July 2015 Archives

Why should every business owner write an operations manual...and why now? What is the urgency? Creating an operations manual is a big job. It requires valuable time that most business owners would rather use elsewhere. Some owners complain that the manuals end up collecting dust on the shelf, so why write one?

Operations manuals are used for several reasons, among them are: to on-boarding new employees, build a second, third or forth (etc.) store, risk management and added value. Obviously, new employees need to be trained. The ops manual is often used to ensure that new employee training is consistent and accurate. Without this, employees are trained by the the most experienced employees, who may or may not be doing things the way the owner wants it done. Operations manuals eliminate this confusion.

By eliminating this confusion and documenting the required systems and routines , the business can grow and duplicate. Replication is the key to becoming a franchise, or successful chain. The most successful multi-unit chains write, use and maintain an operations manuals because they create consistency and uniformity.

Creating an operations manual is a risk management tool as well. What happens if the owner is suddenly "hit by a bus"? Who in the business understands all aspects of the systems that need to be implemented. Without written instructions regarding how to run the business, who would understand how to keep things moving while the owner recovers? Did you know that most businesses that suffer such a catastrophe fail within six months? This tragic end of successful businesses is the result of having all the operations locked in the owner's head.

Operations manuals add monetary value to the business. Business brokers know that owners who invest in writing a comprehensive operations manual (or at least an Owner's Emergency Handbook), increase the value of their business. Operation manuals can add between $10-20,000 to the sale price of a company, and eliminates the need of the owner to stay on and train the new owners how to run things. Who doesn't like more cash?

JumpStart Manuals give business owners the tools and process to write their own operations manuals. Whether one uses our template-style workbooks, hires a consultant, or strikes out alone, writing a standard operating manual is key your success. Operations manuals decrease inconsistency, improve employee training, avert catastrophic collapse and increasing the value of the company.

What business can afford not to have an operations manual?

For the 5 Most Fascinating Stories in Franchising, a weekly report, click here & sign up.

Franchise business owners are responsible for following a multitude of government rules and regulations.

In May 2012, a Massachusetts court issued a $3 million damages judgment to Coverall, a privately held janitorial services franchisor found to have misclassified its employees as franchisees.

Misclassification of employees is one of many expensive human resources management risks that both franchisors and franchisees face.

Here are 10 RECOMMENDED STEPS to protect your franchise brand and business:

  1. Understand your human resources obligations. Check your franchise system's operations manual and employee handbook for guidelines, procedures and responsibilities concerning employee management, workers compensation and HR compliance.
  2. Ensure that you have adequate insurance protection. Make sure you have sufficient coverage provided by workers compensation, general liability, directors and officers, and employment liability insurance. Don't underestimate your exposure to costly litigation resulting from disputes such as sexual harassment, wage and hour or discrimination.
  3. Don't rely on your accountant for HR expertise. Your accountant can keep you informed of your payroll and tax obligations. However, the administration and processing are likely handled by a third-party provider. Know your provider's responsibilities, as well as their limits. Don't rely on your payroll provider to identify or prevent any lapses in worker classification, compensation or wage and hour compliance.
  4. Know your obligations under federal law regarding your workforce. The federal government is actively pursuing companies to reduce the misclassification of employees to capture more tax revenue. Another goal is ensuring compliance with labor laws, which provide important benefits and protections to employees. Misclassifying employees as independent contractors can increase your risk for an IRS audit. Franchise system operators may want to consider focusing on this area in training or operations manuals to help franchisees successfully achieve compliance. Learn more by visiting the US Department of Labor website.
  5. Subscribe to franchise industry-specific legal sources, such as the International Franchise Association's legal events, e-newsletters and committee information-sharing. Keep in mind that what legally affects one franchise system can easily impact other franchise operations that are similarly structured.
  6. Consult with an employment attorney to establish or review your local HR policies and procedures to help you stay in compliance. Knowing and achieving compliance before any potential problems arise is your best protection against HR-related lawsuit risks.
  7. Seek an outsourced HR service partner. Professional Employer Organizations (PEOs) are expert full-service human resource companies that take control of a franchisee's employee management functions. PEOs help franchise system operators and owners identify potential risks, mitigate exposure and transfer their employment-related liabilities and responsibilities.
  8. Avoid costly discrimination lawsuits. It is illegal to discriminate among numerous protected classes of people, as listed on the website, or retaliate against those who file a complaint of discrimination. Become familiar with the many US laws passed since the Civil Rights Act of 1964 first established protection against discrimination based on race, color, religion, national origin or gender. Visit the US Equal Employment Opportunity Commission website to learn how to avoid workplace discrimination.
  9. Confirm your new hires' legal status by using E-Verify. Operated by the US Department of Homeland Security in conjunction with the Social Security Administration, this Internet resource was established for employers who are committed to maintaining a legal workforce. It determines the employment eligibility of newly hired employees.
  10. Protect the value of your brand. How much is your brand worth? How much would you spend to protect it? Widely publicized violations of employment laws or regulations could damage your brand over and above the costs for legal defense, penalties and judgments. Today, bad news spreads virally on the Internet. Take action to prevent your brand from being damaged in the eyes of consumers, prospective franchise owners and the community.

