By definition, an emotionally charged buyer is someone who makes a buying decision based on feeling rather than rationale and reality.  This creates fertile ground for a misalignment of expectations; the consequences of which are typically dire in franchising.  But why is franchising different?

Well, in scenarios where you may be selling goods and/or services and the buyer and seller are independent of each other once the transaction is complete the consequences are not as severe.

As an example, if I visit a car dealership and see a shiny, new, red, foreign sports car I might envision myself sitting behind the wheel, driving around, and being the center of attention.  It smells new, it looks new, and it handles great.  I could easily romanticize about all the joy this car will bring me, and it’s this type of emotion that will be easily picked up on and played by the car salesman.  Despite the high cost of ownership including the premium gas, insurance, expensive maintenance, not to mention the price tag – I can probably talk myself into buying it.  However, in a few weeks the newness will wear off and I’ll find that nobody was as impressed with it as I thought they would be.  I didn’t achieve all of the joy that I had envisioned that day while standing on the lot and now the reality of the gas, insurance, maintenance, and first loan payment has sunk in.  I still like my car but I can see that my expectations were not realistic due to my emotions.  I rushed the decision a bit, but perhaps I’ll sell it or just leave it in the garage.

The good news for the car dealer is that they aren’t relying on me to drive the car every day or to maintain it.  What I decide to do with the car after the sale is made has no impact on the dealer’s business.  A car dealer wants you to be an emotional buyer.  They want you to create an emotional bond with the car, fall in love with it, romanticize about how great it will be to have it.  Because a rational approach would require studying the total cost of ownership and being realistic about what you’re really getting and therefore you might not buy it.

In a franchising business model the seller (franchisor) is dependent on the buyer (franchisee) after the transaction.  This dependency creates a completely different relationship dynamic than a typical B2B or B2C transaction.  A franchisee who wants to sell their business soon after opening, or one who quickly becomes overwhelmed with the realities of operating a business and underwhelmed with the fruits of owning it is not an optimal situation.  If too many of these misaligned relationships occur during the growth phase of a franchisor’s life cycle the cost of unwinding them, in both financial and human resources, could easily drain the franchisor thus pulling the focus away from new opportunities and setting the sights on extinguishing fires.
The bottom line is that if your franchise sales process is primarily designed to create an emotional engagement with the candidate (especially those who have never owned/operated a business), without doing a thorough job of ensuring that expectations are aligned, then you are most likely setting the stage for long-term failure.  You will win the battle of selling franchises but lose the war of building a sustainable, healthy, franchise system.

Investing the time to create a sales process built around understanding your prospective franchisee’s expectations and criteria, instead of trying to create an emotionally charged buyer, is a step in the right direction toward longer-term success.

As always, I look forward to your feedback and comments.

Check out this video for an overview of the benefits of a Google Adwords and Salesforce mashup.

I came across a rather interesting question that was posed on Linkedin yesterday which prompted this post. The question was “Which thesis about IT within emerging franchise networks most appeals to you?” The author, Heath Waldorf, is putting together a thesis paper and was looking for some insight. I obliged….

Information Technology within franchise systems would appear to be a scarcity judging by the lack of conversation on the topic. A few quick searches about franchising and technology will pull up a handful of dated articles on intranets (which are rapidly becoming a thing of the past), there are two LinkedIn groups dedicated to technology in franchising – one has 23 members and the other has 3. There are virtually no conversations taking place about franchise and IT in the cloud… that’s Facebook, Twitter, Google, etc. The technology playing field is being leveled by the emergence of cloud-computing, whereby organizations can utilize and develop sophisticated business apps without a significant investment into hardware or software infrastructure, and access them via any web browser. Inquiring minds are wondering why there is a lack of discussion in the franchising world about this?

Let’s take a look at what we believe to be 5 of the most important aspects of IT for franchisors.

1. Integration with Social Media- Interactions with existing and prospective customers no longer takes place solely via the phone or email or even through corporate websites. Gartner predicts that Facebook membership could hit 600 million by year-end 2010 and it will be the No. 1 social networking site in all but 25 countries. Opportunities to drive new business development and provide customer service will increasingly take place within social networks such as Facebook and Twitter. If your CRM system does not easily integrate with these social networking sites then your opportunities will be limited. Integrating your use of social networking sites into your CRM system also allows you to develop analytics and set measurable KPI’s.

