August 2015 Archives

Well here's a nightmare no one in business wants to face! But it happens. As a veteran PR woman of 32 years, I can promise you incidents like this happen. And suddenly and without any warning you find out someone who has worked for you, with you, under you, next to you, across from you is a serial killer. Kind of like Dr. Walter Palmer being your dentist.

Fred DeLuca, one of the giants of franchising, is a prince among men. He is one of the greatest leaders in the industry and as unselfish and giving as one can get. Yet, I guarantee you he, or no one else at Subway had a clue about Jared's "secret life". Actually I am pretty sure Jared's wife didn't have a clue about it! What to do when a terrible crisis, totally out of your control, arises? I have experienced and aided in the following crises:

• A male and female housecleaning duo having sex on camera in a client's home as part of an NBC investigative "maid-cam" sting.
• A president of a large smoothie chain being marched out of HQ by police for sexually molesting his 14 year old daughter.
• A franchisee caught peeking through a hole in the ladies' bathroom in his own restaurant location.
• A pizza delivery driver killing a motorcyclist with Jack Daniels found in his back seat.

Can I stop now? Here are the most basic steps to take in a crisis, and hopefully not a very rough one like this one.

• Definitely distance yourself from the culprit as Subway did here. And rightfully so. This has nothing to do with their product or franchisees or Fred DeLuca and HQ. If anything they made a multimillionaire out of this guy and this is how he handled his own great luck and life.
• Develop a sympathetic statement if there are "victims". In the case of an accident of some kind truly express in a one paragraph statement that your thoughts and prayers are with the family.
• Get on a line with your attorney and PR specialist and put together a strategy. You don't want to stonewall the media--but you also don't want to just blab away and put any admission of guilt or liability out there.
• Have a 5-10 step process in your "back of house" for all franchisees, management and their employees similar to this one here.
• Employees should NOT talk to the media but instead politely take contact information from them if they call or show up and promise to deliver it to the right people. Then reach back out with a designated person to the reporter. If not they can easily go rogue with an unflattering story.

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Franchisors who provide Item 19 (Financial Performance Representations) in the FDD (Franchise Disclosure Document) show earnings claims that can be backed up by actual results of their franchisees; therefore, you can know what to expect when starting your business.

This is regulated by the Federal Trade Commission (FTC) and enforced by a number of state regulatory agencies.

I know that some people in franchising are nervous about providing that kind of detail to candidates- I personally think that it sets up reasonable expectations.

We may not award the most franchises on an annual basis...but we have happy franchisees who are meeting their expectations and have never had any litigation in over 30 years of franchising. (Check our item 3 in our FDD.)

Wild Birds Unlimited actually provide a significant amount of data in our Item 19 that provides information on top line sales and Bottom Line 'Owner's Cash Flow" data that is pulled from our franchise store owner's annually submitted financial statements.

We also provide data from our customer loyalty program so that prospective franchisees can determine system wide KPI's regarding average ticket and # of annual visits to our stores.

We give ranges, averages, medians, % & # of stores that exceed the averages and break down both top and bottom line metrics into quartiles.

This along with requiring that each and every candidate develops a Business Plan and projections (which we cannot review, of course) provides the candidate with information that they need to make the most informed business decision that they can make given the fact that no one has that crystal ball that we all would like to have.

I personally would find it hard to award franchises if we didn't have such a complete Item 19 as I wouldn't be able to sleep at night if our candidates didn't have historical numbers to use in their decision making process.

Transparency in our process allows me to sleep through the night...every night.

Does This Sound Like You?

1. Energy and Passion for Retail & the Hobby of Bird Feeding.

2. $300k Minimum Net Worth

3. $40 to 50k Liquid Capital

4. Commitment to Follow Our Proven Business Model

5. Strong Drive for Excellence Motivated and Community Minded

Take the Next Step to Find Out More

Many people buy a franchise because they feel they don't know how to effectively start a business without a lot of help.

Franchises offer support and systems already in place that are meant to help you start your business in an efficient and effective way. There seems to be a perception that buying a franchise is a much lower business risk than starting a business from scratch. While this is true in many cases, it is by no means risk free as there is also real risk with franchises. In many cases, help from your franchisers is there during your grand opening. It is one of the strongest benefits about franchising.

One of the myths of franchises is that they are "turnkeys." It is still up to the owner to manage the day-to-day operations and make the franchise work financially.

I worked with a struggling, established franchise in a very small North Carolina town. The franchiser charged them the same fees as their franchises in large cities such as L.A. and Chicago.

With a much smaller market, the business couldn't generate enough revenue to pay their franchise fees and earn a reasonable profit. Many franchisers do not differentiate their franchise fees for the size of the market. Always check with franchise owners in similar size markets to see how they are doing before making the leap. Another key factor is whether or not you will have exclusivity in your geographic market. Having the same franchise a few miles down the road will make it much harder to be successful.

If you are considering buying a service franchise where you have to physically travel to your clients, always check out the "density" of your potential geographic market. I worked with a client in a small Southern town who considered a service franchise where they would have to take their service to pre-schools in the area.

In analyzing the number of pre-schools within a 50 mile radius, I identified that it would require an average of 30 minutes of travel time between preschools.

This would only enable them to provide four service sessions per school day as well as cost more than $75 a week in gasoline costs. Given the franchise cost, their investment in equipment and operating costs, the franchise didn't appear to be attractive in that kind of market.

Franchises can be a good investment, but a lot of research and analysis must be done before making the leap. One crucial question is whether or not the "national brand advertising" will benefit you versus the same cost for local market advertising.

The key question is how strong is the franchise "brand name" versus competitors. Will the brand name generate enough additional business to cover their franchise fees and turn you a good profit versus going it alone?

Consult with other franchise owners in similar sized markets, evaluate your location for traffic and evaluate the drawing card power of the "brand name" and look at the cost of the franchise fee relative to your market size before making the plunge.

Bob Papes is a local business expert and the author of two books, "Management During an Economic Crisis" and "Turnaround." His email address is: [email protected].

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