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Dan's Blog - The insane rambling of a Franchise guy
26 August 2010
Franchisors, Cars and Football Stars
We are now 2 weeks into the new premiership season and if the pundits are to be believed we have already seen contenders for the goal of the season, watched the game of the season and the Premier League is the best league in the world. Whilst the use of clichés by football pundits is probably nothing more than an indication that although talented with a ball at their feet many of them spent little time with a book in their hands, there is a darker trend to all this hyperbolic nonsense.
If Jamie Redknapp genuinely believed that watching Arsenal vs Liverpool (which was barely an average game of football) warranted the use of the phrase “that’s what makes the Premier League the best in the world” then I pity him because he is as deluded as a pundit as he was ill-advised to take the Thomas Cook advert gig.
You see we have not yet seen the goal of the season, nor the game of the season and if the Premier League is superior in any way at all in comparison to other national leagues it is in the amount of hype with which it is festooned. Fostering the myth that it is otherwise may help Sky Sports to sell subscriptions and enable Premier League clubs to justify horrendous entry prices but it also creates a very real problem.
The promise of the hyperboly is not delivered by the national team in World and European tournaments. The supposed superiority of our league sides has also not led to dominance on the European club stage which is anything more than our fair share. The expectation though has been raised to a point where some fans genuinely believe that we are the best in the world. The problem then comes when we do not triumph and we all experience that sickening, gut wrenching, heart-stopping disappointment of an early exit at the hands of technically better players.
In the motor industry too this gap between the expectation built by a brand and the experience delivered by that brand is something that you ignore at your peril. Many thousands of words across dozens of dissertations must have been written about Skoda’s death and subsequent rebirth. I would prefer to focus on the less told story of the negative impact of the early iterations of the second generation Mercedes C Class.
It could be argued that the average Skoda purchaser didn’t have huge expectations from the brand, even before Jasper Carrot set about destroying them. Mercedes buyers however, are always brand loyal and come to the party with an expectation of true excellence that only comes from years of positive brand reinforcement. Imagine if you can then the brand disappointment which those loyal followers faced then when they first met the W203 model in the year 2000. Build quality questions, wallowing suspension and rattling dashboards are not what Mercedes buyers expected and as a result they were disappointed. Mercedes of course stopped the rot and the brand started much higher so the damage was not fatal, there are some however who would still argue that it is not what it was.
In franchising the dangers of over promising and under delivering are not just ones of brand disappointment, they are an area where the franchisor that over promises can find themselves in court at the hands of a misrepresentation case. Franchisors should be passionate about their business and should address a prospective franchisee’s caution in entering self employment by encouraging enthusiasm in the prospect. If however they go too far and gild the lily, overstating franchisee performance, promising support which is never delivered they risk a disappointed franchisee with a real grounds for claiming that this was not the car or Premier League match that they were sold.
Beyond actual misrepresentation the franchise industry has also been infected by the demon hyperbole. I have never really understood the desire of some franchisors to declare themselves the fastest growing franchisor or state proudly that they have added 50 new franchisees this year. If I was considering organisations such as this I would want to know whether it was sustainable and if they have grown so quickly how they plan to support all of those new franchisees.
I have always preferred to err on the side of caution and paint the darkest picture possible for a prospective franchisee. I believe that if they are still interested after I have placed these hurdles in their way, they may go some way towards having the right stuff.
So where does that leave us, well Monday the 23rd August saw the much promoted launch of Sky Sports News HD which we are told, was just what we were waiting for and which, we are led to believe will revolutionise the provision of completely unnecessary sports related trivia and conjecture. I don’t think the football world will change anytime soon and could suggest for devilment that HD actually stands for Hyped to Death but franchisors should take note and temper their enthusiasm if they want to avoid being sick as a parrot in the game of two halves that is the franchise industry.
16 August 2010
Are we making the cut?
So 100 days of the new coalition and the cuts are starting to bite. The actions of the government are debated with, on the one hand large projects such as the Wynyard Park “super hospital”, Hartlepool and Stockton saving £464m being measured against seemingly insignificant savings with major local impact such as the Rape and Sexual Abuse Support Centre, Croydon, losing support to save £27,000-a-year.
