November 2014 Archives

My last article ("Site Selection Basics") focused on the importance of distinguishing between your trade area (geography, demographics, mixed uses) and site attributes (such as type of shopping center, access, parking and co-tenancy).

How do you develop your customer profile so that you locate your business in a trade area with a significant number of your customers? 

If you're buying a franchise, you'll be given the customer profile so that you can target the right trade area as well as the most desirable site characteristics for that type of franchise.

There are franchises that focus on attracting customers during particular day parts. For example, fast-casual restaurants that cater to customers in early morning and during lunch will recommend locating in trade areas with a nice mix of residential and employment centers. 

They will recommend picking sites that are perceived as convenient by the target customer, such as being within a short distance (due to time constraints such as a limited lunch hour), good access and sufficient parking.

Some uses are "mass market" businesses. By definition, a mass market business is one where the majority of people in the trade area are potential customers, such as fast food establishments or florists.

And while some demographic segments might provide more customers than others, these businesses depend on being in areas with a lot of activity to bring customers to their door. Here the trade area demographics might be less important than the quality and number of competitors and the particular site location characteristics.

A franchisor will (or should) provide you with both a customer/demographic profile as well as recommended trade areas, types of shopping centers that are better for the franchise, recommended site characteristics and space requirements (size, dimensions of the space, required utilities, etc). 

 If you're buying into a franchise that has other national competitors (and most do), go online and research what the competition is recommending with regard to trade area and site requirements. It's often listed under "real estate" or "submit a site" sections on their website. 

Compare it to what you're being told by your franchisor and ask questions if the requirements differ. A franchisor should be able to explain differences, and this will be a good double check on the quality of the franchise concept.

Franchisors will often have a few franchisees (likely the most successful and happy franchisees in the system) that they refer to prospective franchisees as examples of the business operation, location and potential. 

It's good to spend time looking at a few of the higher volume locations for a variety of reasons:

(1) Talking to an experienced franchisee who's willing to discuss the pros and cons of their business is always worthwhile
(2) It will give you an opportunity to review their trade area and site characteristics so you can see how it conforms (or differs) from the franchisor's recommendations
(3) You can then take what you learned and apply it to your target trade areas.

It's good to visit at least one average store and one poor performing store so you can see what those look like as well. Sometimes you'll notice weak operations (spend some time observing, on different days and at different times), or you might observe problems with the site (such as limited parking) or other issues with their trade areas. This will be time well spent.

If your franchisor doesn't provide trade area, site and space checklists, develop them for yourself using the information from the franchisor as well as other tips you've learned from the competition. 

When looking at different locations, it's easy to get confused so making notes and using a checklist will allow you to keep track of your observations so you can review them later. 

And it goes without saying that reviewing the sites of your potential competitors is critical. Be honest with yourself regarding their strengths and note their weaknesses. This will help you to position you franchise business for success.

It is understandable why so many franchises fight wage increases, benefits increases, etc.

They have established a competitive landscape and business model that depends on low, low wages.

I read an article last week that in Denmark, the average pay at Burger King is $20/hr with full health benefits. So, people pay more for burgers.

That is true across all the food franchises, so there is no competitive disadvantage to paying employees a living wage.

I have also wondered at times if in the US a lot of the franchisor pressure against health care is really a concern about royalties.

If the franchisee pays more for employee health care that means they may have less available to pay royalties. There is no way to know what is motivating HQ folks, but I wonder if that has a lot to do with things.

Franchising is a great business model. It can work even when employees aren't paid the minimum wage, and even when franchisees are treated more transparently.

Australia recently made changes to its Franchise code that should reduce some abuse of franchisors. I read a lot of submissions by people to the Franchise-Info columns. I appreciate they are stuck within a mental framework requiring pay and transparency must fall to the lowest common denominator.

If people opened up to different possibilities the industry could still thrive and would have a better reputation with potentially less conflicts.

Stu Levin, founder of the Franchise Wealth Academy, helps franchise owners to stop the financial bleeding and regain control of their lives by helping them decide, usually in 30 days or less, whether to fix the franchise or find a more personally profitable path.

A recent email we received below gave us some good ammunition for this blog.