2. Integration with Mobile Devices- With the rapid expansion of mobile devices and virtually everyone in business having either an iPhone or blackberry these days, we have the ability to access information anywhere and at anytime. Having access to all of your new leads for the day, or being able to pull up a complete view of one of your franchisees while on the road, or being able to solve a customer’s problem via Twitter from your iPhone, are all possibilities. And not only are these things possibilities, but they will become necessity and expected in the near future. Having a technology platform that integrates seamlessly with your mobile devices will have great implications for businesses.

3. 360° Views- Building out a 360° view of your franchise system is possible and is necessary to long-term success. Having a single-source, easy-to-access, view of every interaction with your franchisees from lead through the awards process to pre-opening to training to operational information is vital to creating and improving your systems. Knowing where all your touch points are with your franchisees allows you to create analytics and develop KPI’s and measurable benchmarks for improvement. Making decisions based on anecdotal evidence won’t cut it anymore. Read What is a 360° View, Anyway for more information on this topic.

4. Customization- Have you ever needed to further customize your existing platform? Maybe you needed to add a field or change a workflow process or tweak some part of your CRM system so that it fit your business. How long did it take? How much did it cost? Did your technology vendor understand what you were wanting to accomplish? It’s a poor expectation to believe that an off-the-shelf solution will fit your every need without needing some level of customization. This is where many technology vendors make the majority of their revenue because they understand that you’ll need customizations done. But at that point you’re held hostage because it’s a closed platform that only your vendor can modify. You’re stuck with expensive customizations and upgrade fees.

It will be increasingly important for franchisors to use platforms that: 1) give them the ability to customize themselves, 2) allow business users to customize without the need for a computer programmer, and 3) if advanced customization is needed there should be an eco-system of vendors who can perform this customization thereby creating competition and giving the franchisor an opportunity to pick the vendor who provides the most value. Salesforce.com is one example of a company who fits all three of these criteria.

5. Scalability- What I mean by scalability is that the cost structure is set up to pay for what you use. The advantage of cloud-computing platforms is that there is no hardware or software infrastructure to invest in upfront. A per-user fee is paid in a subscription format. If you want more users, you pay more. If you remove users, you pay less. If you sign a 1-year contract and at the end of that year decide that you don’t want to continue then you don’t renew. A strong ROI is much easier to achieve and risk is minimal when compared with platforms that require an upfront investment into hardware and software, whereby scrapping that plan after 1 year would mean a significant loss of investment.

As always, I look forward to any feedback and discussion surrounding this topic.

What do you see in the future of Information Technology for franchisors?

Potential reasons why basic internal processes are not adopted include the following:

1. Lack of understanding of what the process should be.
2. Lack of discipline to consistently execute.
3. An inadequate workforce.
4. No priority given to developing processes.
5. Lack of tools to properly manage processes.
6. Lack of defined KPI’s and ability to measure them.

The first four reasons listed above could each be examined in excruciating detail, but let’s focus on the last two.  Building an effective and profitable system of managing a franchise organization means that the people in the organization need access to a lot of data.  And they need it fast.  You’ve heard the saying, “don’t take a knife to a gunfight”, right?  Well, continuing to operate from Outlook and spreadsheets makes you a knife-wielding fighter (and it’s a rusty pocket-knife, at that).  With the emergence of cloud-computing technologies and sophisticated yet user-friendly CRM solutions, you can now afford that gun.

The 360° View

There’s no doubt that by the time one of your franchisees opens the doors of their business they have been through a great deal of interaction with the people in your organization.  They interacted with your sales department, they spent time with your pre-opening staff, training department, and operations team.  They were also on the admin/legal department’s radar.

A  360° view would give you the ability to look back over the course of this life-cycle and view all interactions with the franchisee from the day they first entered your sales team’s pipeline and extending forward up until the day they exit your system. Having key information available in a single view such as: how and when they entered your pipeline; all communication with the sales team; records of all signed contracts; real estate leases, site developement projects, training records, support issues and communications, unit performance history; and so forth is an invaluable tool in developing a high-performing franchise organization.