The reality here is that those affected by the cuts will always believe that the justification for their project should have protected it from the knife. When emotive subjects and seemingly small savings are volunteered as provocative arguments for the arbitrary nature of the cuts, by journalists with little invested in the resultant damage, you could be forgiven for missing the reality that we are all going to be touched in some way by the task that the country faces. Something that Rory Crew and Lettice Franklin could have remembered before writing their popcorn political commentary in the Independent over the weekend.
I should be clear at this point that I have no opinion either way on the specific projects listed in the 100 cuts in 100 days article. I cannot have a definitive view as I do not know enough about them. I do believe that we are all being touched by the combination of the financial mismanagement of the previous government and the critical convergence of an economic correction and a credit freeze. So we have to act.
Now I hear the argument of the last lot that cuts now will damage the recovery but unfortunately it is difficult to believe that this is much more than politicking when in Liam Byrne’s own words “there’s no money left”. It is an equally hollow call when Labour ministers leaving their posts were quite happy to accept severance pay, Mr Byrne ironically receiving £20k. So there’s definitely no money left now Liam!
The reality is that our business has been forced to evaluate every penny that it spends and the 40 franchisees that are part of our network have had to do the same. We are fortunate that most of our network work from small office / home office environments and as such the overheads in the business have been relatively straight forward to control. We are also in the almost unique position of having lobbied hard for over 3 years to free up access to our raw material (data) and a recent ruling from CLG has given us that access at no cost.
The upshot of this is that our prudence over the last 18months and the hard work that we have all put into lowering our costs leave us very well placed to dramatically increase profitability in the coming 12 months. We are however in a fairly exclusive club in this respect. The reward of our current strong trading has been brought about by efficiency and belt tightening over the last year, something that the public sector must now endure if it is to come out of the other side.
The reality check for public bodies should come in an inspection of the Premier League. With the notable exception of Manchester City the money that is available for excessive transfer fees and obscene wage bills is not there. The recent addition of a 25 man squad limit could be seen as receiving the easy passage that it has past the clubs that will be limited by it because a happy side effect of its implementation is a potential reduction in a club’s costs.
My message to the public sector is that unless you have a Manchester Cityesque benefactor you will need to be leaner, more efficient and harder, as many businesses have. If you expect to survive without first putting in the pain of efficiency, you will and indeed ought to find yourself included in the mythical 25% to lose their jobs. The reality is that we are all paying for this recovery and I for one am not prepared to use my hard won earnings to subsidise anything other than an organisation that is fighting as hard as I am to succeed.
13 August 2010
Safer than a speeding planet – not a flat one!
History is littered with commonly held beliefs which were disproved by a mixture of scientific development, endeavour and bravery. Until 330bc many believed that the planet was flat. Aristotle was amongst many freethinkers who suggested an alternative theory which turned out to be pretty accurate. Nowadays, not withstanding the foundation of Samuel Shenton’s “Flat Earth Society” in 1956, the spherical planetists are in the ascendancy.
In the same way many in the scientific community believed that the pressures created by flight at faster than 343 metres per second would destroy both the pilot and the plane. Then in 1947 along came Chuck Yeager and proved them all wrong by breaking the sound barrier.
So what relevance to self employment does the shape of the planet and faster than sound travel have? I have been amazed in the last 6 months by the nervousness of some prospective franchisees when it comes to starting their own business. I understand entirely that anybody considering self employment will be having a bout of caution induced nerves which feels much the same as MajGen Yeager must have experienced before his sound breaking flight.
I also respect the fact that taking the step into self employment will be as alien to some as the suggestion must have been that the seemingly flat planet that we inhabit is actually spherical. What I cannot quite comprehend are the instances in the past 6 months of prospective franchisees considering self employment and also applying for jobs. I have so far this year heard on 4 separate occasions “Thanks for your help Dan but I have decided to accept a job offer as I think it is more secure at the moment.”
Far be it for me to suggest that people could be wrong and in truth if they were considering employment alongside franchised self employment, they were probably never fully bought into working for themselves in the first place. I do however have to point out some of the practicalities of what this suggests.
