What are some of the challenges of being a franchisor? Aaron Smith is an award winning entrepreneur and the founder and owner of KX, a boutique fitness company with franchises in Melbourne and Sydney. Here he shares the five things he has learned as a fledgling franchisor.
1. Choose the right people
Franchising is a fantastic way to get your product or service out to the market at a rapid rate, usually faster than if you could do it yourself with endless capital. But it’s like selecting players for a sporting team – if you don’t choose the most suitable players then your team is unlikely to be competitive and do well. I always look for passion and personality in potential franchisees. Do they fit the brand? Will clients love them? And most importantly, are they going to work in their business and work hard for at least six months; it is those initial early stages where the franchisee is needed most.
2. Don’t grow too fast
The most common mistake I see in franchising is the company growing too fast and selling franchises too quickly. The well-known franchising figure Rod Young once told me, “As a franchisor, you don’t create your wealth from the initial franchise fee, but from the long sustainable support fees of the franchise when you make sure they become successful.” I’ve also never understood why a franchisor would want 50 stores to open if 25 are going to close down soon after. It’s simple – uphold your brand credibility, care about your people and be patient.
3. Stay honest. Stay ethical
Being fair is my number one rule as a franchisor, and keeping everyone happy (although difficult at times), is by far the hardest part. Don’t lie, cheat or scam, and don’t take the best locations for the company. Most importantly, don’t treat other stores or locations as competition. We are all one big team united in our goal, so why not work together and achieve success in greater numbers. Unite, and you will be surprised with how successful the whole brand alliance becomes.
4. Don’t promise what you cannot produce
Too many franchisors promise outcomes and profit margins to franchisees they simply cannot uphold. A different location with a different franchisee will not always produce what is expected, so it is really important that the risks involved are outlined from the beginning, don’t make outlandish promises and cover your tracks. A colleague once told me that as a franchisor it’s not a question of if you will be sued, but when. I disagree. Stick to points one, three and four and you should be pretty safe.
5. Your passion must lie with wanting to help your franchisees succeed
It’s a simple equation – if your franchisees succeed, the franchisor succeeds. So you may have put all the systems in place to help the business operate efficiently on a day-to-day basis, but what’s just as important is putting the right staff in head office and the right support network so that your franchisees succeed in their own business. They will come from all walks of life with varying skill sets and attributes. But they should all share the common trait of being passionate about your brand and your business. And your passion should lie in helping them succeed. With this in place, success has a much greater chance of being the end of result for everyone involved.