Today marks the end of the first 4 weeks of business ownership. It has been a month of highs and lows, celebrations and disappointments. The most important thing is that I have learned a lot!
Lessons from Month 1:
1a. Don't be afraid to speak up. I called and emailed a Franchisor multiple times over the course of several days and didn't get a response. This is HIGHLY unusual. Most Franchisors call or email me back within 1 hour. The lack of response (and a couple other things that day in particular) had me really frustrated so I left feedback on my Alliance's broker site about the lack of responsiveness. The manager of the broker site saw the feedback, got a hold of the Franchisor, and told them to straighten up or they could not be part of the Alliance. Hopefully that saved another broker some headache.
1b. Think before acting. I really feel like I got lucky with 1a. I acted hastily and could have made a name for myself as a problem child. The manager of the broker site was understanding of my beginner's frustration and agreed to remove my feedback from the site. A fresh start!
2. I will close 1 out of 100 deals, on average. I put in a lot of time and effort doing research for my clients. Often, they have second thoughts and stop returning my calls. I need to learn to expect it. After all, it is not personal, just business. After one of those clients I am closer to helping my next client achieve their dream of business ownership.
3. Don't assume a lead is invalid too quickly. A couple of leads have come to me that say my potential client is looking at a franchise that is not in my Alliance. I can work with "outside" franchises if that is what my client wants. My job is to listen to my client's requirements and match them to the best possible franchise, whether inside or outside of my Alliance. For example, a client recently contacted me about a franchise that is a great restaurant, but not a great franchise. After discussing what my client really wanted from a business, I provided him with other options. My client agreed his first idea wasn't the best fit and has decided to work with me on the other options.
4. Follow my instincts. I have one client who was so excited during our initial call that he did most of the talking. He thought he and his business partner had all kinds of great ideas and he wanted to see what I would come up with. He gave me their requirements and I did my research. I called him at our scheduled time to review my findings. He said he and his partner were looking at lots of different things at the moment and I should just email my findings. From my training I knew that was outside the normal protocol, but I felt like I was losing my client. I knew I had great options for him based on his requirements, so I sent the email. He emailed back immediately and LOVED one of my ideas. That was on 4/14. By 4/16 he and his partner had talked to the Franchisor multiple times and they were already scouting locations for at least 3 restaurants!
So much excitement in just 4 weeks! In the next 4 weeks I'm hoping for additional excitement in the form of reaching new milestones and, of course, learning more lessons that will ultimately help me be successful.
http://www.metafranchiseconsulting.com/
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Friday, April 16, 2010
Wednesday, April 7, 2010
Why Do Franchisees Pay a Royalty?
The first point to make about Royalties is that good Franchise systems should look at them not as a payment but rather as a remittance. It is the Franchisor’s share of the income derived from customers or clients. The Franchisee collects that fee along with all other revenues from the customer.
It’s an important concept because it emphasizes that the customer ultimately pays for everything, including the Franchisor’s royalty, the Franchisee’s overhead, all costs of sales, employee’s salaries, and the Franchisee’s profit. Therefore it’s all about the customer – as it should be.
The Franchisee should want the Franchisor to earn a significant amount of royalties because that’s really the oil that makes the engine run. Each Franchisee collects and remits a small portion of that oil to the Franchisor. All elements of the system can continue to improve as long as the royalty stream is strong.
The Franchisor’s royalty will be based on the fact that they have provided a system and strategy that has ultimately served the customer. The Franchisee delivers that system to that customer. The royalty represents the Franchisor’s share based on the various parts of the Franchise system, which has four elements.
The four elements of a Franchise are:
a) Brand
b) Operating System
c) Support System
d) Franchisee
Brand – the name associated with the services delivered in a memorable and satisfying experience to the customer
Operating System – institutionalizes the excellent service delivered in a memorable experience so it can be done over and over again from Franchise to Franchise in a consistent manner
Support System – helps the Franchisee get better and better at delivering the service in a memorable experience – helps a Franchisee improve their performance
Franchisee – the individual motivations or reasons for being in a good system, as well as the talents and experience delivered to the business.
The Operating and Support systems will generally provide access to advice at the level of professional consultants in the fields of marketing, management, advertising, execution of the delivery of the product or service, customer support, etc. The cost of these types of consultants on the open market will often far exceed the value of the royalty fees that are remitted by the Franchisee that participates in a system that delivers these items from a position of experience. In fact, it’s the exact experience the Franchisee requires as opposed to open market advice.
Now here’s the test. If each of the four elements of a Franchise system is evaluated in terms of the percentage of contribution to the overall success of the business, then the royalty can be assessed in a proper light. Many people will say that each of the four elements contributes equally – or 25%, to the overall success. That means that the Brand, Operating System, and Support System provide 75% of the success formula. Therefore, as long as the royalty is less than 75%, it’s a good decision to participate in the system. That’s a little silly, but it emphasizes the point.
Most royalties range from 2% to 10% depending on the type of system, so as long as the Franchisor’s systems contribute 10% or more to the success of the business, it makes sense to participate, and remit the collection of royalties to the system.
http://www.metafranchiseconsulting.com/
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It’s an important concept because it emphasizes that the customer ultimately pays for everything, including the Franchisor’s royalty, the Franchisee’s overhead, all costs of sales, employee’s salaries, and the Franchisee’s profit. Therefore it’s all about the customer – as it should be.
