Recently I (Kim Bonner) was interviewed by Marisa Palmieri about what makes a good franchisee. For more details or to read the article, click on the article here. After reviewing the article, I realized that I did not previously write a blog post on what I believe are the top five (5) traits of successful franchisees. Although some of my ideas are covered in Palmieris article, most are not. So, I thought I would take the time to write my thoughts on the subject.
Although there are far more than five (5) qualities that make successful franchisees, the five traits that I have identified seem to appear more frequently in successful franchisees who I have worked with in the past. There may be exceptions, but these five traits appear consistently among successful franchisees.
1. Adequate Funding
As I state in Palmieris article, adequate funding is critical for the success of any business. Franchises are no exception. Lack of sufficient capital to run a business is the primary reason why most small businesses do not succeed in the United States. Critical in determining whether a franchisee will be successful is determining whether they have sufficient capital. Yes, the franchisee should expect income from the business. But, if the franchisee does not have adequate reserves to deal with the unexpected occurrences such as harsh weather conditions or an economic hiccup in a region, its a recipe for disaster. There are a variety of funding sources. The majority of franchisees self-fund via 401K rollovers, home equity loans and/or gifts from relatives. Many other franchisees seek loans to get the business started from the franchise or banks. Prior to investing in a franchise, entrepreneurs should seek counsel from an experienced accountant who has worked with franchises before and has an understanding of some of the issues that a franchisee will face. Additionally, entrepreneurs should thoroughly vet franchises with present franchisees to get a clear and precise picture of the amount of funds needed to successfully run the operation. The Franchise Disclosure Document (FDD) gives a basic understanding of some of the funding required. However, present franchisees should provide far more detail about the amount of funds required in order to successfully run their operation. Thus, franchisee validation regarding funding requirments is critical for franchisee success.
2. Franchisee Personality
Variety is the spice of life, right? And everyone is different. All of us have unique personality traits that make us stand out from the crowd. Not all franchisees have the same personality traits. Successful franchisees can be introverts or extroverts. They may have very different goals and values for their lives. But one trait every franchisee must have is the ability and desire to follow a proven system in their business. If you are an entrepreneur on steroids (say a Gary Vee type personality) being a franchisee will probably drive you insane (not to mention the franchisor). As a franchisee, you cannot simply do it your wayeven if you think your way is better. That is a recipe for a broken franchise agreement and a defunct franchise operation. If you have the type of personality that demands freedom and leadership at all costs, then franchising is not the right option for you and you should start your own independent business.
3. Sales and Marketing Expertise
Some people may be surprised that I placed this trait at #3, but based upon my experience this is the case. Although there are some franchise systems that have major national advertising campaigns on television and radio, the vast majority of franchise systems DO NOT. This is a rude awakening for many franchisees and franchise prospects. Many buy into the mythology that if they buy into a franchise system, the marketing and sales will be taken care of for them. Nothing could be further from the truth. This is YOUR business. You have purchased a system that you must work in order for the system to work for you. That is especially true in sales and marketing. If a franchise cannot identify the specific marketing and sales strategies and plans that you can apply to be successful, then you need to run from that franchise system. You are investing in a franchise to get a proven system that you can apply DAY 1 of the business. If a franchise cannot provide that to you, run. However, if the franchise system provides you a clear path to marketing and sales victory and you fail to continually execute the system, then that is a franchisee problem not a franchisor problem. Again, when you invest in a franchise systemyou are getting a proven system. But that system must be appliedand applied and applied again to get results. You are still the owner of a business and you cannot expect the franchise system to operate the system for you. Unfortunately, many individuals who come from corporate backgrounds are not comfortable with sales and do not have adequate an network to survive let alone thrive. Your network is your networth. Prior to joining a franchise system, make sure that your marketing and sales skills are adequate or hire someone to help. But do not invest in a franchise without this expertise.
4. Human Resources Management Skills
Life and business is all about people. This is one of the most important statements I could ever share with anyone. Your relationships are the most valuable asset that you have. Your relationships are more valuable than time and money because properly functioning business relationships give you time and money. Toxic relationships and people ALWAYS cost you time and money. Thus, your people skills are paramount in business. Unless you simply want to buy a job (and most people do not want to do that) you have to scale your business at some point. That means you have to have the right people in the right positions. And that is one of the most difficult tasks that a business owner has. Nevertheless, it is critical for your success. If you have poor people skills or little to no HR management experience, you need to hire someone to do this for you or look for an alternative to owning a franchise business. Even if you are simply an investor in a franchise business, you must know how to hire the right people or you will fail miserably.
5. Well Educated About Franchise
An educated franchisee is the best franchisee, period. The worst franchisee is a clueless franchisee, period. As you endeavor to make this incredible investment of your time and money, you should really focus on understanding the franchise system. Study the franchise system. Ask questions of the franchise leaders. Ask questions of the franchisees. Read the FDD and franchise agreement. Passion and emotion are wonderful. And I think every relationship (business or personal) requires emotion and passion. But if you enter into any relationship based upon blind passion without grounding it in reality, you are asking for serious problems. One of the biggest problems in business relationships is confusion about roles and unreasonable expectations. Franchisors need to be clear about their expectations and the roles of parties. Franchisees must take time to understand roles and manage their expectations, particularly in the first 2 years of operating.
In conclusion, although it takes a variety of traits to be a successful franchisee, the following are critically important: adequate funding, personality fit, marketing and sales skills, HR management skills and franchise system knowledge. If you would like more information about franchising and would like to set up an initial free consultation with a franchise consultant, please call us at 703-925-5901 or e-mail us at email@example.com. We look forward to speaking with you soon.