The Franchise Opportunity. Part 5 of 5: The Franchisor

Part 1 of this series focused on fees associated with franchise ownership. Part 2 focused on operating and training systems and their importance to business success. Part 3 focused on the importance of a system for marketing the business and growing the brand. Part 4 focused on Business Model.

The desire to own a business burns inside many. This feeling may be driven by several motivations, least of which is probably the desire to experience the joy and satisfaction that comes with owning a successful business. If you possess an entrepreneurial spirit, you are probably driven to take on the challenge that business ownership presents, which is to solve a problem in such a way that you change lives while you and those you employ make a good living doing it.

It sounds easy enough. However, it is far from easy. This fact is proven every day. All one must do is look at the stats. According to data from the Bureau of Labor Statistics, as reported by Fundera, approximately 20 percent of small businesses fail within the first year. By the end of the second year, 30 percent of businesses will have failed. By the end of the second year, 30 percent of businesses will have failed. By the end of the fifth year, about half will have failed. And by the end of the decade, only 30 percent of businesses will remain. That equates to a 70 percent failure rate.

Hence the franchise attraction. However, franchising also carries a sizeable business failure rate. The stats shared by Bureau of Labor Statistics do not discriminate. They are not exclusive of franchise brands.

Granted, there are many variables that contribute to business failure. Some will start a business and realize they don’t have the heart nor the desire to put forth the effort needed to succeed. So, they quit. Some will make the investment without first fully understanding the commitment necessary to achieve success. Some attempt to play business because it looks cool on social media to be listed as an entrepreneur.

No matter the reason, business failure is real, even for franchise brands. The truth of the matter is this, not all franchises are created equal. Not every franchise opportunity is the right opportunity for everyone. Not every franchisor is as good as the next.

Therefore, due diligence when choosing a franchise brand is critical to success. Beyond the entrepreneur’s business acumen and determination to succeed, the franchisor may be the single most important factor contributing to the success of the franchise business. This is not only because the franchisor built the business you are looking to franchise. It’s also because the franchisor’s visionary leadership, purpose, values, and ethics can make or break the future of the brand, which includes individual franchise locations.

To give you some insight, consider the following business decisions that are, for the most part, out of a franchisee’s control but very impactful when it comes to a franchisee’s success.

• Franchisee Selection

• Brand Image and Voice

• Ongoing Training and Support

• Incorporation of Technology

• Product and Service Offering

• Royalty Fees

• Vendor Rebates

• Systems Refinement

• Future Investments

• Attitude Toward Growth

The best franchisors are visionary and assertive leaders who are driven to help franchisees succeed. This comes in the form of regular product and service improvements, ongoing training and development that is designed to improve service delivery, location support that helps the franchisee overcome common obstacles, a system for engaging in meaningful communication, guidance with business decision making that is based on best practices that have been proven to work, and more.

While it may be difficult to determine the character of a franchisor when it comes to these things, there are behaviors that telegraph who the people are that lead the brand. You just need to do a little investigative work. While we are naturally inclined to take a person’s word, when deciding to engage in a franchise agreement you need something a little more substantial than a person’s word. You need evidence. The best evidence of what you can expect is based in past behavior. What's the franchisor's track record? What's the track record of franchisees?

Talk to franchisees and not just those who are submitted as references. Look at the brand’s marketing efforts. Determine customer opinion about the brand. Compare the brand to competition. If all comes back as stated by the franchisor, then you should feel very confident about your choice and the investment being made. If not, you’ll feel good that you did your homework.

Randy Stepp is a Principal with Renaissance Leadership Group. RLG is a full-service medical aesthetics practice and business development firm committed to helping owners achieve long-lasting success and sustainability.

Visit Renaissance Leadership Group at www.renaissanceleadershipgroup.com to learn more.