October 31, 2014

Does This Franchise Company Get It?

Roosters - experienced only need applyI present seminars on franchising several times a year, and always try to leave a half hour at the end of my presentation for questions about the franchise model from the audience.

One very common question relates to what I call “The learn while you earn” model.

This model was a personal favorite of mine when I was in my late teens and early 20s. I would apply at 2 or 3 really different companies for positions that interested me in a general way, and in my mind, I had very little risk, because I would be learning about these totally different types of businesses, while getting a paycheck. Wow! If it turned out that I didn’t like the business, or at least my role in it, I could resign, and try something else. I did this a lot.

People looking at franchising ask me this common question:

“Joel, are there any franchise companies out there that will let me work with a local franchisee, to see if I like the business?”

My answer (being the laid-back, totally politically correct person that I am not) is No.

That is as long winded as my answer will ever be.

“But why not, Joel???”

There may be a few franchise companies out there that will let that take place, but I would not advise it. It comes down to the major difference between employment and small business ownership.

In an employment scenario one has lots of options. One could move up the company ladder, one could resign, one could opt for going part time, instead of working full time, or one could even have the option of trying out other jobs available at the company to see which one would fit best. The small business ownership option gives one more limited choices: Find a way to make your business successful, or sell it. (Or close it down!)

I think the reasons for someone wanting to try out a franchise business before they buy it are legitimate. But I argue that the commitment level is just not there. It is impossible to be there. If one was to “shadow” the owner of say a House Of Bread franchise, to see if they could “handle the pace and hours of a food franchise,” they just would not be able to get the entire story.

It is because they have no skin in the game.

It is easy to be a shadow in a restaurant franchise. It is hard to be the franchisee. The franchisee takes the financial risk of course, but it is deeper than that. The franchisee knows that it is in his or her hands to make it successful, and has a totally different energy level and mindset than someone who is shadowing for a day, a week, or even a couple of months. If you are someone who is just not sure about getting into the toughest business in the world (the restaurant business) in the first place, you may want to look at that as a sign.

The main reason I came up with the topic of this franchise article is that I just received word about a restaurant franchise that is looking for franchisees who are way beyond the “I wonder if I am suited to be in the restaurant business” type. They are not looking for someone who wants to shadow one of their franchisees, or work in one of their restaurants, first. They seem to only want experienced restaurant operators.

What a great idea! I can think of a few rather large sandwich franchise companies that might have had lower failure rates by using a business model like the one Roosters is using.

The president of Roosters Franchising thought that other restaurant franchise companies, which command big royalty and advertising fees, create resentment among franchisees. So he is seeking to woo a different kind of operator — experienced restaurateurs who don’t need hand-holding or the trappings of a larger corporation.

So Roosters wants to find current, experienced restaurant operators who want to get to the next level, but need a little help. I don’t have a crystal ball, but I feel very confident about the possibilities here. What do you think?

* * * * *

Joel Libava on 2008 franchise trends About the Author: Joel Libava is President and Life Changer of Franchise Selection Specialists. He blogs at The Franchise King Blog.

13 Comments ▼

Joel Libava - Franchise Expert


Joel Libava Joel Libava is the Franchise Expert for Small Business Trends. Joel, The Franchise King®, equips today’s prospective franchise owners with time-tested, proven techniques designed to increase odds of success. He does this through one-on-one coaching, and gobs of useful content that can be found on places like Small Business Trends, SBA.Gov, and his award-winning franchise blog, The Franchise King Blog . He’s been featured in Entrepreneur® magazine, and is frequently called upon by national media outlets and publications for his no-spin insights into the world of franchising.

13 Reactions

  1. I think Roosters has the right idea. This way they are able to keep the quality of their good name while expanding their franchise. An experienced franchisee has a better chance of survival and growth.

  2. I had to laugh when I saw that Roosters was going into franchising. I used to live down the street from the Original Roosters in Columbus and often asked the ownership (with a face covered in chicken wing sauce) why they didn’t start franchising. I’ll be interested in following their success, as it seems like a model that would make sense for an industrious franchisee…I’m just not sure I see enough upside for the Zor.

  3. I think this approach could solve some of the problems that occur between franchisors and franchisees as it is often said those who buy a franchise treat it as a job not a small business. I wonder if Roosters have very good systems in place as the expectations of experienced restauranters would be higher.

  4. Sound like a good plan and if the food is top notch and the prices are right – should be a success. But I wonder if they might not be hurting themselves a bit by gearing towards experienced franchisees? And Susan makes a good point, too. An experienced franchisee will have higher expectations here – especially if they are being approached from that angle by the franchisor.

