The Franchise’s Owners Involvement
From Franchise Owner Involvement to Skills and Characteristics, just exactly what is required from you as a Franchise Owner? Get a clear picture of how involved your new venture would really need you to be and which other attributes and skills would really help you turn your new franchise into a success.
Do I have to be hands-on in my franchise?
Generally, most franchisors would be very reluctant to grant a franchise to someone who does not plan to be actively involved in the business.
There are occasionally cases in which an investor is granted a new franchise and operates it successfully without having any personal operational involvement. With the exception of multi-unit franchisees, these scenarios are rare and usually only apply to investors who have a proven track record as franchisees in other franchises, and have experienced management staff who will be operating the business for them.
When purchasing a franchise, the disclosure document often outlines the franchisor’s requirement for a franchisee’s personal involvement in the business. It normally specifically states whether the person signing the franchise agreement needs to be personally involved in the daily business operations, or whether the franchisee can employee someone else to operate the franchise.
In the United States, it is estimated that about a quarter of franchisors require buyers to commit to a clause in the franchise agreement that precludes absentee ownership.
The franchisee’s workload
A common mistake prospective franchisees make is to underestimate how much work is involved when running the business on a day-to-day basis. Far too many new franchisees believe that once the franchise has been bought, the hard work is over. Actually, the exact opposite is true – your work has just begun!
You’ll need to oversee most of the everyday operations and that will require a significant investment in time on your part. Therefore, you must be prepared to make a serious commitment to your business if you expect to achieve long-term success.
The type of service or product you will be offering in your franchise will determine your level of involvement in the day-to-day business operations. Your personal preferences, financial position and overall goals will also be determining factors. In addition, if you’re buying an existing franchise, the level of hands-on involvement will depend largely on the seller’s existing management team.
The very nature of the day-to-day operation of a franchise demands that the owner has his/her finger on the pulse at all times. It’s a business where acute management of customer service, product quality and costs is paramount. The difference between success and failure of a franchise can often be measured by a few percentage points on the profit and loss statement.
Success ultimately depends on the individual franchisee’s level of involvement, as well as his/her motivation and drive to succeed. Regardless of the types of service or products offered, the most important influence should be your personal characteristics.
Are you the type of person who wants to know exactly what is happening on an hourly basis guided by your own influence? Do you like to look customers in the face and shake hands as the owner, offering a personal touch to customer service? Or are you an investor who would rather delegate responsibility to a seasoned manager?
Even if you decide on the latter, you have to realise that there are some things you should attend to personally, especially during the initial opening phase when you are establishing managerial operations. For instance, you will have to learn about all the key positions in the franchise and make sure you know how to carry out every function in the business. Only once an experienced team is in place, will it be safe to spend less time at your franchise.
As an owner-operator, you have to ensure that cash registers balance, that sales volumes are meeting or exceeding expectations, and that marketing strategies are being implemented. You must also consider the cost of operations for your franchise. In this regard it would be important to include the expense of hiring a GM to replace your contribution of time. If the expense for a GM significantly lowers your franchise profits, you may not have the capital to maintain his or her salary. This would almost certainly require you to become an owner-operator.
As a prospective franchisee, it is imperative to ensure that you are able invest an adequate amount of time in the business. Although the business system is basically set up in franchising, you will still need to initially spend extra time learning how the system works.
Leadership and partnership
One of the most important skills a franchisee needs is the ability to be pro-active and take initiative. You should therefore be able to easily assume a leadership role.
To succeed in this regard, you have to understand how the entire system works and not be reluctant to ask questions about aspects of the business you are not clear about. You are essentially entering into a partnership with the franchisor and therefore, you should be able to work together, share ideas and resolve issues together.
You may even notice things the franchisor was not aware of because you are much closer to the business. The franchisor would probably appreciate you bringing concerns or discrepancies to his/her attention, especially if you can offer possible solutions.
Effective communication and organisational skills are key requirements for a successful franchisee. Apart from keeping in close communication with your franchisor, you will need to be able to communicate efficiently with your customers, employees, vendors and other business contacts.
Furthermore, it can be very beneficial to interact with other franchisees on a regular basis. Sharing ideas and solutions to mutual problems with fellow franchisees can help you run your business more smoothly.
In your role as franchisee, you should be prepared to wear many hats. You will have to manage all the daily operations including ordering supplies, meeting with customers and suppliers, preparing the payroll and resolving problems. It will be essential to organise all your responsibilities in such a way that everything gets done accurately and timeously.
Putting together and managing your staff or team is, one of the most important responsibilities and challenges facing an owner-operator in a franchise business. The first question you must ask yourself is what you want your team to accomplish. For example, do you want your team to be primarily concerned with operational implementation? Or, do you want your team to be creative and innovative?
In a team in which the focus is on implementation, expectations are clear and there is a strong interconnectedness and cohesion among team members. Creativity and innovation, on the other hand, are best served by loosely-led teams. Members have a high degree of autonomy and more individual freedom. The challenge for the franchisee is to find a balance.
As an owner-operator franchisee, you should follow these four rules:
- Encourage discussion, but not too much – Discussion and the exchange of ideas allow for greater creativity and innovation. Through dialogue, your team can expand its problem-solving capability. Meetings and discussions can, however, spiral out of control. When you hear yourself repeating the same themes, when the same people drone on endlessly and when people skip meetings, you’ve overdone the discussion and nothing gets implemented.
- Give autonomy, but define parameters – A good leader indicates the general direction of where the business is heading and trusts everyone enough to carry out their individual roles. The leader should not, however, be completely hands-off. They should have confidence in the group to move forward without micro-managing every detail. On the other hand, if things go too far off course, the leader needs to step in and keep everyone on track and moving forward.
- Celebrate the collective and recognise the individual – The franchisee has to maintain a sense of who contributes what. The team can be celebrated for completing a major project, but the team members who made significant contributions should be recognised for their individual accomplishments.
- Encourage opposing views, but beware of obstructionists – Opposing views are vital to energise teams and stimulate creativity. However, there is a thin line between well-meaning criticism and obstructive rhetoric. When the opposing view is no longer positive in spirit, it may spill over into sabotage and prevent things from getting done.
Conclusion on Franchise Owner Involvement
It is important to keep in mind that it’s not recommended that you consider buying a franchise unless you are prepared to play a pro-active role in moving the business forward. Only experienced operators with a proven track record, who have a strong reliable management and operations team, should ever consider this option.