Franchise business owners can spend an inordinate amount of time achieving compliance and ensuring that employee paperwork is in order to avoid compliance risks and liability.

No franchise system operator wants to be devastated by a multi-million-dollar catastrophic damages bill, such as Coverall suffered.

You may find it is well worth your time to prioritize becoming informed and compliant.

For the 5 Most Fascinating Stories in Franchising, a weekly report, click here & sign up.

Let's say you own a regional system of franchised stores. Your newest franchisee has just handed you a draft lease for the store he intends to operate.

What are the six most important changes you can negotiate to protect your interest in the new location - and the associated goodwill - in case the franchisee defaults under the lease, the franchise agreement, or both? In order of importance, here are six critical goals to shoot for:

1. Notice of default. Insist the landlord agree to give you written notice of any lease default by the tenant, even if the lease does not require that the tenant be notified. Keep in mind the lease may make certain events (e.g., nonpayment of rent or failure to maintain required insurance) automatic defaults without needing to notify the tenant. If the lease does require notice as a precondition to default, insist the landlord agree to copy you on the notice sent to the tenant. It is essential that you learn about your franchisee's failure to pay rent (or otherwise perform under the lease) in enough time to decide upon - and implement - an effective response.

Without this most basic of protections, the eviction process could be well under way or even complete before you learn of the tenant's failure to perform. Although some landlords resist the administrative burden, a prudent one will recognize that bringing you into the process early on will enhance prospects of a quick resolution without substantial legal costs or prolonged interruption of the rental stream.

2. Right to cure. Having the right (but not the obligation) to cure any lease default by the tenant goes hand-in-hand with the right to receive notice of that default. Ideally, the period permitted for your cure will exceed that allowed for the tenant's cure; among other things, the lease may permit the tenant only a short period, or none at all, to cure matters such as a monetary default, failure to insure or a prohibited assignment.

You can expect the landlord to try to limit the number of times you will be permitted to cure during the lease term; you can also expect the landlord to try to keep the cure period to 30 days or less.

3. Consent to lease amendments. If the landlord and tenant are permitted to amend the lease without your consent, any protections you succeed in building into the lease can disappear with a stroke of a pen.

Moreover, the way will be cleared for the tenant to leave your franchise system (or join a competing system) and retain control of the store by negotiating necessary lease changes (such as a modified use clause or rent structure) directly with the landlord. Having the right to approve any amendments to the lease (or, at a minimum, those that affect your rights and interests as franchisor) before they become effective is critical to your ability to protect your interests and preserve locational control.

For similar reasons, you should seek to prohibit the tenant from having the right to renew or extend the lease term, assign the lease or sublease the premises without your consent; all are mechanisms for the tenant to attempt to exit your system, join a competing system or bring in a competitor to operate in the store location.

4.Limit permitted uses. The uses permitted under the lease should be limited to operation of the franchised store under the parameters of the franchise agreement.

Not only will this impede the tenant from assigning the lease to a competing operator (or anyone else who does not intend to operate the franchised store), it will also help ensure the lease can be transferred only to you or another franchisee in the event of the tenant's bankruptcy.

5.Conditional assignment of the lease. Consider requiring the tenant to conditionally assign the lease to you. Such an assignment would give you the option (but not the obligation) of taking over the lease and operating the store (or possibly transferring the lease and store to a another franchisee) in the event of the tenant's default under the lease and/or the franchise agreement.

Conditional assignment language can be inserted in the lease itself or in a separate document. However the assignment is documented, the landlord's consent (given up front, upon execution of the lease) is essential. You can expect the landlord to seek your agreement to completely cure any existing default by the tenant if you choose to exercise your assignment rights.

