What are the eight most expensive words in the English language? ‘Because it has always been done that way’.
There are two reasons why this phrase might be trotted out.
- New management which doesn’t know any better and sticks to what it is told.
- Established management harbouring a reluctance to change
The new operator syndrome
In franchising, we are heading into a new era as many franchise systems have reached a stage where the ownership is transferring from the founder to a new set of managers. This can be either:
- a succession plan approach backed by stability and a gradual change of ideas, or
- a full blown sale of the business which can lead to a radical change, or a more fiscal approach eg a private equity firm, mainly interested in the bottom line.
Private equity relies on forecasts of additional value for the brand by taking both long term and short term steps to improve the bottom line, and may have a plan to float the company on the stock market in the short to medium term.
If a company is viewed only as the results in the financial reports, the long term direction of the business could be in doubt.
Maybe there is more on the table if a more rigid data based approach is taken? Areas such as strategic network planning or territory planning may have been very much in the founder’s head, and little has been done to develop a structured approach to some of the most important long term directions of the business.
If you are going to purchase or take over an ongoing business, you need to look at many of the individual component parts in a critical manner. This may involve a major accounting company reviewing the business, but does this cover some of the more specialist areas that offer the largest potential growth?
Our view at Spectrum Analysis is that as well as the dollar numbers we should be considering questions like:
- What is our market share and store numbers in each state?
- Where are we under represented and could look for growth?
- Where we are over represented, and do we want more stores or sales in those markets?
- Is there a strategic plan for our future stores’ roll out and how do we evaluate new location opportunities?
- Are we offering franchisees a territory or an exclusion zone, to ensure their security with our brand?
- Are the territories we have previously given as part of our franchise agreements of similar opportunity?
- Are our existing territories properly mapped out with no gaps or overlaps?
These type of questions should be raised as part of due diligence, but it is often only when you gain control of a business that you really see beneath the surface to know what you have purchased, and what needs to be done.
Old habits and a reluctance to change
I am sure we all can think of real life cases where this applied, and wish we had taken steps to make changes earlier than we did. With the huge expansion of the digital world into business, now is a good time to revisit this, no matter what the reason. It could be simply that as an existing manager you feel that things can and should be done better.
Maybe due to a retirement or other staff changes, you now are in a new position and see a need for change.
Many of these cases come about where a highly-respected older employee has left, and with them has gone all the localised experience they had, and had used well in the past. Unfortunately you cannot just acquire 30 years of experience!
What is often required is to make that change in direction from a one-man-band of expertise to a more data driven approach, so that the processes and logic are transferrable in the future.
If we are considering the strategic network planning and site selection area, which is for many a crucial part of the business, then using mapping and data to help support the decisions is essential.
Questions you need to ask within the business may be:
- Do we have mapping to show our locations (and/or territories) along with our retail competitors?
- Do we have a nominated territory/exclusion zone or trade area around each of our stores?
- Are we sure there are no overlaps or small unallocated areas between territories?
- Do we have a strategic network plan for our senior managers to look at so we are all clear on our direction?
- Are the people in charge of finding new locations working in line with the strategic network plan?
- If not, can we fix this internally, or do we need assistance?
Is it time to change?
The eight most costly words in the English language can be applied to almost any decision-making process in business. We are reflecting this in the property side of your business and you may conclude that you may have a deficiency in this area, or other parts of the business.
Don’t let ‘because it has always been done that way’ the way you do things now.
