During the heart of the 2008 economic downturn I was the manager of the Franchisee Assistance Program for a large sandwich restaurant chain.  

My job was to work with distressed franchisees to help them put together a plan to save/fix their businesses.  

Unfortunately most people reached out to our team when it was already to late: they often had accumulated a lot of debt and their weekly sales could not support their costs.

Our options to help our franchisees were limited and to their dismay we were unable to give franchisees cash or reductions in fees to help them solve their issues. 

The following are some take always from that time and my interactions with our franchisees:

  • Know when to say when:  

    • Don't wait until you have already lost a lot of money to try and turn it around. If you start to notice a downward trend take proactive measures immediately. 

    • Often times people would reach out to our program as a last resort when it should have been their first call. As a franchisee you should know and avail yourself of all the support that your franchisor offers.

    • If you are going to buy a franchise and make that kind of investment; you need to push yourself to achieve great success but also set an amount you can afford to lose.  If you hit that loss amount then you need to take action and close your business. You are responsible to yourself and your family; don't let your business go from a calculated risk to a financially devastating life event. 

    • I was constantly amazed talking to people who were thousands of dollars in debt, had given up on their business, but were not doing anything to shut it down or fix it. They were business zombies going through life accruing more debt every month with no end in sight.

  • Franchisees cannot abdicate their responsibility for their success to the franchisor:

    • You are the business owner and financially responsible for your it's success or failure.  

      • It is your name on the lease and the loans. 

      • It is your credit rating that will be hurt if you default on your obligations.

      • It will be you that is paying off this mistake for years to come if you don't make this work. 

    • The franchisor is responsible to give you a system and a model to run a business and to help you help yourself. 

      • Help you help yourself is one of the core concepts of franchising.  Here is a business in a box, now you focus on execution. 

      • I can't tell you how many people I spoke to, that spent all of their energy focused on how their franchisor had: lied, cheated, and manipulated them, instead of taking some action to solve their problems.  It is hard to look in the mirror and and accept that you aren't doing well but it doesn't change the fact that you aren't doing well and something needs to change.

    • Here is an an example of abdicating responsibility; I would ask distressed franchisees what marketing they were doing and they would site their ad fund contribution. 

      • Those of you in a franchise system know that very few companies can do national advertising every single month.  If you are lucky they have several events a year.  

      • National advertising is a big plus of becoming a franchise owner, being able to pool your money with all of the other franchisees to get more exposure is a big appeal of franchising but that can't be your only marketing.  

      • Local store marketing is a bigger factor in individual location success than national advertising.   

      • If you don't want to local store market then don't own a franchise. 

  • Don't buy a franchise in an industry that you don't have any experience or access to experience in:

    • Everyone thinks that they will just hire a manager.  That is fine until the manager quits or gets fired and then for some period of time you are running your business.

    • If you are interested in owning a restaurant; before you buy the franchise you should go work in a similar restaurant for 6 months to a year to learn on someone else's dime. 

    • I was constantly surprised when I would talk to franchisees that weren't restaurant people who were surprised at how hard running a restaurant was. 

  • When times are tight cut the right costs:

    • If your business is really slow and you are having a hard time breaking even or you are loosing money, you need to cut the right costs.

      • Don't cut:

        • Bookkeeper - that was an expense that most people would cut first because their bookkeeper was giving the franchisee bad news.  You need to know your businesses finances.

        • Cleaning service - unless you are willing to clean your restaurant as well and as frequently as your cleaning service don't cut them.  Dirty restrooms are the fastest way to sabotage your current business.

        • Local marketing efforts - don't cut them completely, you can change them if they aren't working. 

      • Costs to reduce: 

        • Ask your landlord for a temporary rent reduction or some relief.  The property managers will want to see your plan for growing your business and a reasonable time frame for execution. 

        • Manage your variable costs tighter, specifically food and paper cost. Conduct more inventories and do your best to forecast your needs on a weekly basis trying to reduce waste and excessive stock. 

        • Labor:  take a pay cut if you are paying yourself.  Manage your shift labor tighter - cut people when it gets slow or better yet use those labor dollars to do more work. Send your employees out to coupon cars or drop off catering menus at local businesses.  No one should ever be standing around when they are on the clock.

There is so much that goes into running a successful franchise business.  

These points were based on my personal experience working with our franchisees and they may not be applicable to your situation. I hope they were helpful to you. If you have any questions, please feel free to email me through LinkedIn

If you are a restaurant owner or manager, my company has developed an operations and sanitation inspection tool named Mobile Inspector.

I invite you to watch a short two minute video at http://mobileinspector.biz



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