Understanding when and where the organization has touch points with prospective franchisees and existing franchisees allows the franchisor’s leadership team to develop measurable goals, objectives, and strategies for each point of contact that you have.  Once these goals are in place an organization can begin to measure, benchmark, and improve.  Continuous improvement is a core philosophical belief of The Flywheel Group, as the silver bullet doesn’t exist.  And without a system, a set of measurable KPI’s, a way to measure them, and a competent team of people to execute, well, then improvement is really just anecdotal.

Learn more about a solution that may be right for your organization:

Having worked in the franchise industry for over 25 years, I learned a lot of things. Most of those you won’t find addressed in Entrepreneur Magazine or by the IFA.

Franchise systems come in many shapes and sizes. Long term success doesn’t come in the form of more franchise sales. Insightful management and development of franchise systems is achieved via the adoption of certain philosophies, and many of those are counter to what pundits or experts claims. This is not only true for franchising, its true for many businesses and industries.

To understand the core philosophies that can drive a franchise system to greatness, one should become familiar with Dr. W. Edwards Deming, known as the father of the Japanese post-war industrial revival. He was regarded by many as the leading management guru in the United States. He passed on in 1993.

Trained as a statistician, his expertise was used during World War II to assist the United States in its effort to improve the quality of war materials. He was invited to Japan at the end of World War II by Japanese industrial leaders and engineers. They asked Deming how long it would take to shift the perception of the world from the existing paradigm that Japan produced cheap, shoddy imitations to one of producing innovative quality products.

Dr. Deming told the group that if they would follow his directions, they could achieve the desired outcome in five years. Few of the leaders believed him. But they were ashamed to say so and would be embarrassed if they failed to follow his suggestions. As Dr. Deming told it, “They surprised me and did it in four years.”

He was invited back to Japan time after time where he became a revered counselor. For his efforts he was awarded the Second Order of the Sacred Treasure by the former Emperor Hirohito. Japanese scientists and engineers named the famed Deming Prize after him. It is bestowed on organizations that apply and achieve stringent quality-performance criteria.

Deming’s business philosophy is summarized in his famous “14 Points,” listed below. These points have inspired significant changes among a number of leading US companies striving to compete in the world’s increasingly competitive environment. The 14 Points pose a challenge for many firms to figure out how to apply them in a meaningful way that will result in continual improvement. The essence of the 14 points are a good thing to ponder when evaluating the long term viability and management practices of any franchise system.

His work is outlined in two books: Out of the Crisis and The New Economics, in which he spells out his System of Profound Knowledge.

Condensation of the 14 Points for Management

The following is excerpted from Chapter 2 of Out of the Crisis by W. Edwards Deming:

The 14 points for management (Out of the Crisis, Ch.2) in industry, education and government follow naturally as application of this outside knowledge, for transformation from the present Western style of management to one of optimization.

Origin of the 14 points.

The 14 points are the basis for transformation of American industry. It will not suffice merely to solve problems, big or little. Adoption and action on the 14 points are a signal that the management intend to stay in business and aim to protect investors and jobs. Such a system formed the basis for lessons for top management in Japan in 1950 and in subsequent years (see pp. 1-6 and the Appendix).

The 14 points apply anywhere, to small organizations as well as to large ones, to the service industry as well as to manufacturing. They apply to a division within a company.

The 14 points.

1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business, and to provide jobs.
2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change.
3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place.
4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust.
5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.
6. Institute training on the job.
7. Institute leadership (see Point 12 and Ch. 8). The aim of supervision should be to help people and machines and gadgets to do a better job. Supervision of management is in need of overhaul, as well as supervision of production workers.
8. Drive out fear, so that everyone may work effectively for the company (see Ch. 3).
9. Break down barriers between departments. People in research, design, sales, and production must work as a team, to foresee problems of production and in use that may be encountered with the product or service.
10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.

* Eliminate work standards (quotas) on the factory floor. Substitute leadership.
* Eliminate management by objective. Eliminate management by numbers, numerical goals. Substitute leadership.

11. Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality.
12. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual or merit rating and of management by objective (see Ch. 3).
13. Institute a vigorous program of education and self-improvement.
14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody’s job.