The Limits of Intuition in Franchise Marketing

As franchise consultants we can quote average close rates and costs in the franchise sales process as if they were dogma, but the truth is some franchisors will significantly outperform the averages. What does it take to get to that next level? Here, we talk about marketing to beat the average.

When prospects call your franchisees, if your franchisees are not validating well, you have a problem. As a franchisor you may be better in the long run addressing the franchisee validation issue rather than simply increasing your ad budget.

Also, your concept, no matter how strong it is, must communicate its unique value proposition if it wants to stand out from the crowd. Well written ads and other marketing materials must differentiate you from the thousands of other franchise opportunities in the marketplace.

Far too many franchisors rely exclusively on the founder’s intuition, and few franchisors actually test ad and media performance. The franchisors who are able to beat the averages will consistently measure empirical cost and performance data for each of the various media and different messages that are employed for lead generation.

To generate franchise sales at an accelerated pace the franchisor needs to have a strong understanding of their prospective franchisees and the media that attracts that prospect. Again, too many franchisors choose to use intuition as their primary guide when it comes to gaining this understanding, only to find out, that their intuition, shaped as it is by their own entrepreneurial compass, does not always represent their ideal franchisee.

While it’s fine for franchisors to use their intuition as a guidepost, actual data is needed for lasting success.

Manage Executive Onboarding the Way Franchisors Bring in New Franchisees

Originally published on Forbes.com
First Serial Rights March 4, 2015

If everyone treated executive onboarding the way McDonald’s brings its franchisees into the fold, the failure rates for new leaders would plummet. In particular, increase your investment in the screening process, two-way qualification and onboarding executives across time, locations and media.

“I’d like you to quit your job, give up your benefits,
go into a business you know nothing about;
and, oh by the way, I can’t tell you how much money you’ll make.”

This is how iFranchise Group’s Mark Siebert describes the value proposition for potential franchisees. This is why franchisee onboarding has “a lot more of a sales process involved.” This is very much about qualification. Franchisees expect to be involved for 15-20 years. You can’t just fire them “because you don’t get along with them.”

Siebert took me through what the strongest franchise systems like McDonald’s, Auntie Anne’s Pretzels and HoneyBaked Ham do to qualify and onboard new franchisees. Their three priorities line up exactly with the only three true job interview questions (Strengths, Fit, Motivation).

Strengths to succeed

The first piece of qualification is about the basics. As Siebert put it, “Stupid, undercapitalized and lazy doesn’t work in any business”. Franchisors screen for intelligence, work ethics and capital. Then they focus in on what their particular organization needs. For example,

  • HoneyBaked Ham franchisees need a combination of food service and retail
  • For senior care franchisees, the managerial components are more important
  • McDonald’s requires discipline
  • For other businesses, sales strengths are more important.

Fit with organizational philosophy

Most important is finding “people that are going to believe in your organizational philosophy from day one.” Franchisors can train skills. They can’t force fit. This is why poor franchisors fail by trying to go too fast. The best franchisors screen for fit throughout the sales and due diligence process leading up to a “discovery day.”

Ninety-five percent (95%) of franchisors host some sort of two-way discovery day for potential franchisees and the organization to get to know each other. These typically involve a dinner and then a day of meetings with senior leaders and functional groups. At the end of the day they get together and figure out if they all believe in the fit between franchisee and franchisor.

Motivation – not too entrepreneurial

Franchisors need people who “follow the rules of the road and systems to protect the franchisor’s brand.” Siebert told me that “True entrepreneurs never saw a rule they didn’t want to break.” So, the ideal franchisee:

  • Has a long history of working in a corporation.
  • Retired from the military.
  • Has been in one relationship for a long time. Typically married.
  • Doesn’t break a lot of rules.
  • Was an A and B student.

Essentially, these are people who “drive minivans in the right lane of life.” (Unlike entrepreneurs who are “C-students who started their first business before age 25, bounced around from job to job, divorced, have traffic tickets and are rule breakers.”)

Don’t confuse following the rules with lack of creativity and innovation. Half the items on McDonald’s menu were developed by franchisees including the Big Mac, Filet of Fish and Egg McMuffin. The best franchisees come up with ideas. They just work within the system.

Franchisee Onboarding

Siebert explained that best franchise onboarding programs are ongoing processes that include

  • Initial training via video, on-site (in a unit), at HQ (like working in Hamburger University), in their own physical location at the grand opening.
  • Check-ins every week at first and then every two-four weeks as the franchisee becomes more proficient.

This varies based on complexity because “in the food service business if you get it wrong you can kill your customers.”