If you are self employed, you are fully in control of your own destiny, you are fully responsible for the business that you are running. You can and history tells us will, do more, sell more, make more, better, faster and more efficiently than you would if you were working for somebody else. Franchised outlets are regularly found to provide better service and to be more successful and profitable than corporate owned and employee managed outlets.
If however you work for someone else you are a cog in a gearing system which has to turn at a pace governed beyond your control and with a greater dependency on the actions of others. You will have less control and will be less in a position to influence the direction of your destiny.
Now neither of these options is without risk and neither is insulated from the impact of market forces. But I cannot accept that working for someone else would give anything other than less security than a self employed position where you could stand and fall by your own actions.
So does my view make me the guy holding Aristotle’s scroll as he shares his thoughts for the first time or the guy from the scientific naysayers with a “Go Chuck” banner. Neither, I respect anybody with the drive to take a step into self employment. In uncertain times, which for sure we have at the moment, those being brave are being especially bold. They are however captains of their own destiny in a way that an employee never can be.
The world is not flat Mr Shenton and we have surpassed Mach One flight several times over. It is only by challenging these norms that we develop. Employment should not be a default position and it certainly does not provide any more insulation from the effects of the economy than self employment does.
3 August 2010
When your right hand is missing
OK so I admit it. After writing a piece for Venture Marketing Group’s Franchisor News on blogging I have been hoist by my own petard. In my “To blog or not to blog” article I advised that the art to successful blogging is regularity (amongst other things). I have since then not put fingers to keyboard in 3 weeks, a regularity problem which must now be fixed with the blogging equivalent of Turbo Lax TM.
The subject for this week is the team of people around you. If there is any defence for my wanton neglect in not writing for three weeks it is that during the summer holiday silly season, our business has like many others missed key staff. The impact on Aviva of employee number 2345 taking two weeks in Turkey is relatively light. For many small businesses coping when people take well-earned holidays is like having your right hand cut off.
So the crux of this piece is that when we recruit good people and empower those good people to make a difference to our businesses it is always going to be the case that when they are not around we are going to miss them.
Having read an excellent Blog last week by the BusinessGP Marc Lawn where he discussed the need for business people to look in the mirror first when considering business success. My extension of this would be to look in the mirror and realise what you are not good at, then recruit someone that is good at this.
The problem for many small business people is that the business oligarchy and decision making monopoly that comes from having created the baby can often lead control freakery that would make a public school headmaster blush. Being good at the business may not be the same as being good in the business and could also not be good for the business.
Mike Goddard the current Chairman of the British Franchise Association and Chairman of Belvoir Lettings refers to his art of delegation as finding people that do things better than him and letting them do it.
In franchising this is essential. Once the original business becomes a franchise it actually morphs into 2 businesses. Successful franchisors recognise that just because they are talented retailers or restauranteurs it does not mean that they will be best placed to recruit, train and support franchisees. The franchise side of the business has a requirement for resource and expertise and should be treated with the appropriate love to make it a success.
In coming back to my situation my right hand (lady) as it happens has now returned and all is well with the world. For the last two weeks I have been working with the sense that I have had my right hand cleaved at the wrist. It is amazing though what can be achieved with a bloody stump.
5 July 2010
Franchises proven to be more stable and profitable
SME profitability research from May 2009 showed that 19% of SMEs had not recorded a profit since the second quarter of 2008, and unsurprisingly 55% had not been profitable at all in 2009. These figures highlight to true damage to SME’s of the recession during 2008 and 2009.
Interestingly figures for the same period for franchise businesses showed that 90% of franchised businesses were profitable 08-09 and 88% of franchised businesses were profitable 09-10. (NatWest bfa Annual Franchise Survey 2010)
The efficiency in supply chain management and cost control within franchise businesses could explain the difference. It is however more likely that the efforts of franchised owner operators in promoting their businesses in a recession is the reason for franchising’s strong performance.
Franchising provides a unique combination of national leadership, business direction and buying power, whilst harnessing the enthusiasm, drive and local understanding of small business owners as franchisees.
