Better-educated franchisors attract better franchisees
Education alone may not be a determinant of business success, but it can be an essential element.
Unsurprisingly, a desire to learn and a commitment to ongoing professional development (in addition to formal qualifications) are commonly seen as highly desirable attributes in potential franchisees.
Franchisors like having franchisees who are prepared to learn.
But by the same token, why should franchisees invest in franchisors that aren’t prepared to learn themselves?
Many highly successful entrepreneurs who start franchise systems have little or no formal educational qualifications. However just because they might not have been to university doesn’t mean they aren’t continually learning, and prefer instead to attend short courses and workshops, and read books written by other successful business people.
Furthermore, as their business develops, such entrepreneurs often surround themselves with highly-qualified talent because they are savvy enough to realize the limitations of their own skills and hire staff with the smarts to fill the gaps.
But equally, the use of education and professional development as selection criteria for franchisees could also be used by potential franchisees to assess what franchisors are worthy of their investment.
A study conducted back in the early 1990’s that tracked start-up franchisors in the United States over a ten-year period indicated that failure rates among start-up franchisors were as high as 75% – a figure surprisingly similar to frequently quoted failure rates for independent small businesses, commonly understood to be approximately 85% over five years.
This potential failure rate, combined with the severe consequences of a system’s failure on its franchisees (who lose part or all of their investment, if not their entire business), would suggest that education in franchising principles and techniques is necessary for franchisors prior to and during the use of franchising to expand.
Yet too often business owners start franchising their concept, and then realize after they receive complaints from franchisees and problems emerge in the network that they don’t have the answers for everything and need to learn more about the business of franchising. For example, important franchisor processes such as field support, site selection, financial benchmarking of individual and group performance, and franchisee selection are just a few areas where franchisors can flounder.
For those franchisor personnel with previous work experience in, and an understanding of the operations of large company-owned chains, a passing familiarity with these concepts overlooks the one key difference between corporate and franchised chains – the franchisee who has invested in the brand and expects to get a return on their investment. Managing and supporting franchisees is a world apart from managing and supporting employees in a company-owned chain.
It should be understood that franchising is not a business by itself, but a way of doing business that transcends the boundaries of business type and industry. A fundamental knowledge of the principles of franchising is essential for franchisors to effectively lead and grow their organization, in addition to the specific industry-knowledge particular to their business.
An assessment of these two types of knowledge (ie. franchising and industry-specific) is important for a franchisee to determine the viability of a long-term commercial relationship with a franchisor. Not only should franchisees be encouraged to ask for more detail about the business qualifications and franchising experience of officers named in a company’s disclosure document, but they should also be considering the wider context, such as the qualifications and experience of the support personnel with whom the franchisee will have regular contact.
A potential franchisee might consider asking a franchisor the following questions (and of course franchisors should ask themselves these same questions periodically):
- What is the franchisor’s professional development policy for its staff?
- In the last 12 months, what training programs (including conferences) have been attended by franchisor personnel who will be involved in supporting the franchisee’s business?
- How relevant are these training programs in supporting a franchisee’s business?
- Are staff who support franchisees required to undertake any competency assessments or attain any qualifications to maintain or progress in their role?
- What induction training (if any) are franchisor staff required to undertake prior to working with franchisees?
- What ongoing professional development is required of franchisor staff, particularly those in direct contact with franchisees?
Caught up in the excitement of becoming their own boss, a potential franchisee can easily view a franchise offer through rose-coloured glasses, but asking some serious questions about the franchisor’s knowledge of franchising, and their commitment to learning can be highly revealing.
Questions of this nature will be particularly useful to help distinguish one franchise opportunity above another if the business concept, investment level and other factors are similar. Many franchisees shop around for the franchise that suits them best, and often narrow their search to two or three businesses that may operate in the same market and be direct competitors to each other.
A franchisor’s demonstrated commitment to continual improvement through ongoing professional development might make all the difference between a potential franchisee applying for one system in preference to another. (And for that matter, if a potential franchisee is thinking about their future business investment in this detail, it may make them an even more appealing candidate as it demonstrates a thorough and planned approach to starting their business).
Not only can a commitment to ongoing education and professional development make a franchisor more appealing to potential franchisees, it can also improve its long-term chances of survival and extend competitive advantages over its rivals.
While there are no educational qualifications awarded to a franchisor’s business, there are both vocational and postgraduate qualifications available for themselves and their staff, as well as the International Franchise Association’s own Certified Franchise Executive (CFE) program.
The CFE is a designation that identifies franchisor personnel who are committed to ongoing learning. To earn and maintain the CFE designation (which often appears as a postnominal after a person’s name), a participant must commit to a learning pathway. This can include short courses, workshops, and highly specialised franchise leaning events, such as those conducted by the Franchise Advisory Center.
The CFE designation is awarded only after a participant has completed sufficient points of professional development across a range of activities. In order to retain the designation, a CFE-holder must continue to accrue a minimum of professional development points.
Franchisors generally prefer their staff to attend a number of short, highly-focussed education events rather than extended, drawn-out courses for the reason that they can rarely afford for their staff to be out of circulation for more than a day or so at a time. In addition, highly focused events can help a franchisor’s business build its overall skills rapidly, resulting in accelerated improvements in support and guidance to franchisees. (In particular, education now delivered in a live and interactive format via online platforms via Zoom can benefit a franchisor’s entire national team with the minimum of disruption to the business.
Business owners typically don’t know what they don’t know. Franchisors are no different. Building the knowledge and capabilities of their staff in the specialised world of franchising is important to ensure that in turn, their franchisees have the best possible chances of success.
Perfection in franchising is a journey, not a destination. Ongoing education of franchisor personnel makes that journey safer and more sustainable for both franchisee and franchisor.
Jason Gehrke is a director of the Franchise Advisory Center and has been involved in franchising for more than 30 years at franchisee, franchisor and advisor level. He provides training and professional development services to franchisor teams and regularly conducts franchise education programs. For details of scheduled education events for franchisors based in the USA and Canada, click here.