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THE SECRETS OF SELECTING GREAT FRANCHISEES

by Fred Berni,
last updated 23/07/2009

Over ten years, Fred Berni has identified the critical characteristics which high-performing franchisees have in common. In this article, he shares his findings

What one thing would most franchisors change about the early years of running their business as a franchise? In almost every case, they will tell you they would have paid closer attention to the type of people they selected as franchisees. Why? Because it is the people in the system, and not the system itself that really defines how successful a franchise will be.

For example, they have learned that the most critical part of running a franchise is NOT 'Location, location, location', but rather 'People, people, people!' Selecting the right franchisees is vital not just for an individual location but for the whole franchise network. Franchisees who are successful stay in the system longer, contribute more, require less individual support and generate more revenue.

I have been told of instances where a franchisor with a poor performing location found that, simply by replacing the existing franchisee, the location was able to show a sales increase of over 40% almost immediately. How did they achieve such a dramatic turnaround? By paying attention to the critical core values that all successful franchisees have in common, and recruiting new franchisees who shared these values.

So how do you assess these core values? The first step is to interview the candidate using behavioural style interviewing techniques. You need to give the candidate some common situations that franchisees find themselves in and ask the candidate how they would resolve the problem, or simply how they would react to the situation. If done effectively, behavioural style interviewing can give you a tremendous edge. You will have some idea how the candidate may react in given situations.

However, that still leaves some doubt since candidates can often 'talk the talk', but when it comes right down to it, they cannot 'walk the walk'. Perhaps they have gone to a number of interviews with franchisors and have learned how they are expected to react.

Personality Profiles Don't Work

Many franchisors have therefore taken the additional step of using personality profiles, a standard tool of the recruitment industry. However, they have found that they do not work in franchising. Why? Because the developers of personality profiles take a tool which may work very well doing exactly what it was originally designed to do (describe a personality), but then try to shoe-horn it into the franchise community and tell you that it will predict how well a potential franchise candidate will do. Most often, all the franchisor gets out of the deal is a bad taste for any kind of profiling tool.

Here's an example of why personality profiling does not work. If you met face to face with ten successful franchisees in any system, you would probably walk away thinking: 'There is no way to predict how well these people will perform. Every one of them has a unique personality.' Well, you would be half-right. They do all have different personalities. However, if you look deeper, you will find that they all share a set of common core values that really transcend personality. Personality is simply how individuals present themselves to the world, rather than their beliefs about things and how they feel about others in general.

For instance, racial prejudice is not a personality trait, but it certainly has a powerful influence over how the individual will deal with others. Let's face it, when you are dealing with employees and customers, how you react to them and deal with them is critical.

What are these seven critical core values I keep mentioning? Our research with thousands of franchisees and franchise candidates has shown that they are, in order of importance:

  • Attitude towards employee involvement;
  • Positive attitude for success;
  • Independence;
  • Sales orientation;
  • Responsiveness to customers;
  • Social orientation; and
  • Drive

Let's look at each of these common core values of successful franchisees in more detail (by the way, successful retail managers have these same core values in slightly different order and strengths).

Employee Involvement

The most important core value in predicting how a franchisee or owner/operator will actually perform is their attitude towards and about their employees. What this means is that if a franchisee or owner/operator really believes that employees are a valuable asset to the business rather than an expense, the business will tend to do well. Intuitively, we all know this is true. You know that if you treat your employees right, your employees will treat your customers right.

Managers who prefer to manage using participative rather than autocratic decision-making styles tend to have lower staff turnover rates. This stability leads to higher profits since training costs, among other employee related expenses, can be reduced greatly. The stability that results is also beneficial because customers like to come back to stores and deal with the same serving staff that have given them great service in the past.

Positive Attitude For Success

The second most important core value is the owner/operator's attitude to success. Individuals who believe things will work out for them and have a positive attitude towards life, success and business tend to do well. We all know people who have all the opportunity in the world, but who, because of their poor attitude and their tendency to always see the clouds rather than the silver lining, do poorly. People with negative attitudes are forever looking for reasons why things won't work out rather than looking for ways to make them work. People with negative attitudes do not accept responsibility for their own successes or failures. It's always 'somebody else's fault', and if they are a franchisee that usually translates into the blame being placed squarely on the shoulders of the franchisor. When you think of it, in a way they're right. If the franchisor had made sure that the franchise candidate had the right attitude when he or she was sold the franchise, the franchisee would not be in the situation he or she is in.

Independence

The third core value is how independent the candidate is. The more independent the individual, the more entrepreneurial they are. Quite often you hear people talking about franchisees as entrepreneurs. But if you really look at the type of person it takes to be successful in most franchise situations, what is really needed is an intrepreneur: in other words, someone who is creative but needs to work within a system.