  5. I think it is an easy trap to think that using experienced people ensures success. It is similar to a manager who thinks that “if I can just get the right people” then they won’t have to work so hard to support these people and be successful. These are the same managers who end up missing the warning signs and not supporting their staff – and watching everyone leave while profits tank.

    While I understand most franchises don’t want people working in a franchise before buying one, I believe it is more because they don’t want people to decide not to buy one once they figure out how much work it is – not because they feel the people won’t understand the commitment level. The franchises would rather “sell the dream”, then sell the work that comes along with owning a location. That’s Sales 101.

    My concern with this franchise is that they may think just bringing in experienced restaurant owners means they don’t have to put the same level of work into making sure their franchises are a success. Experienced restaurant owners can get left hanging in the wind just like anyone else – and without the corporate support or corporate advertising…

  6. It strikes me there are 2 schools of thought, both of which could be valid under the right circumstances.

    There’s the experienced-only-need-apply approach. Like Roosters. This gets you people who at least won’t be stunned by the industry and playing a lot of catch up learning the basics. However, they may not be good businesspeople or managers, and they may bring bad habits from past lives with them.

    Then there’s the give-me-someone-with-smarts-and-general-managerial-skills approach (but not necessarily industry experience). This may get you a really smart and sharp person who isn’t burdened with preconceived notions about an industry that can be limiting. But they may not be prepared for the realities of some industries, especially if their own background is too dissimilar.

    I know franchisors that have had success with both approaches. But in either case they have to select carefully. The biggest problem is franchisors who, in a push to expand rapidly, start letting their selection standards slide as they try to meet the numbers that the market is expecting.

    My 2 cents. :)

    — Anita

  7. Joel:

    I disagree with you on whether someone should shadow or work with a franchise before making a purchase. Many franchisees are investing their life savings in a franchise. Why would it be a bad idea to shadow or work for a franchisee BEFORE making such a huge investment. It’s probably the best due diligence any franchisee could do.

    Rush

  8. I spent over 10 years of my 17 with Pearle Vision as a regional franchise manager and watched those franchises that had just bought themselves a job fail miserably when times got tough and they had to do more than just service the people that came in to make their nut every month. Those franchisees wouldn’t have benefited from having a chance to “test run” the business because, as Joel points out – they didn’t have any skin in the game. They were opticians very talented at their craft but not entrepreneurs.

    Then there are the investors who will ultimately be master franchisees of a geographical area – they would benefit from the opportunity (perhaps in one of the corporate stores) of spending a month working the buisness so they can see the day to day operations – but their purpose would not be to see if they could be successful so much as to gain a better understanding of the process.

    What Roosters is proposing sounds like they will attract the middle candidate – the skilled craftsman with the entrepreneurial mind. The trick will be clearly identifying the right franchisee for that business model. Have they made a study of what characteristics that person will have? You are right, Joel, it will be interesting to watch what happens.

    My fear would be the franchisee that doesn’t believe they need hand holding and buy into a business with a smaller royalty/advertising contribution in hopes of a larger bottom line margin, but when times get tough will really require hand holding and more. I wonder what the UFOC spells out in terms of operational assistance. Very interesting – thanks for sharing.

    Deborah

  9. Joel, I am still interested in looking into the possibilities of a potential franchise concept of our business idea. All the Best, Martin. P.S. How does the roosters wings taste? Is it like Buffalo Wild Wings?

  10. Joel,

    I think it’s a good idea – but with a question – What if experienced restaurant operators simply don’t want to follow the top-down rules of franchising?

    I mean, they have experience and would be practicing their own best practices – It would be hard to comply to the franchise operation manual, don’t you think?

    Just my 2 cents :)

    Cheers!

  11. Thank you all for the fantastic insights and comments!

    In summation, if this franchise concept is really going to have a shot at real success, the execs must be very selective in who they choose as franchisees. {This is the most important thing for a franchisor to do!}

    A great franchise model, with great systems, and the right financial backing are all needed. But the system will fail if the wrong franchisees are awarded franchise rights.

    Here’s to a successful franchise concept!

    Joel Libava
    The Franchise King Blog

  12. Franchising presents a tremendous amount of upside, but also with a good amount of downside. The upside is that you purchase the rights to a business that is already established. The challenging growth part is already taken of. You could step into a situation where your new franchise already has great brand equity (you don’t have to start from scratch with a no-name business). The downside is that you are not as flexible to grow and offer products that you wish to offer.

    Ron
    http://www.readtheanswer.com/index.php?RTA=web2

  13. Not that I’m totally impressed, but this is more than I expected for when I stumpled upon a link on Digg telling that the info is awesome. Thanks.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>



Compare your business to the industry - Try our new tool