Designing a Process for Awarding Franchises – Part 1: Leadership

Posted on 13. Mar, 2010 by in Franchise Lead Generation, Franchising, Management Philosophy

Designing a process for effectively awarding franchises can be challenging.  There is both a management and a leadership component to doing it.  You may recall the image that Stephen Covey paints in “The 7 Habits of Highly Effective People” whereby a group of Workers are fighting their way through the jungle, wielding machetes and cutting through the underbrush while their Managers stand behind them “sharpening their machetes, writing policy and procedure manuals, holding muscle development programs, bringing in improved technologies and setting up working schedules and compensation programs for the machete wielders.”  The Managers are helping the Workers to be more efficient.

The Leader, however, is the person who climbs the tallest tree, surveys the entire area, and yells, “Wrong Jungle!”

As Covey would say, management is efficiency in climbing the ladder; while leadership determines whether the ladder is leaning against the right wall.  Peter Drucker says it this way, “Management is doing things right.  Leadership is doing the right things.”

You’re probably thinking what does this have to do with awarding franchises, right?  Well, the main point is that to design a truly effective process of awarding franchises you first have to be in the right jungle.  The franchisor-franchisee relationship is a complex one that’s governed by lengthy contracts that spell out very specific obligations that each party has to the other.  If certain expectations get misaligned or are altogether not addressed during the franchise sales process (which happens quite often) this will inevitably manifest itself and result in a problematic relationship at some point.   If too many of these “problematic relationships” begin to present themselves this creates heavy baggage for a franchise organization and eats up much needed resources – both financial and human.   Anyone who has first-hand experience with this knows that the costs associated with these problems can quickly consume any profit that was garnered through the franchise fee and subsequent royalty payments.

Bryan O’Rourke has written a very informative white paper that addresses this concept in more detail.  You can get the paper here.

Let’s continue to look at the Leadership component of developing a process for awarding franchises.

Leadership:  The Right Jungle

This is the philosophical, right-brained part of the process that causes the greatest discomfort for franchise organizations to wrap their minds around, especially those in the organization who derive a commission from a franchise sale.  I have been there before so believe me when I say that I’m not being judgmental, but realistically it requires a paradigm shift away from conventional thinking.

As a franchisor, your company has developed a product or a service, or perhaps a combination of both.  The decision was made that the best strategy to expand your product/service in the market is through franchising, as opposed to bearing the burden of outlaying the capital expenditure and providing management oversight of the individual units yourself.  You now need to find people or organizations who are capable of, and willing to, execute your business model day in and day out.

A quick analogy…. imagine that you have been commissioned to create a baseball team that will represent your state in a competition with the best baseball teams from across the country.  It is your job to go out and recruit the best team that you can, keeping in mind that your ultimate goal is to put together a championship-winning team.  You have a list of positions to fill from the pitcher to the right-fielder.  Do you think that you would start with identifying and recruiting the top major-league, minor-league, and college pitchers in your state; or would you sign up someone who had never thrown a baseball before?  Seems like an easy answer, right?  Regardless of how good your facilities are, or your pitching coach is, you intuitively understand that you need someone with a proven track record of being a solid pitcher.

The same holds true in franchising.  If I want to grow my gourmet pizza restaurant concept and compete with every other restaurant in every market that I’m in;  should I focus on identifying and recruiting the best restaurant operators that I can?  Or should I award a franchise to someone who has never owned a business nor operated a restaurant before?

To ask yourself and your team these questions, with an open mind, and to be willing to accept the answers certainly requires leadership.  It’s uncomfortable because you may find that you’ve been toiling away at the underbrush and making progress, only to realize that when you sent someone up the tree to survey the land, they cried, “Wrong Jungle!”

In Part 2 of this post we’ll examine how the advent of the internet created an influx of “leads” and sent us into the wrong jungle.  We’ll also discuss the two-tiered model for awarding franchises and how to manage it.

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