6.Cross-default with franchise agreement. Including a clause that makes a default under the franchise agreement an automatic default under the lease will give the tenant/franchisee another incentive to perform, and it will increase your leverage in the event of nonperformance. However, the landlord may be concerned about the risk of lease termination because of a technical default under the franchise agreement.

Be prepared to identify which of the tenant/ franchisee's obligations under that agreement are important enough to justify termination of the lease in the event of a violation.

Even Better Protection

Your financial standing and track record, the size and prominence of your franchise system, and the importance of the lease to the landlord will all impact your success in securing these changes. Ideally, negotiated concessions are set forth in a rider or addendum to the lease, which you would sign as a party along with the landlord and tenant.

Alternatively, language can be added to the lease naming you as a third party beneficiary of the negotiated concessions. This is a less desirable approach, however, because your rights to enforce the lease as a third party beneficiary may not be clear. In any event, obtaining these six changes - or most of them - will afford you much greater protection than the typical landlord form lease.

This has been a guest post by Steven J. Davis, counsel to Thompson Hine LLP. Steve is counsel in the firm's Real Estate practice group. He focuses his practice on the acquisition, sale, development and leasing of commercial real estate and commercial construction contracts.

For the 5 Most Fascinating Stories in Franchising, a weekly report, click here & sign up.

Choosing the right franchise requires some research and due diligence before making such an important decision. You should think about your experience and your strengths and weaknesses to determine if it's a good fit. Do a thorough evaluation of the opportunity. Assess your goals and objectives to see if they're in line with what the franchise has to offer. Determine how you can compliment it with your background and business experience and expertise.

Do you understand the franchise system - how it works and does it really work effectively and efficiently?

Be sure to understand what you need as a franchisee to operate the business successfully. On the other hand, understand what your requirements are as a franchisee to the franchisor. Ideally it should be a win-win relationship. You create a successful business based on the support and expertise of the franchisor. In return for this support, the franchisor receives his royalty fees knowing that the business will be successful based on his proven business model.

It's all about processes - get them in place - are all the ducks in a row?

So here's where we really get to put the franchisor's experience and expertise to the test. Are there streamlined processes in place to help you run the business? And have these been proven to be effective by others in the business? A positive answer to these critical questions should most help to steer you in on the right path whether or not this is the right business to acquire.

Manage the Process - operational management - Who's in charge of operations?

Now comes your part as a franchisee. Can you follow the "rules book" from the franchisee? After all, at this stage of the game, the franchisor is acting like your coach. He know the rules and is in fact saying to you that if you follow the rules of the game, you will succeed. Well it's not quite that simple, but you know what I mean. So know the rules of engagement to manage the process.

Know your Numbers - so what are they telling you... and are you listening?

Ah yes, the numbers. Sometimes the most neglected part of running the business. So often, the focus is on marketing and sales. But without accurate and timely financial information most businesses are running blind and doomed to failure. You need to understand the numbers so you can see where your business has been (historical financial information) and where it's going based on projected financial information. This helps you to run your business proactively based on informed decisions that allows you to make course corrections along the way. It's sort of like your business compass or GPS system.

Here are a few crucial numbers you need to know and monitor to control your business operations:

Pay particular attention to cash flow. It's still the king. Review the balance sheet, income statement and cash flow statement every month to assess net worth, net profits or losses and cash flow. On a quarterly basis, calculate the following financial ratios to evaluate key performance measures:

  • Sales year to date
  • Gross profit margin
  • Cost of sales as a percentage of sales
  • Labour rate as a percentage of sales

By comparing these ratios to those of franchise or industry averages, you can determine the progress of your business. If you need advice or assistance, an accountant experienced with franchises would be your best resource. This professional can help you interpret financial results and benchmark your progress relative to both competitive businesses and other locations within your franchise system. He or she can also guide you on how to strengthen and improve results.

Proactive Management - are you working on your business?

And finally, your ultimate goal is to get to the stage where you're working On your business rather than In it. So often, franchisees start off a business with great excitement and lots of ambition and enthusiasm. Only to find out that things are not as they anticipated and they actually become an employee of the business rather than an employer. In short, the business is running them, rather than them running the business. For those of who who really want to understand this philosophy, I highly recommend you read "The E-myth Re-Visited" by Michael Gerber. There is a famous chapter in the book entitled "Working On your Business, Not In It". I think you'll enjoy it.

The Bottom Line

So here you are! You've decided on a franchise in which to invest. It's a financially stable company that provides "know how" and support to help you become a successful entrepreneur. But be sure to get the accounting support you need, either from the franchisor or your own accounting professional -- and be committed to follow the "rule book", know the numbers and manage and monitor your business in real time to achieve financial success. After all, isn't that why you're an entrepreneur?

