinnati-based Window Genie is a mobile cleaning services company focused primarily on its "big three" services: window cleaning, window tinting and pressure washing. The company also offers, among many other services, dryer vent cleaning, tile and grout cleaning, chandelier cleaning and gutter cleaning and re-securing. Window Genie services primarily residential customers, as well as small offices and commercial spaces. The company currently has 65 franchise owners operating 140 units in 28 states, and expects to grow to 100 franchisees by the end of 2014 and over 300 within five years. Target markets include California, New York and Florida. For more information, visit www.windowgenie.com.

Have your heard this from your great franchise prospect?

"After talking to your franchisees, I've decided this isn't the right business for me."

As a former franchisor, I heard that statement from prospective franchise owners many times. Too many.

I usually asked, "Who did you talk to?"

Sometimes the prospective franchisee wouldn't say for fear that I might use the information against the franchisees, but often times I persuaded them to "name names".

Talking to Unhappy Franchisees?

Then, I would glance at my list of franchisees rank ordered from Best to Worst. The "best" were the franchisees that produced the highest numbers (and most money) monthly, and the "worst" were the struggling franchisees.

If they had talked to the worst franchisees, I would ask:

"Do you think it's a good idea to make a decision based on information gathered from the worst franchisees in our network?"

"The franchisees you spoke to are ranked in the bottom third of our network.

I doubt that they can give you an objective review of our franchise.

If you had spoken to our 'best' franchisees, do you think you might have come to a different conclusion?"

Of course the answer was always "Yes," followed by, "Who are your best franchisees?"

Who Are Your Best Franchisees?

You might be wondering why I didn't give them the list of our best franchisees from the get-go.

I didn't because it might have been misconstrued.

Franchisors must be careful not to appear as though they are "leading" a prospective franchisee.

If I told you the names of my best franchisees, and you never talked to the worst franchisees, you might later accuse me of stacking the deck to convince you to buy a franchise.

However, had you asked me for the names of my best franchisees, I would have told you.

But, most prospective franchisees don't know to ask that question - or, for that matter, most of the other questions that should be asked before buying a franchise.

You might even argue that talking to the best franchisees only makes sense.

Yes, it does, because they are the franchisees that know what they're doing. They are the franchisees that know how to operate the business successfully.

The worst franchisees - and every franchisor has them - are looking for that "mutually beneficial relationship" that some franchisors promise!

By the way, you'll find all the key questions to ask before buying a franchise in 101 Questions to Ask Before You Invest in a Franchise.