While the industry, as you can see, is in the legal profession, believe me, it can happen in every industry.

It's from an attorney, and Mike Webster tells me that this is par for the course.

1. Around 1:00 p.m. today I returned opposing counsel's telephone call from this morning.

2. The first person that answered the phone took my name and asked me to hold while he checked to see if she was back from lunch.

3. After a short hold, he came back on the line and transferred my call.

4. Now, at this point opposing counsel's assistant answered the phone.

5. She had to take  my name for the second time and then put me back on hold.

6. After holding a couple of minutes, opposing counsel's assistant came back on the line and asked if I could call back in twenty minutes!

7. I am sure that her assistant told opposing counsel that I am a jerk because I answered, "No, I am calling her back now."

 

How many .1 of an hour were billed for this non-communication do you think?

We all have said it at some point. Many of us have even used the phrase frequently. And, if you have not said it, you definitely have heard it. In most cases, it comes from the purest of intentions. The bottom line is that we want franchisees to succeed and we believe that these words somehow have the magic power to turn around the performance of a struggling or disgruntled franchisee. Other times we use it because we seek to protect the integrity of the brand and the investment of all franchisees. The fact is that many of us use these words almost like a mantra.

YOU ARE NOT FOLLOWING THE SYSTEM!!!

Intuitively, from a franchise relationship angle, many of us know that these words are not very effective; in fact, the word 'compliance' which is implied in the above statement hurts more than it helps our relationships with franchisees. However, these words and their message are ingrained in franchising to the point of being used automatically and without thought of their consequences.  The danger is that from a brain science perspective these are the worst words we can use because they produce exactly the opposite results we seek. Let's explore why.

The Short Answer Is FEAR

The sentence: "You are not following the System" is one of the most fear-producing phrases a franchisee can hear. Think about it. What does it mean? It is an accusation more than a statement of fact; and franchisees, consciously or unconsciously, hear different messages. Here are some examples of the possible interpretations franchisees may give to those words:

• I'm a failure.
• I will never get this right.
• I'm a disgrace to my family and my peers.
• I will lose everything... all of my savings and my investment-all that I have worked so hard to get will be gone. My franchisor will take it all away from me.
• Can I be so dense? I thought I was following the system. What do they mean? What am I doing wrong?
• The franchisor is out to get me. They want me out. They want to resell my territory.

The Science

Our brains are designed to constantly scan for danger. We are always in survival mode.  That's how we are wired to protect our lives. However, the dangers we encounter today are no longer the beasts we had to fight thousands of years ago. Instead these dangerous creatures have been replaced by things we interpret as threats to what we hold most dear. To franchisees, losing their franchise means they will lose their investment, livelihood and social status; in their eyes, they won't be able to survive such a catastrophe. Facing such a possibility, their brains think they will die. They signed an agreement and thus they know that not following the system gives the franchisor legal standing to take away their franchise rights. This is very scary; and fear is the worst motivator to use in franchising.

Additionally, when franchisees hear these words applied to their performance, they feel that their reputation and social standing within the organization is also threatened. Research has shown that such a threat activates similar networks as the threat to one's life (1).

Moreover, when we use these words without giving specific examples of where a franchisee may not be following the system, the phrase is construed, rightly so, as unfair. Research also shows that we seem to have a happiness reaction when we process experiences as fair and a disgust or protest response to unfairness (2).

The Technical (Geeky) Stuff

The limbic system of the brain is composed of structures that process emotions such as anger, happiness or pleasure, as well as fear.  The Amygdala is one of these structures and it's often called the fear center. When this portion of the brain gets activated, it prevents the engagement of our prefrontal cortex where our cognitive functions reside--it highjacks our ability to reason.

The job of the amygdala is to prepare the body for emergency situations. And, as such, it has a three-pronged reaction to a threat: flight, fight or freeze. When a real or perceived threat is encountered, energy is diverted to that part of the brain that needs to get us ready to deal with the threat and danger in order to save our lives. This means that there is very little energy going to the prefrontal cortex. In other words, in a state of fear, the orchestration between thought and action, planning, problem solving, complex thought, goal-centered mind activities, and the ability to respond in a logical and cool manner all escape us. 

