by Simon Lord
last updated 25/05/2016
Franchising - the best education young businesspeople can get
by Simon Lord
last updated 25/05/2016
A colleague recently suggested to me that some managers seem to look down upon franchising, as though it’s not really a ‘proper’ way of doing business. Somehow, he suggested, they think it’s respectable to have shareholders share the risks and rewards of building a business, but shabby to include owner/operators who have a physical stake, as well as a financial one, in the success of the brand.
If that’s true, it’s a sad reflection on the state of management education in this country – but perhaps it’s understandable. After all, franchising isn’t really covered in business degrees, and it’s often dismissed in a single session at law school.
Despite this lack of formal instruction, though, New Zealand is, per capita, the most franchised country in the world. Our franchise sector is worth an estimated $20-30 billion and a franchise business model is used by such big name corporates as Fonterra, Fletchers and Foodstuffs, as well as the occasional SOE.
As a result, it should be clear that franchising is something that no company with multi-site operations can afford to ignore. Franchising can offer you a way to expand your business using the capital and labour of others. It can offer a way to improve profitability and increase the efficiency of outlets, release capital and increase buying power. It can help you grow both nationally and internationally. And if your own company hasn’t already considered franchising, you can bet that your competitors will have.
Franchising is how Paper Plus transformed itself from a regional buying group into a national brand with the power to out-perform Whitcoulls and repel Borders; it’s how Restaurant Brands simplified its management chain and improved performance in regional Pizza Hut outlets; and it’s how Les Mills created a global giant, Harcourts became a big player in Australia, and BurgerFuel went from Ponsonby to Iraq.
Equally, many established New Zealand companies have diversified by taking up franchised brands from overseas. In some cases – as with Wendy’s – they have then chosen to expand via company-owned outlets, while others – such as Speedy Signs - have appointed sub-franchisees.
Real life experience
So knowing something about franchising can be a real asset to a manager looking for ways to help his or her company improve its results. But I’d like to go further than this and suggest that, for a young graduate, working in a franchise can be even more valuable. You see, while franchising isn’t considered valuable enough to be taught in our universities, joining a franchise and working with franchisees can be a superb way of adding practical knowledge to theoretical learning.
Over the years, I’ve met a number of bright young people who have joined franchises in business development manager or field support roles and have found that having real-life experience has given them a much more effective understanding of business. While individual franchised businesses are generally small enterprises, good franchise systems provide them with the information systems and support structures of much larger organisations.
Consequently, field support managers see a huge range of issues at a macro level: understanding balance sheets and P&L, cash flow management, setting and achieving KPI’s, profitability, margin maintenance, product mix planning, recruitment, training, personnel management, promotion, operations, cost control, and a whole lot more. They aren’t dealing with issues in isolation, and by having to explain these concepts to others they develop a deep understanding of major business drivers. Above all, they are dealing direct with the decision-makers – the franchisees who actually own the business.
It’s a hugely exciting challenge, and it can be a hugely rewarding role, too. Field support staff can make a massive difference to the speed with which a new franchisee achieves profitability, how high they fly and how they overcome the inevitable problems they face along the way.
That’s why my own business supported the addition of a field support manager category to the prestigious Westpac New Zealand Franchise Awards a couple of years back. It’s a reflection of the impact they have upon businesses throughout the country, and also promotes the value of field support as a career move.
After all, corporate managers might see the pyramid they have to climb from day one, but they’ll eventually discover it gets a lot narrower towards the top. Field support managers gain wider experience and have a lot more options as a result – including running a business of their own. For anyone with a real goal, it’s perhaps the best education of all.