Implications for your non-franchised business

  1. Get your screening criteria right. It’s not just about strengths. Make sure you’re considering fit and motivation as well.
  2. Make the qualification process a two-way street. Think about mutual discovery days instead of pressure interviews.
  3. Invest in executive onboarding across time, locations and media starting with a New Leader’s 100-Day Action Plan. Treat everyone like they’re going to be with you for 15-20 years – and they may be.

 

Franchising Sparkles in the Health and Beauty Industry

Originally published in Franchising USA
First Serial Rights March 1, 2015

Do you think French fries and fitness, or pedicures and pancakes, have nothing in common?

Think again. All can benefit from franchising’s proven business model, which combines marketing, business, and operational best practices with the name recognition and economies of scale associated with a branded channel of distribution.

Just like a franchised restaurant, a franchised spa, salon, or a dental or chiropractor office can duplicate its success in other locations based on an established system of operation, and by leveraging the capital and skills of independent franchise owners.

Franchising in health and beauty provides the same advantages that it does in other industries:

1. The customer benefits from an established brand that provides a standard of care they’ve come to expect.

2. The franchisee benefits from tested and streamlined office operations, advanced appointment scheduling systems, preferred vendors, and operational protocols. For medical or beauty professionals who want to concentrate on patient and client care and own their own business, franchising offers an attractive solution.

3. And the franchisor benefits, as in other industries, by allowing growth using someone else’s financial and sweat equity.

 

Statistics tell a tale of growth in the health and beauty sectors

It’s no secret the market for healthcare is growing tremendously. The aging population continues to feed the boom for services, as does a proliferation of new treatments. A society focused on health and fitness has more people looking for outlets to cure what ails them, or maintain what doesn’t.

In addition, revenue in the U.S. spa industry alone has grown from $12.3 billion in 2009 to $14.7 billion in 2013, with the number of spa visits increasing by 2.5% from 2012 to 2013. In the hair care segment, revenue is anticipated to grow at an average annual rate of 3.2%, to $58.7 billion by 2019. And as the economy continues to improve, it is expected that more new and return clients will visit these businesses .

Consumers who are putting their health, their bodies, and their dollars in this arena want some credibility behind a concept. Consumer confidence is gained through tested systems and cohesive messaging – the building blocks of a franchise system.

Consider, for example, what Massage Envy® has accomplished through franchising. Massage Envy® opened its first spa in 2009 and grew to over 1,000 units today. The fundamentals of the Massage Envy® model were then used to franchise The Joint – the chiropractic place (500 units in less than 4 years) and recently Amazing Lash Studio (over 300 franchises in two years).

This year, all six massage franchises in Entrepreneur’s Franchise 500 improved over their previous year’s rankings with what the publication calls “a testament to franchising’s power to transform an industry.”

 

Getting the Prescription Right

While there is growing acceptance and interest in franchising in the healthcare arena, the area of medical franchising, in particular, is significantly more complex than franchising a pizza parlor. Franchisors have to consider Stark laws, laws prohibiting the corporate practice of medicine, HIPAA regulations, and Medicare anti-kickback statutes. With expert strategic planning and sound legal advice, franchise systems can be set up to both fall within the safe harbors of these laws and succeed at expansion. Despite the complexity, it is important to bear in mind that many professional care franchises have already navigated these waters (for example, Pearle Vision®, Comfort Dental®, The Joint® and Doctor’s Express®).

 

Laying the Foundation

Just like restaurant, duct cleaning, or auto service franchises, the optical shop, lash extension spa, and hair salon franchise will need best-in-class franchise documentation such as operations manuals, training documents, strategic business plans, financial pro forma,and marketing and sales documents.

For beauty and healthcare companies considering franchising their business in a marketplace full of demand for well-polished concepts, knowing where and how to start the process can be a daunting task. The first advisor to be hired is the franchise consultant.

Franchise consultants can provide objective advice about the franchisability of a business, and play a vital role both in the decision to franchise and in the ultimate franchise structure and expansion plans. Companies will also need to hire a franchise lawyer with experience representing emerging franchisors.

It’s important to consider that while franchising certainly requires an investment of time and funds, the cost of the services of professional advisors to get a franchise company going the right way is often less than the cost of opening one additional company-owned location.

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Mark Siebert is CEO of the iFranchise Group, the nation’s leading franchise consulting firm. Within the health and beauty industry our consultants have worked with concepts in urgent care, home healthcare, dentistry, pharmacy, weight loss, nutrition, massage, optometry, hair care, tanning, skincare, lash extension, nail salons, spas, and fitness. For a copy of our whitepaper, “Franchising: A Business Expansion Solution for the Healthcare Profession,” please contact us at: [email protected] or (708) 957-2300.