When we use the words "You are not following the system" we send franchisees into a fear response. They will react by getting angry (fight), avoiding us or the issue (flight), or simply by not doing anything different (freeze). In essence, these words activate their amygdalae and the consequence is that they take away, or at the very least, highly diminish the franchisees' cognitive ability to implement the franchise system. The result: we achieve the exact opposite of what we wanted.

Why do we use these words in franchising?

There are many reasons why we have come to use this phrase so often in franchising. And, most of these motives are well meaning, even when misguided. For example:

• We may believe that this phrase has the magical power to produce franchise success.
• We may believe that non-compliant franchisees make a conscious choice and act like teenagers by rebelling against the system, and thus we use the phrase in an assumed paternal role to scold or punish them.
• We may believe that these words will create the awareness franchisees need to make the necessary corrections and to change their behavior and their results.
• We may believe that not following the system is the only reason a franchisee doesn't achieve the results he or she seeks.
• We may believe that our most important role as franchisors is to protect the integrity of the franchise system and the investment of all franchisees, and furthermore we may believe that these words will help us accomplish that.
• We may believe that our attorney's insistence on system compliance is so critical to our success that we create an organization where the franchise relationship is solely defined and upheld by the legal agreement and not by the values of the company; or
• We may believe we have not followed our own system, and thus feel guilty and ashamed. 

Yet, perhaps, just perhaps, our own fear center is triggered when franchisees fail. Perhaps we make their struggle mean that we have completely failed or that what we have created or have faith in (i.e., the franchise system) may not be as effective as we once thought. Perhaps we use these words to point the finger in the other direction because our brains have gone into a fight mode.

Why don't franchisees follow the system?

There are many possible reasons that cause a franchisee not to follow the system. They include: lack of understanding, lack of clear instructions and procedures, lack of a coherent message and directions across the company, weak training programs and/or support systems, level of difficulty or required change in the way a franchisee thinks and/or behaves.

From a brain science perspective, a franchisee engages in, or disengages from, the franchise system according to his or her perception of whether the system is rewarding or threating. Assuming that the franchisor provides strong training and support programs, clear messages and directions and a safe environment for learning to take place, a franchisee who does not follow the system basically has encountered something in the system that is a threat to him or her.

An Example

A franchisee of a fast food restaurant may decide to change a recipe to reduce the amount of the most expensive ingredient. Upon examination you find that the franchisee believed that her profit margin would be significantly reduced. This may be a true fact; but the franchisee is most likely unaware that her decision was led not by that fact but by her fear that a lower profit margin was going to jeopardize her ability to make a decent living for her family. It's this fear that is leading the decision and interfering with her reasoning abilities. She is focusing so much on a single indicator and what she is making it mean that she can't see the consequences of her decision. The fact that she soon will start losing customers because her quality has decreased eludes her. She can't see that her fears permeate all she does and her entire business, or that it will result in exactly what she fears most. If her franchisor's representative were to tell her: "You are not following the system" her fear and thus her inability to solve her problem will just get worse.

So, what can we do?

• Think before you speak!
• Create a safe space where you can have honest communication.
• Don't use blame or guilt tactics.
• Know that each franchisee is different and so is the meaning they attach to the world; therefore there is not one answer that applies to all struggling franchisees.
• Help your franchisees discover what meaning they are attaching to the part of the system from which they have disengaged.
• Explain to them how the brain works and how it can help us and also how some portions of our brains can highjack our ability to solve problems and use reason.

You don't have to get technical or geeky; a general explanation suffices. When people understand what's happening to them, what's prompting their behavior, when they realize that this is how we humans are wired and that is not them personally, they can start to make changes. Awareness is a key; in addition, repetition and coherence are also critical to make the change sustainable.

 References

(1) David Rock, Your Brain at Work

(2) Melanie Greenberg, The Mindful Self Expression

The post What's the WORST Thing You Can Say to Your Franchisees appeared first on InFraSu.

I remember the time I got a call from a hot prospect in a market we were targeting.

We'll call him Charlie since that happens to be his first name.

Charlie really sounded like he knew what he was doing.

But, I'd only been selling franchises for about 14 months. I was greener than green.

