Statistically, franchised businesses are able to bring in greater revenues than independently-owned businesses. The U.S. Small Business Administration has found that on average, a franchise can earn five times the first-year revenue of the average independent business and over 95% of franchises that open are still successfully in business five years later.
Since franchisees typically get more training and have more resources than independents, this makes sense. In addition, the business concept of the franchise has been tested and proven. So why, if you own a franchise, does it seem so hard? Why do franchise owners struggle? Why does it seem like at times you can never get ahead operating your franchise?
I own and operate 2 Pure Barre franchises both are successful. That is, both are profitable and will run without me there. I can be out networking, working on my businesses, sleeping, or on vacation and know that classes are being taught and purchases rung up. Don’t get me wrong, I work really hard—but so does my team.
Owning a Pure Barre franchise is great. The Franchisor gives me support that I would not otherwise have if I just owned my own barre or fitness studio. And I do have some independence while making marketing decisions that best fit my location and client needs. If I don’t like something, I can call or email and express my unhappiness—if it can be fixed right away, it is. Bigger changes might not happen immediately, but at least I’m being listened to.
It is important to remember, however, that the interests of the Franchisee and the interests of the Franchisor are often at odds, which starts us off on how to succeed at owning a franchise beyond what the franchisor supports …
Understand that the Franchisor and Franchisee Care About Different Things
The number one concern of the franchisor is revenue growth. As long as your franchise continues to grow revenue, the franchisor is happy. See, the franchisor collects a monthly royalty and as long as that monthly payment keeps getting bigger, all is good. The problem with that is that as a franchisee, your primary concern is your net income growth—or profit. If your profit is growing you’re happy. As a franchisee, if you could gain more profit by lowering expenses and not increasing revenue or even decreasing revenue, that’s awesome. Good work! Unfortunately, the franchisor doesn’t see it that way.
This juxtaposition of interests does not make franchise ownership bad and it doesn’t mean doom for your business. It is just extremely important that you understand these conflicting interests—the better you understand this, the more successful you’ll be. If you’re looking at your monthly reports from the franchisor and think you’re killing it because your top line is growing—what are your own financials telling you about your net income growth? If you aren’t making any money (negative net income) or just scraping by to pay your bills—that’s not awesome. IF YOU’RE NOT PAYING YOURSELF—YOU NEED TO BE. I know a lot of franchise owners that don’t pay themselves regularly but talk about how their business is doing well. Hummm … really?
Only you are keeping tabs on your expenses and working to control costs while growing the business. Generally speaking, the more profit you can make from your business, the happier you are as the owner.
To succeed at owning a franchise beyond what the franchisor supports, you must look beyond franchisor-produced sales reports which only track revenue growth and focus on growing your net income.
Buying an Operating System Does Not Include Buying a Company Culture
Owning a franchise is great because you essentially purchase a working operating system. You don’t have to develop anything brand new. The product is already created. The sales strategy is already planned. You just have to execute it.
Unfortunately, this operating system does not include your own unique company culture. I’ve written about the importance of creating your Mission, Vision and Culture statements in a previous post. Even if your franchisor has these things (mine didn’t), it makes sense for you to expand on the culture statement because you may place value on some additional points that will make your location excel.
If you don’t define your business culture, your employees will, and they might have other ideas than you—like, bad ideas that will limit your business growth and success.
To succeed at owning a franchise beyond what the franchisor supports, you must create your unique company culture—write it down and hire only employees that believe in that culture and act according to its guidelines.
Being a Business Owner Does Not Mean You Know How to be a Leader
Buying a business does not instantaneously make you a leader—damn. If only it did. If your franchise requires that you hire a team of employees to run it, you will need to learn how to manage and motivate them to run the business.
I probably spend a good 90% of my time trying to figure out how to keep my team motivated and how I can better support them to sell more. Does this shock you? At this point, I have hired an incredible team to help me run my businesses. Since they complete the day-to-day operations, that frees me up to work on supporting them and working on activities that enhance my businesses. It’s great—but getting to that point does take time and calculated effort.
If your franchisor offers leadership training or management training—sign up and take it! If nothing like that is offered, then it’s on you to invest in yourself and learn how to lead and manage (maybe start by reading some of these books and listening to some of these podcasts).
The key to business management success is actually, to invest in yourself by attending seminars, reading books and learning from other business owners. The more you invest in your own leadership training, the more you can give back to your team.
To succeed at owning a franchise beyond what the franchisor supports, you must invest in your own leadership and management training and make it a continuous priority.
Notice that all of these things could easily be applied to succeed at owning an independent business. There’s no secret sales strategy or silver bullet to franchise ownership or business success in general—sorry for the big let-down. It all boils down to knowing your numbers and operating your business within those means, creating your company culture and hiring only those who believe in it, and making it a priority to invest in your own leadership and management training.
Approaching business ownership by applying these three principles isn’t sexy. It doesn’t involve a killer Social Media plan or some cool video that goes viral. So maybe that’s why more franchise owners don’t jump at working on these things. If the foundation of your business isn’t rock-solid, then you’re going to keep struggling—whether you own a franchise or not.
In my next post, I’ll let you in on a little secret—your distribution channel is more important than the product you sell. Say what?! I’ll explain on Thursday.
Until then, stay on your toes!