Historically franchising has outperformed the wider SME economy during recessions. Between 1988 and 1990 the average proportion of franchises that were profitable was 82% during the country’s last major downturn. The average profitability for franchise businesses in the decade leading up to the current figures averaged 91%.
It is also interesting to note that whilst the wider economy has been hit hard by recession induced redundancy the level of employment in the franchise sector has remain constant at around 465k employed.
The CBI has declared a policy of reduced Corporation Tax for SME’s to encourage growth of SME businesses. Along with a push to reduce the overall rate of Corporation Tax, the CBI has specifically referenced the need to move SME tax rates down before other businesses. The relatively profitable trading experienced by franchised SME’s would suggest that they too should be given a favourable tax position.
As the coalition government explores the distribution of the public purse between now and the introduction of the cuts to expenditure expected in October. It would seem sensible for some of the current expenditure on generating self employment through Business Links and Development agencies to be specifically targeted at franchising.
Franchise business has a greater survival rate and as these figures show is more profitable. Money spent by government on developing these businesses would be more efficiently spent due to the survival rates and would yield greater tax revenue because of their profitability. Mr Osbourne and Mr Prisk we await your call.
28 June 2010
Standing on the shoulders of giants – England, Chip Shops and Franchising
Effective business format franchising is about defining a proven system to the point where business success is easily replicable. Documenting the things which work for your business and providing the insight to those who become franchisees so that they avoid the mistakes which would cause the business to fail.
This proving of the business needs to take place for the business concept the end game being that you are able to run a successful version of the business. What supply chain works, what promotion is most efficient, how should the offering be priced and what is the best route to market. Once your business has been successful and the reasons for that success have been documented, the next stage in proving the concept is whether and how best to replicate the business at arms length.
The second stage proving or pilot franchising is best completed with individuals who have no prior knowledge of the business, running one in a controlled environment. At this point the franchisor is discovering the best way to train incoming individuals and support them to affect a transfer of the IP such that the pilot franchisees can enjoy the same success as the originators of the business did.
Once this is completed the franchisor business is ready to move into franchisee recruitment. The purists view at this point is that the business, which will have been proven in the specific operational business, no longer operates in that sector. Simply put 10 years of proving the concept of a fish and chip business would result in a franchisor that no longer runs a fish and chip business.
The reason for this and the point to this ramble is that a franchisors role is to recruit, train and support franchisees. The franchisor supports franchisees to help them to be successful. They are standing on the shoulders of their network, succeeding if the franchisees succeed. This is a mechanism that the Football Association could learn much from. The England football team’s pathetic capitulation in the 2010 World Cup was evidence of an ineffective structure and system, characterised by the wrong players in some areas and poor decision making and the suppression of talent in others.
So what could England learn from franchising? Our business has faced the introduction and withdrawal of a new market, a recession and the introduction of 2 potentially damaging pieces of legislation in the last 3 years. Our current strong performance is testament to a franchisor concentrating on putting a system in place to enable franchisees to succeed and a policy of recruiting the right individuals in the first place. We have successfully lobbied Westminster on behalf of our network, used European legislation to counter UK regulations and trained and supported our franchisees to enable them to flourish.
What we did not do is manage them so tightly that they felt devoid of responsibility for their own success, require them to ply their trade in areas that did not suit their skill set and select the wrong people in the first place. All three are things that England has been guilty of. When Ferdinand went home injured (at the hands of Heskey on the training ground – a player who shouldn’t have been on the squad) Gerrard’s first press conference included the immortal words “…we are a team full of captains.” That should have rung alarm bells as what it felt like was a guy looking to somebody else. England is a team of captains but they still needed a leader.
That is the equivalent of a franchisee saying “the franchisor doesn’t give me enough support” when what they mean is the franchisor doesn’t do it for me. The system employed by the England setup didn’t allow the very best to show their very best and as such it was flawed. The responsibility for this failure has to sit with not only the underperforming squad but also with the management style and structure which did not provide the right platform for them to succeed.
We do not run our franchisees businesses, they do. Their success is just that and it is a very great pleasure for me to have enabled them in some way to have reached their potential. We have recruited, trained and supported on the whole the right people. Perhaps the Football Association should concentrate less on frying fish and more on providing a structure for others to succeed frying fish.