As a potential franchise buyer Charlie asked great questions like:

How much does it cost to develop this franchise?

What are the real estate and site requirements?

How long did it take to build the franchise?

I answered all his questions respectfully and carefully.

And then I took the opportunity to ask him some qualifying questions.

I wanted to know if he met or exceeded out financial requirements.

Charlie surprisingly answered that his net worth was about $5 million with 80% in real estate and he had cash or cash equivalents of about $1 million.

Now Charlie already had me excited with his questions at the outset! And now he had told me his financial profile which exceeded our requirements.

Charlie was my kind of guy and we were having such a great call.

It was now time to get Charlie approved. Send him a NextDay UPS franchise information packet with an application and instructions on how to fill it out (back in early 1990s that's how you did it).

Charlie said that would be terrific!

At this point Charlie and I were like family. 

And then Charlie said to me -

"You know Joe I've got this piece of land that I think will make a great QSR restaurant site and I'd like to build one of yours on it. Do you think you could have one of your real estate guys come take a look at it before we go any further? I'd really appreciate that, Joe. You'd be doing me a big favor and we'd both be moving this process along faster."

Now I had a dilemma we didn't pre-approve sites before a franchise candidate had been approved to be a franchisee.

But Charlie was perfect and so easy to talk to. I told Charlie I'd have to check and get back with him the next day.

Then I looked at the Director of Real Estate's schedule and saw that he could be in that market next week if he stayed out in the field another day. My real estate guy said he'd do it if I thought that Charlie was that good of a candidate.

I called Charlie back the next day with the good news. And he thought it was fantastic that we would break with our franchise sales process for him.

Well the week goes by and the Director of Real Estate is back in the office with good news that from a preliminary look at the market, demographics and competition the site was acceptable.

I was delighted!

So, I phoned Charlie back with the good news about his location --and now it was time to get his application in to us and get him approved. Charlie said would get right on it and that I'd have it faxed in within 3- 5 days.

After to waiting the 5 days and one more day for good measure I called up Charlie to check on the status of his application. No answer so I left a voice message. I thought for sure that I'd get a returned call straightaway from Charlie.

But I didn't.

I dutifully called Charlie for the next 4 weeks until one evening late in the office I gave Charlie a call and he picked up. Charlie apologized for not getting back to me sooner but assured me that he'd like to see one of our restaurants on his piece of land.

I said okay when do you think you could get you franchise application in?

And then Charlie said -

"About the application, I've been talking to my real estate guy here in town and he says that some of your big competitors have been sniffing around at sites around town including mine. I was thinking Joe that I might be better off as a landlord on this location and I'm wondering if you've got any franchisees who like to be in our town or maybe you'd want to put one of your company units in here".

I asked Charlie just to be clear you no longer want to be a franchisee? His answer as you would expect at this point in the  in the story was a resounding No.

I'd been duped. As you might suspect Charlie was never interested in being our franchisee. He was selling a real estate deal. And I was providing the validation and possibly the tenant.

We never did a deal with Charlie.

And my very experienced Director of Real Estate would in a nice way ask me from time to time how I was doing with my Uncle Charlie.

Need more experienced tips on How to Sell a Franchise?  Sign-up for the weekly newsletter.

Like most trainers, I frequently engage participants in interactive activities that hopefully shift their paradigms. With one such activity, I give participants a list of like-hotels in a location they've never been to, and then have them each place a group sales or reservations inquiry call. Afterwards, each participant reports back to the overall group on their experiences and observations.

Recently, while training the reservations team of a four-star hotel, the results were especially interesting when two participants in particular described their call experiences.

The first participant had a glowing report for the agent she'd spoken with, and raved about how he was so enthusiastic and hospitable that the participant actually felt bad about not booking with him!

Interestingly, the second participant reported the polar opposite experience in calling another four-star hotel in the same area, as her agent did little more than check dates, quote rates and described rooms as being "your basic hotel room with one or two beds."

It is interesting to see how two different hotels within the same location, serving the same hotel market segment, recruiting from the same labor pool, and probably paying about the same base wages can have such extraordinarily different levels of hospitality and guest service.

