4 Key Learnings Every Franchisee Needs to Know
Aug 20, 2024
There’s a gap between what a franchisor gives to operate a franchise and what the franchisee needs to run a successful franchise business. Not to mention what it takes to go multi-unit. That’s why franchisees need to educate themselves so they can develop new leadership and management skills and the necessary business acumen.
That’s what I discussed with Harvey Tuck, Head of Franchise at Coffee Republic and LinkedIn Top Franchising voice, who also hosts The Franchise Show, a UK live podcast about franchising.
This was a different dynamic because The Franchise Show’s listeners actively participate in the dialogue, asking questions and commenting on what Harvey and their guests are talking about. I’m glad to say that it was a very constructive experience.
So, along with the audience, we discussed four learnings franchisees must know to succeed in this industry. Here are some insights on what we chatted about.
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1. How the model works
What I love most about franchising is that the model is based on systems and processes that, if implemented well enough, can increase your likelihood of success.
But it’s not only the brand systems I’m talking about! The franchise model has two sides:
- The brand systems. They include a proven brand, a product or service, the service processes, the image, and the marketing, and are provided by the franchisor. Combined, they produce sales which bring revenue.
- The business systems. They involve the how-to’s to build the right team, control the income and the profits, and scale the business. These elements are the ones that turn sales into profit, but defining them is the franchisee’s responsibility.
That's the biggest secret in the franchise world: when you buy a franchise, you don’t get everything you need to be successful. What you get is a proven brand that brings revenue.
You need systems, processes, and procedures to turn that revenue into profit. But surprisingly, not many franchisees master this other half of the model. And without this business part, it is much more challenging to succeed.
As I explained to Harvey and his audience, this was actually one of the main motivations for creating the American Franchise Academy eight years ago. As I was taking a sabbatical from over 25 years of experience in the franchise world, working on the corporate side of the industry and running company stores for Domino’s Pizza, Popeyes, and Darden restaurants, I started getting various calls from franchisees I worked with in the past.
They were struggling, not with the brand but with the business, and wanted me to help them save their franchise business. That’s how I realized that franchisees need these learnings.
Even though most franchisors do a really good job teaching their investors how to duplicate the product, the service, the image, and the marketing, and tend to have good operation manuals, training guides, and precise procedures to execute the brand systems, when it comes to the actual management of the business, there’s a lack in the industry.
Since I spent a third of my career running company operations and having access to top management tools and resources, I decided to start this academy and share this knowledge so they could be successful and complete the franchise formula.
That’s what the AFA focuses on: franchisee success. It’s a commitment that my team and I have made, not only so that our clients can be profitable but also grow into a multi-unit organization.
To quickly sum this up, and using Harvey’s very accurate words, the AFA “takes those skill and knowledge gaps and fits them into a solution.”
Disclaimer: In the US, there’s a thing called “joint employer liability” that prevents franchisors from dictating the franchisees' business and people management systems. They are unable to teach or support franchisees in those areas. If they do, the franchisors will be liable for anything the franchisee or their employees do.
That’s why they are hands-off, and franchisees are on their own in everything business-related. But, as Natalia -one of our listeners- pointed out, this doesn’t happen in other countries.
Nevertheless, I think it’s essential that franchise investors are aware of the key business indicators and take responsibility and accountability on the management side of their franchise so they can positively impact the profit, move the numbers forward, and aim for the expected results.
2. How to Understand Your Numbers
Perhaps you were a great executive in the corporate world before entering the franchise industry, leading many successful projects. But that’s very different than running a business, where you must know how to calculate the break-even point, read a financial statement, identify business opportunities, and hire the best people for your team.
Most entrepreneurs who buy a franchise don’t have small business management experience, but as Harvey said, “knowledge is very powerful”.
As a franchisee, you must possess the business acumen and understanding of what it takes to run a multi-unit organization. Otherwise, you are going to have many challenges and even be at risk of failing.
Must read: 6 Key Financial Insights for Multi-Unit Franchisees
This is true not only for new players in the industry. Some franchisors actually introduce us to their franchisees so that AFA becomes the source of the knowledge, tools, and resources they cannot give. Some franchise owners even recommend that franchisees who want to grow go through our flagship program, COMMAND, to understand how to be a successful multi-unit franchisee.
That way, the franchise owners can focus on the brand systems while we support their top-performing franchisees in creating, developing, and implementing their business management systems.
3. How to Lead Your People
If you truly want financial and time freedom, you must have a solid and committed team who can help your business thrive. Without them, you won't have a company but a “one-man show” that cannot grow.
That’s why franchisees need to have leadership skills as well as a set of systems, processes, and procedures to manage the entire employee life cycle.
Something else to consider is that your franchise may be the first job opportunity for many Gen Z’s who are entering the workforce, so not only do you become their employer but also their teacher, coach, mentor, psychologist, and sometimes even a mother/father figure.
One more factor to remember is that, as Penny -another one of our listeners- mentioned, “large franchises may have up to 5 generations in the workplace”, and the motivations, aspirations, desires, and opportunities they seek differ from one another.
By understanding, acknowledging, and taking advantage of this diversity, business owners can overcome generational issues and ensure that the brand and business systems are replicated faithfully.
In fact, I recently developed an e-book that highlights how to attract and retain Gen Z’s, with tips to address their job expectations. You can download it for free here:
It is important to remark that these strategies must come with a healthy culture that accepts people, encourages growth, and positively impacts the world.
As a matter of fact, this is the first step we review when franchisees join the American Franchise Academy. Before digging into the financial statements, the break-even point, or the inventories, we focus on the culture because that’s how you get into the minds and hearts of your people.
- It’s not just about your customers. It’s also about your employees, your vendors, and each other.
We believe that if you can create an aspiring and inspiring mission, vision, purpose, and values, you’ll be able to align multiple generations in the same direction. And again, it's all systematic, teaching everybody what the culture is and then following up and living what you stand for.
4. How to Prepare for Growth
If you only have one unit, your role as a franchisee most likely includes the responsibilities of a Unit Manager. To delegate those tasks and operations to a manager, you must have all the business systems defined and clearly documented.
This critical process of documenting is especially true for anyone who wants to grow into a multi-unit organization. In fact, we help our clients put all their systems together in a clear and concise management manual that they can then give to their unit managers and leaders and transfer this knowledge and information.
It’s as Harvey mentioned. “As long as you have at least aspirations for multi-unit, this is something you must have to generate and maximize profits.”
Keep learning: The Art of Delegation: Best Practices for Franchisees
As you can see, the conversation between Harvey, his audience, and I delved into how franchises can improve their revenue and profit, as well as their happiness and success, by focusing on these four key learnings. As I mentioned earlier, it was a fascinating discussion with different points of view, opinions, and even franchise modeling.
If you want to educate and empower yourself to face the challenges of being a multi-unit franchisee and exceed expectations, the American Franchise Academy is here for you! Let us become your source of information, tools, and resources to support your growth dreams, improve your operations, and achieve your desired results.
We have three training programs to make their franchises as profitable as possible: one for Franchisees, another one for District Managers, and a third for Unit Managers or Single-Unit Franchisees. Reach out to us to discover how we can help!
WATCH THIS PODCAST INTERVIEW on YOUTUBE HERE.
