We have, on more than one occasion in this column, referenced
the need to exercise caution when awarding franchises. New
franchisors, fresh from spending $100,000 or more to develop a
franchise program, will soon find themselves put to the test when a
less-than-ideal candidate comes calling.
But the success of your initial franchisees, perhaps more than
any other factor, will have a huge impact on the success of your
franchise program.
The Nature of the Beast
Let's start with a key assumption: No business is foolproof.
Fools are simply too ingenious; they can find ways to destroy even
the simplest business.
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Put another way, no business system is so strong that it can
survive franchisees that are stupid, undercapitalized and lazy. So
if you sell franchises to these prospects, they will fail.
Period.
Once they fail--and, in fact, while they're on the way
down--they'll be listed in your Uniform Franchise Offering
Circular, along with their address and phone number, and your next
prospective franchisee will call them. Every book on buying a
franchise and every expert in franchise sales will counsel them to
call. And rightly so.
And what do you think the failing/failed franchisees will
say?
"Mr. Franchisor was a great teacher, and the system is
flawless. In fact, the only reason I failed is because I am stupid,
undercapitalized and lazy..."
Of course not.
They'll say the business is much more difficult than it
appears. Franchisees will talk about the long hours and how the
franchisors (you) don't care. And by the time they get around
to telling the prospect about how they lost their house, their wife
and their 401(k), and how they now live in a cardboard box
underneath the train station, one thing will certainly be true: You
will never sell that franchise prospect.
Ironically, these marginal candidates will not only say the
worst things about you, but will require the most work from you,
will pay you the least amount of royalties and will be the
franchisees named "most likely to sue you" in your annual
yearbook.
If a marginal franchisee is your 25th franchisee, you probably
can weather the storm. But if this franchisee is among your first
10, you have problems. And if this franchisee is your first, you
may be so distracted that you never get your franchise program in
line again. Moreover, your first franchisee will often set the tone
for your entire franchise program.
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