By Misti Hewatt
THE FRANCHISE DREAM
“â€˜Build it and they will come’ was a conÂcept in the movie Field of Dreams, but it ain’t the fact in the franchise business,” says Jim Squire, Certified Franchise Executive and the Franchise Development Manager for HoneyBaked Ham Co. and CafÃ©. With a long history in the franchise business, Squire knows that success in franchising, whether as a franchisor or franchisee, is more than hoping and praying.
A growing number of Americans are hoping to uncover the true keys to successÂful franchising. According to Entrepreneur magazine’s Franchise 500 survey, the total number of franchise units for companies grew 11 percent from 2004 to 2005 compared to a 4 percent increase from 2003 to 2004. And, restaurant franchises are top contenders, holding 13 spots in the top 30 Franchise 500 rankings. Subway claims No. 1 and is also the fastest growing franchise followed by Pizza Hut, Inc. and Quiznos Sub.
With this promising momentum and the growing trend in eating out – the National Restaurant Association estimates that Americans will spend more than half their food dollars at eating-and-drinking places by 2010 – restaurant franchisors and franchisees stand to profit. As with any business, however, profits depend on smarts, not trends.
Squire puts it simply, “There is no automatic pilot for any franchise company.”
Several metaphors describe the relationÂship between franchisors and franchisees, parent-child and husband-wife among them. “Unfortunately, some franchisors look at franÂchisees more as employees than as the business partners that they are. Some franchisors conÂsider franchisees as customers,” says Squire. He thinks that franchisors should think of the relationship as a mutually beneficial business partnership. After all, franchisors are only as successful as their franchisees.
Franchisors can practice the “partnerÂship” philosophy by involving franchisees heavily in the decision-making process. At HoneyBaked Ham Co., a franchise advisory council comprised of five franchisees, elected by their constituency, provides feedback and ideas to headquarters. Only at HoneyBaked it is no longer “headquarters,” but rather “cusÂtomer support center.” The name change is a little thing, but according to Squire it helps foster the partnership mindset because “it is not setting us up as â€˜the company’ or â€˜Big Brother.’”
Legally, Charles Hoff with the law firm Taylor-Busch, general counsel to the GRA and co-chair of Franchise Round Table, thinks that the foundation for a good partnerÂship starts with an “even-handed” Uniform Franchise Offering Circular (UFOC) that “takes into account the sensitivities of a franÂchisee.” In his experience, one of the biggest mistakes franchisors make is leveraging franÂchisees too much.
Find Good People
Selecting the right franchisee is crucial, but according to Hoff, franchisors often do not spend enough time on the qualification process.
Wing Zone’s Stan Friedman agrees, “The best system in the world is moving with deliberation and not rushing, having several meetings and several conversations with all of the decision makers.”
Decision makers extend beyond the poÂtential franchisee: Investors, spouses and even children are impacted by the decision to open a franchise. Discovery Days provide one opportunity for franchisors to meet with potential partners and introduce them to the concept, but it is also an opportunity to meet all relevant parties.
Get Professional Help
Although Stan Friedman shares a last name with Wing Zone co-founder Matt Friedman, they are not related. Stan describes their meetÂing and eventual partnership as serendipitous. They met at a franchising conference where Stan was speaking. His speech influenced Matt’s business prospective, and as a result, Matt began requesting frequent lunches with Stan. During these lunches, he would pick the seasoned professional’s brain.
“It took me several months before I realÂized I was being worked over for some cheap consultancy,” Stan quips.
Eventually, Stan entered into an equity partnership with Wing Zone, and he now serves as the Executive Vice President. He explains that successful franchisors do just what Matt did: They get professional help.
“When you have an organization like [Wing Zone] where everybody is from the inside, you start having to go outside to find more wisdom than you have collectively.”
Make It Easy
At Wing Zone, simple things – such as their signature 25 flavors, clean shirts and a standard friendly greeting – work together to deliver consistency. Friedman makes clear that these might be “little things in the minds of some, but they are not little things at all. The value proposition of franchising is built on consistency of customer experience.” Wing Zone’s “very, very specific operating system” helps the franchise “over deliver on low expectations.”
In addition to easy-to-follow operations, the most successful franchisors provide approÂpriate education and support. HoneyBaked assigns each franchisee a project manager who works to establish a specific timeline during the development process. The projÂect manager also assists with any roadblocks the franchisee might encounter, from site selection to construction and a myriad of other potential issues. In addition, there is an extensive two-week training program, and during the opening process, training and field operation representatives spend time with franchisees in their local market.
Appropriate and high-quality products, from ingredients to equipment, also simplify franchising. Squire touts the importance of HoneyBaked’s strong supply chain. “We ensure that our suppliers manufacture everyÂthing to absolute spec.”
Rob Caswick, co-founder of the fast-casual Italian franchise Artuzzi’s, dedicated a lot of time on equipment specifications. He and partner Jeff Newsham originally wanted to use a wood-fire oven for pizzas, but they soon realized it required greater skill to operate than most ovens and opted for an impinger oven instead. “It isn’t sexy, but it’s dead-on every time,” says Caswick.
Do It Themselves
“As a franchisor, you really have to be in there rolling up your sleeves to get customer feedback,” says Caswick. He aims for 5 to 10 percent of Artuzzi’s to remain company owned. “Without a company store, it is a lot more difficult.”
Company stores help franchisors address franchisees questions, test new products and collect customer feedback.
“If you want to be the true entrepreneur who wants to invent everything, don’t buy a franchise.” This is the advice that Wing Zone’s Friedman has for potential franchisees.
Multiunit Bojangles’ owner Matthew Kirby has a background in operations, having worked with the Navy for five years. He describes himself as good at folÂlowing directions but not very creative. “Bojangles’ has a 30-year history and lots of experience in marketing, operations and food preparation,” Kirby says. “The wise thing for franchisees to do is to buy into the whole concept and folÂlow the system.”
Understanding the concept and the system from the beginning helps. Finding a good attorney and accountant to assist is smart. To identify potential points of contention, an attorney can help navigate the UFOC. One potential source of contention is exclusive territory. “Defined and protected territory is vital to a franchisee’s success. Contractual exclusivity prevents possible encroachment and allows for franchise growth,” says Nancy Oswald, multiunit Ruth’s Chris franchisee and Chair of the GRA.
Another great reÂsource is current and past franchisees. The UFOC contains a list of franchisees that have left the system. Finding out why they left could provide valuable insight, as could talking with current franchisees that are successful. “Other franchisees can help you save money and make fewer mistakes,” Bojangles’ franchisee Kirby says. “Potential franchisees also need to make sure that franchisors are restaurateurs committed to long-term growth, not just finance jockeys.”
Fall In Love
Working with a brand and with people that they like and respect is invaluable. “The two main things that guided my decision were the strength of the Bojangles’ brand and the integrity of the people,” says Kirby.
Nancy Oswald agrees, “I could not only reÂlate to the Ruth’s Chris brand, but I embraced Ruth Fertel’s philosophies.”
A former franchisee himself, Artuzzi’s Caswick shares that the No. 1 thing is having passion – because franchisees spend a lot of time living and breathing the brand.
Hire Good People
“As an owner, there is nothing more imÂportant than picking people,” said Bojangles’ Kirby. Managers are especially crucial to a well-run operation.
Once the team is hired, franchisees need to clearly set objectives and expectations, and hold everyone accountable for results.
THE FRANCHISE REALITY
Indeed, franchising is no field of dreams, and there is no autopilot. As Stan Friedman says, franchise success is about “doing the right things with the right people at the right times for the right reasons.”