If you select franchisees who are too entrepreneurial then you will run into at least one of the following problems: either they get bored and attempt to find excuses to get out of the system, or they stay and start trying to change your system. These people can absolutely drive you nuts, because they believe that they know better than you do how to run your business and will change it to suit themselves without consulting with you.

Conversely, selecting people who are not entrepreneurial enough can be a huge drain on your company's resources. Such people like to be in constant contact with 'head office' and will seek approval for every little change they are contemplating.

Of course, the more units the franchisee owns, the more entrepreneurial the franchisee needs to be. However, there are still limits. The individual must still feel comfortable working within the system. The last thing you want is for someone who owns 5 or more units suddenly to veer off in a direction totally different from that taken by the rest of the company.

Sales Orientation

The fourth most important core value is sales orientation or, as it is commonly referred to, 'local store marketing'. Franchisees or owner-managers need to feel comfortable selling and marketing their products and services. Now, I'm not talking here about being a hard-core salesperson who really loves going out and selling door-to-door, or any other kind of competitive selling. What I am talking about is a person who enjoys talking about their business, and the products they sell, to strangers in their normal day-to-day life - both inside their business and outside. These people need to feel comfortable seeking out new ways of marketing their products.

Customer Responsiveness

On initial examination, it may seem strange that this next core value is rated no higher than fifth. Most people's reaction is that being responsive to customers should be the most important factor. However, when you think about it, it really does make sense. Remember that earlier we talked about the importance of respecting your employees and treating them right. The reason that being responsive to your customers is not given a higher rating is that in many situations it is not the franchisee or owner/operator who deals with the customers on a continuous basis - it is the employees. Sure, the owner/operator needs to have that initial respect for the customer, but this really becomes more of an employee training issue. After all, someone who doesn't care or respect customers will have a hard time training their employees about the customers' importance.

Social Orientation

The sixth core value is how comfortable the franchisee is when dealing with a lot of people on a regular basis. Franchisees who don't enjoy this constant interaction tend to become stressed. This often leads to rudeness to customers, employees, or even the franchisee's family. Needless to say, being rude to your customers or employees is not a great way to build a business. Of course, it is possible to be too outgoing, but the penalties of being too introverted are far greater. A candidate who is too gregarious is of less concern: it is far better to select someone who loves to talk with everyone than someone who needs a lot of quiet time.

One caveat though: when candidates are introverted, it is sometimes possible to compensate for this by making sure that their partner (or future employees) complements them and takes over the role of dealing with customers and/or employees the majority of the time.

Drive

Finally, and actually least important of the seven for franchisees, is the candidate's level of drive for success. This will surprise many franchisors who believe that drive is the single most important characteristic for success, but unless a franchisee has the requisite strengths in the other core values, the level of drive will be irrelevant.

We have all heard of people with high drive levels who end up going nowhere. That's because, although they put in the initial effort that's needed to become successful, they just end up alienating their employees, customers and friends because they are always pushing others to keep up with them.

Without the moderating influence of believing that customers and employees are critically important in their own right and that they all have important things to contribute to the business owner's success, all the drive in the world won't take them where they want to go. These are the people who need to learn something extremely important, and that is: People Matter Most! No matter what business you are in or what products or services you sell, unless you treat people with the respect and trust that they deserve, long-term success will be a very elusive thing. It is no surprise that every single winner of the Franchisee of the Year title in the WestpacTrust New Zealand Franchise Awards has demonstrated a strong commitment to their staff as well as their customers, and that much of their drive has been devoted to building their team as much as their sales.

So rather than looking for a high level of pure drive in prospective franchise candidates, what the franchisor should explore is the candidate's identification with achievement-oriented characteristics that are indicative of success in business roles. This includes characteristics such as need to achieve and the work ethic. The candidate needs to have a strong work ethic level. After all, how successful will they be if they can't even get out of bed in the morning?

The Research

These critical core values were identified by my company six years ago by profiling hundreds of existing franchisees and then comparing the profiles with their real world performance over several years. Some of the franchisees included in our research were successful, some were moderately successful, and some were not successful at all. This research has clearly shown that when you look at successful franchisees, they may, and probably do, have very different personalities. However, when you look a little deeper into their belief systems, you will find that they all have these seven core values in common.

Based on these findings, we developed a questionnaire which prospective franchisees complete. We then compare the candidate to other franchisees on our database and predict whether a candidate will perform at an above average, average or below average level. Over the years, we have found the seven core values to be so fundamental that this method predicts candidates' eventual performance with 93% accuracy.

So take a lesson from other successful franchisors: treat your franchisees with the same respect with which you expect them to treat their customers; use behavioural style interviewing techniques; and make sure you look at the core values of prospective franchise candidates. You will be pleasantly surprised at how effective your franchisee selection process can be.

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