The Franchisee should want the Franchisor to earn a significant amount of royalties because that’s really the oil that makes the engine run. Each Franchisee collects and remits a small portion of that oil to the Franchisor. All elements of the system can continue to improve as long as the royalty stream is strong.
The Franchisor’s royalty will be based on the fact that they have provided a system and strategy that has ultimately served the customer. The Franchisee delivers that system to that customer. The royalty represents the Franchisor’s share based on the various parts of the Franchise system, which has four elements.
The four elements of a Franchise are:
a) Brand
b) Operating System
c) Support System
d) Franchisee
Brand – the name associated with the services delivered in a memorable and satisfying experience to the customer
Operating System – institutionalizes the excellent service delivered in a memorable experience so it can be done over and over again from Franchise to Franchise in a consistent manner
Support System – helps the Franchisee get better and better at delivering the service in a memorable experience – helps a Franchisee improve their performance
Franchisee – the individual motivations or reasons for being in a good system, as well as the talents and experience delivered to the business.
The Operating and Support systems will generally provide access to advice at the level of professional consultants in the fields of marketing, management, advertising, execution of the delivery of the product or service, customer support, etc. The cost of these types of consultants on the open market will often far exceed the value of the royalty fees that are remitted by the Franchisee that participates in a system that delivers these items from a position of experience. In fact, it’s the exact experience the Franchisee requires as opposed to open market advice.
Now here’s the test. If each of the four elements of a Franchise system is evaluated in terms of the percentage of contribution to the overall success of the business, then the royalty can be assessed in a proper light. Many people will say that each of the four elements contributes equally – or 25%, to the overall success. That means that the Brand, Operating System, and Support System provide 75% of the success formula. Therefore, as long as the royalty is less than 75%, it’s a good decision to participate in the system. That’s a little silly, but it emphasizes the point.
Most royalties range from 2% to 10% depending on the type of system, so as long as the Franchisor’s systems contribute 10% or more to the success of the business, it makes sense to participate, and remit the collection of royalties to the system.
http://www.metafranchiseconsulting.com/
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Thursday, April 1, 2010
Where do you see yourself in 5 years? In 10 years?
I hate this standard interview question, which is probably why interviewers love to ask it. I think it’s important to have plans and goals but it’s also important to take advantage of opportunities as they present themselves, be flexible, and be adaptable. In interviews I usually gave a very vanilla answer to this question like “Continuously manage bigger and more complex projects, eventually transitioning into Program and Portfolio Management.” I used to think this meant I wasn’t very creative or didn’t have vision. Then I decided to go into business for myself and realized I am creative, I do have vision, and I know exactly where I want to be in 10 years.
I want to own my own companies. (Yes, companies, plural.) I want to generate an income that will allow me to pay the bills, save for retirement, and have fun along the way. I want flexibility. I want to be in control of my career. I know myself well enough to know I can get there and I also know I need to be careful with how much risk I take as I work towards those goals. So here is the 5 and 10 year plan.
Year 1: Work two jobs; one for someone else, one as owner of Meta-Franchise Consulting. Become an expert in my new industry (franchise consulting). Build a client base and pipeline. Generate income from my new business.
Years 2-5: Focus exclusively on Meta-Franchise Consulting. Grow the business by 10% every year. Be on the look-out for exciting new franchises in the marketplace.
Years 6-7: Choose a franchise whose concept, product, and management I believe in. Become a master franchisee or area developer for the company, opening multiple locations in my chosen territory. Continue to run Meta-Franchise Consulting.
Years 8-10: Enjoy my career as the owner of multiple small businesses. Nurture them and grow them. Mentor others wanting to be small business owners. And, going back to the top of this post, generate an income that will allow me to pay the bills, save for retirement, and have FUN along the way.
http://www.metafranchiseconsulting.com/
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I want to own my own companies. (Yes, companies, plural.) I want to generate an income that will allow me to pay the bills, save for retirement, and have fun along the way. I want flexibility. I want to be in control of my career. I know myself well enough to know I can get there and I also know I need to be careful with how much risk I take as I work towards those goals. So here is the 5 and 10 year plan.
Year 1: Work two jobs; one for someone else, one as owner of Meta-Franchise Consulting. Become an expert in my new industry (franchise consulting). Build a client base and pipeline. Generate income from my new business.
Years 2-5: Focus exclusively on Meta-Franchise Consulting. Grow the business by 10% every year. Be on the look-out for exciting new franchises in the marketplace.
Years 6-7: Choose a franchise whose concept, product, and management I believe in. Become a master franchisee or area developer for the company, opening multiple locations in my chosen territory. Continue to run Meta-Franchise Consulting.
Years 8-10: Enjoy my career as the owner of multiple small businesses. Nurture them and grow them. Mentor others wanting to be small business owners. And, going back to the top of this post, generate an income that will allow me to pay the bills, save for retirement, and have FUN along the way.
http://www.metafranchiseconsulting.com/
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