The "Franchisor's Mindset": Some Factors that Franchisors and Franchisees should Consider
For both (a) franchisees deciding on the right franchise investment and (b) franchisors establishing a solid franchise system, the right "mindset" is critical. That is, it is critical that your understanding of franchise opportunities and franchise systems go beyond the generalized and involve a detailed understanding and evaluation of the overall mindset that a successful franchisor brings to the table. Reflecting on "some" of the critical points that my clients have raised over the years, the following is my take on some of the factors that you (whether a prospective franchisee or franchisor) should be considering in evaluating a "franchisor's mindset":
- Focus on Franchisee Training is Paramount - Smart franchisors, that is franchisors that are focused on the "long-term" are focused franchisee training. That is, the long-term road to franchise growth and the development of a valuable franchise system must be premised on the consistent development and training of its franchisees and not just a quick sale of a franchise unit. Is the franchisor focused on evaluating franchisee qualifications and and developing systems for for both initial and on-going training?
- Franchise Growth Must be Planned and Controlled - Somewhat related toward a franchisor's "training mindset" is the franchisors "mindset toward growth". Franchise systems that grow to "fast" (i.e., at a rate that is not readily supported by expanded training, system development and market evaluation) are bound to fail. Is the franchisor focused on controlled growth and growth that takes place only after developing the necessary support and brand development systems?
- Product Development must be Ongoing - One of the primary advantages of becoming a franchisee (in the right franchise system) is leveraging off of the franchisors centralized efforts in constantly developing, refining and improving the products and services that its franchisees offer. Product and brand development is a constant and on-going process and is critical to the continuing success of a franchise system. Is the franchisor focused on systems and a process that continuously reinforces and refines its brand and the products and services offered to its customers.
There are many, many more points and steps that successful franchisors follow. However, key to every franchise is a franchisor and franchise management team that approaches each day with a "mindset" focused on controlled growth, franchisee development and product development.
It appears that franchisors have no inducement, under existing law and regulation, to control their growth in the interests of BOTH the franchisee and the franchisor.
Would that there was some law or regulation that would require "controlled growth" in franchising. As long as "controlled growth" is only a moral obligation and not a legal obligation, prospective franchisees are in great danger.
Obviously, the franchise business model as defined in contract, is especially attractive to franchisors because it promotes "uncontrolled" and rapid growth of the franchise systems and their profits while reducing the risk of the franchisors who don't own the hard assets that produce the profits for the systems.
When franchisors can legally overseed and churn and turn units, they can survive quite nicely, even as many of their "founding" franchisees fail out of business and lose their entire investments. Often, good faith franchisees, because of their personal guarantees, lose their homes and life savings after they are thrown into bankruptcy. Yet, they are deprived of disclosure of risk, as known to the franchisor, under existing ugly and "captured" regulation.
Many franchisors have no corporate units operating when they start selling their franchises to the public and rely on a "prototype" that hasn't been "proven" in the market place in terms of how successful it is for the franchisees who prove the model for the franchisor.