How was it that these two employees of similar hotels performed so differently that day? Was it luck? Did we just happen to catch their best employee at their best time of day? Or was it a factor of the choices the employees made that day?

Two alarm clocks went off at approximately the same time of morning. Two employees woke up and readied themselves for their workday. Both traveled about the same distance, to work about the same shift, for about the same pay. Yet one employee made the choice of delivering hospitality excellence to the best of their ability in every guest interaction that day. The other made the choice to do their job exactly as it is outlined in their job description; doing nothing more and nothing less.

So why is it that associates at some properties make the choice of hospitality excellence while employees elsewhere choose to be average, or to put it another way at the risk of being blunt - mediocre?

Is it that one hotel has a better luck of the draw when hiring new staff? Do they have a better applicant screening process complete with pre-employment testing and peer interviewing? Or is it more a factor of the overall culture that starts with ownership and executive level management and is reinforced daily at the supervisory level?

Based on my observations as a hospitality industry trainer, it is more than a mere coincidence that some hotels can succeed in even the toughest labor markets, while others squander in mediocrity even where the unemployment languishes in double digits. Instead, hotel guest service teams that make "extraordinary" guest services experiences an "ordinary" and daily event tend to have:

1. Owners who are willing to invest in the physical product and the technology systems necessary to facilitate service efficiency. It is hard to deliver hospitality knowing you are about to sell a guest a sub-standard accommodation, and just about impossible to satisfy guest needs without the proper systems support.
2. Engaged, involved leaders who lead by example under the tightest of scrutiny. Real-world operational standards don't exist in training manuals; they are set by managers who can be observed in action themselves creating hospitality excellence daily! Interestingly, these same managers treat both employees as well as their guests with authentic warmth and generosity, the hallmarks of hospitality. They know that hospitality starts in the heart of the house when they greet their first staffer in the back hallway upon entering the building.
3. Managers and supervisors who coach versus command. Great hotels have supervisors that closely observe each employee transaction, and who know the job well enough to help each staff member tweak, revise, and maximize their performance. Even the greatest so-called "superstars" all need continuous coaching to maintain hospitality excellence.
4. Visionary leaders who see the actual level of hospitality and guest service as it really is being delivered daily in the lobby. They don't relay on the opinions of one quarterly mystery shopper inspection report, nor post-departure guest surveys, nor TripAdvisor reviews alone, nor any one metric to tell them where service is at. They observe firsthand how guests are treated and how efficiently things are working (or not).
5. Managers and supervisors who pitch-in during inevitable bottle-necks. The best managers always seem to appear at just the right moment when the staff is nearly overwhelmed; they not only provide that extra set of hands to get you caught up but help you gain confidence that things will work out. I can still recall how over two decades ago as a bellman of a golf resort I greeted the PGA Senior's Tour Bus only to watch all the famous golfers parade off the bus and directly into their rooms, leaving the absolute biggest pile of luggage and golf bags imaginable for our team of just two bellmen. Minutes later there was our Resident Manager taking off his suit jacket and humbly asking our bell captain "How can I help you guys get through this?"
6. Leaders who honor and understand the frontline perspective. You can always distinguish visionary leaders in the field of hospitality by the way they talk about their frontline employees. Those who appreciate them the most speak with respect, admiration, and appreciation. Those who don't just complain about how hard it is to find good people these days, and that "Millennials just aren't motivated."

Indeed, it is a thin line - a razor thin line - between hospitality excellence and mediocrity that employees in our industry traverse every day. In the end the same number of hours are worked, the same number of calories are burned, and the same wages are received. Yet those who choose to walk the path of hospitality excellence are rewarded daily as well.

While their counterparts elsewhere go home each night complaining about how many rude and nasty guests there are out there these days, those who make the choice of hospitality excellence enjoy their work everyday, and mostly go home raving about how many nice, interesting, and appreciative guests they met that very same day in the very same area as the competitor down the road.

This has been a guest post by Doug Kennedy. Doug Kennedy is President of the Kennedy Training Network, Inc. a leading provider of customized training programs and telephone mystery shopping services for the lodging and hospitality industry.

Doug continues to be a fixture on the industry's conference circuit for hotel companies, brands and associations, as he been for over two decades.