Why supervising and being on the shop-floor is critical to franchising success
‘Do you plan to run the shop yourself?’ is the first question to any prospective franchisee that is asked by Sandwich Baron founder and CEO, Sally J’Arlette-Joy. There is a reason why that is her first question – in some franchises, there are almost no examples of successful businesses where the franchisee is absent.
In some franchises (of course, not all), it’s not just a benefit to have the owner on the floor – it’s an essential feature of success. And for virtually any kind of franchise, the odds are stacked in favour of the owner-manager. In fact, the same applies to any small business. The business world is full of examples of successful, family owned and run businesses deciding to go ‘corporate’ and failing. Leave that to the franchisor, and be prepared to run the shop yourself.
Employees may sabotage your business
Bookshops are full of tomes on understanding human nature – but still, people are shocked when they are defrauded by someone they thought utterly trustworthy. You have to be on the shop floor and have watertight systems – and frequently be obvious in checking up on people. Don’t make it personal – just have a policy of periodically questioning all staff members (even your own family members) and demanding the evidence.
There are examples where franchisees think the business is doing well, only to find once their bookkeeper completes the books, that their stock is being stolen to fund somebody else’s business. Understand people’s motivation: employees are actually perversely incentivised to steal inventory – only by raising the risks does one stop it. That’s why we have laws and policing in a country. On the other hand, franchisees have an alignment of interest in seeing the business profitable.
Certainly, foster close employee relations, but make it policy to frequently verify ad hoc financial matters – don’t wait till the books are closed.
Be the bacon not the egg
There’s an old joke about an egg-and- bacon breakfast. The hen was involved, but the pig is committed. It is precisely that type of do-or-die commitment that a franchisee is expected to bring to the business. You need to demonstrate that attitude by being in-your-face with staff.
It is one thing to lose your job for poor performance – you can find another job. But the franchisor has tremendous power over the franchisee, and poor performance can lead to much more than job loss. It can lead to loss of the entire franchise, which in turn can lead to the loss of the franchisee’s investment, lifestyle, home, and retirement plans.
Therefore don’t trivialise the risks in your franchise – check up on everything as if it were your own. It is. Franchisees are motivated by pride of ownership – they relate to their businesses far more deeply than even the best employee can ever do.
What is the risk/reward of being a hands-off operator?
Notwithstanding all the above, it is commonplace for franchisees to have multiple franchise outlets. If a person is successful in one franchise business it makes sense to want to expand that business with additional locations. You’re going to have to split time between those businesses and cannot be an on-premises, full-time owner/operator for any one business. Something’s got to give if the business is going to grow – and that typically involves not staying close to the employees and the manager. A manager without an ownership position may not be motivated to keep things operating in the way the absentee owner would like. So enforcing standards becomes a problem, and the franchise comes under threat because franchisors obviously rely on their franchisees to keep up the standards of the business operation. One way of mitigating this is to introduce performance incentives or profit-sharing schemes for managers.
Where doesn’t it work
In a franchise selling valuable inventory, having a manager could be a problem, or in businesses that run on relatively small margins already, any loss of inventory can be devastating to the profitability of the business. Also, if the franchise is a B2B type business where the owner needs to have a personal relationship with clients, it may not work to have multiple units.
If you decide to be an absentee owner, ask yourself how hands off should you be? You should still be checking in. You should still have a hand in hiring. And most importantly, you must hire an experienced manager and people to manage your business on a daily basis – and have full trust in them.