For the 5 Most Fascinating Stories in Franchising, a weekly report, click here & sign up.

Now as scary as providing a personal guarantee may be there is not all bad news in both how you approach the subject with your prospective landlord and how you can negotiate a better guarantee for yourself.

Lastly you also need to understand the "law" in your local jurisdiction, which could mean State, County,City laws.

This is why it is essential for you to have legal representation in any real estate transaction.

In many jurisdictions landlords are required to "mitigate" their losses. What this means is before they can cash in what you put up to guarantee the lease the landlord has to do a few things first.

Firstly they can use your security deposit right away. No questions asked.

Secondly, they must make every effort to re‐lease the premises in a timely manner. This means they can't sit around waiting for the next tenant to arrive on their doorstep. They must actively market the space. Once a replacement tenant has been found and secured and only then will your loss or the amount you will be paying as a result of your guarantee be calculated.

The landlord will calculate the number of months of not receiving rent. They will add to this the marketing costs, legal fees, renovation costs and commissions associated with the loss mitigation.

They will in most cases be entitled to interest on the outstanding amount owed for mitigation period. So unless you are near the end of your lease the amount of actual exposure can be significantly reduced.

However, if market conditions are unfavorable or the economy is not good this can work against you as it may take a landlord longer to find a replacement.

The following are some pointers of reducing your personal exposure under the personal guarantee.

1. You can try and limit the amount of time you will guarantee the lease term. Perhaps you can have language that says "that after 2 years in the space, provided the tenant has not been in any default and has been in good standing with the landlord" the personal guarantee goes away or reduced by certain amount of time".

2. You can also try to tie the time limit to your business doing a certain amount of gross sales which you can substantiate to the landlord and if you achieve that level of sales for a certain amount of continuous time the guarantee goes away or is drastically reduced.

3. You can try a have a "liquidated damages" clause which means you are willing to lose a preset and mutually agreed upon amount of money to settle any default. Be cautious as this may mean a substantial amount compared to going the mitigation route.

4. You should require language that absolutely requires the landlord to mitigate its loss, just in case there are no hard and fast laws in your jurisdiction.

5. You can try and have a co‐signor or co-guarantor who has better financials, but be careful as its usually a relative and you all
know how that can play out if your business falters.

6. Try can have a shorter term lease, is reduces the total amount. For example if you were thinking of a 5 year lease term, think about a 3 year term with an option to renew for 2 years.

Your exposure would be only 3 years. Please note however, the shorter term lease may cost more because the landlord wants the security of knowing they won't have to re‐lease the space sooner. Also be aware, if in the event you are having interior improvements done by the landlord and the cost is being rolled into the lease payments, this can cost you more for
a shorter term since the payments will be based on the length of the initial term.

Lastly,if you get a business loan for whatever reason the lender will require you to have a lease term that is the same or greater than the loan term.

Other than these tips you should be prepared to have to sign a personal guarantee.

The only exception might be if you are going to lease property in a run down, economically stressed area, then a landlord should be happy to see you and your business and not require a personal guarantee.

For the 5 Most Fascinating Stories in Franchising, a weekly report, click here & sign up.

In the height of summer in 2012 it was the warmest year on record. Fueled by drought conditions, huge fires destroyed homes and burned thousands of acres in western states.

Temperatures above 100 degrees have persisted to an unprecedented extent across the county. Severe storms in the northeast caused multiple power outages that combined with high temperatures to cause uncomfortable and even unsafe conditions.

This summer, then, it seems more important than ever to pay attention to the dangers of heat. You need to ensure that your workers are safe.

The Occupational Health and Safety Adminstration (OSHA) has created a campaign to help employers and workers understand and prevent heat illness. Heat illness can occur under conditions of heat and humidity, particularly with work that requires exertion and/or heavy protective clothing and equipment.

The three main keys to prevention of heat-related illness are: water, rest, and shade. Train your outdoor workers to pay attention to all three. It's important that those working in heat conditions drink water, even if not thirsty and that they rest in the shade to cool down. Heavy work in hot conditions should be built up to so that the worker's body can acclimate properly and safely.

There are different degrees of heat-related illness from heat cramps to heat exhaustion to the extremely serious heat stroke. Train your workers and supervisors to recognize heat exhaustion symptoms such as nausea, headache, dizziness and drenching sweats with cold, clammy skin. Heat stroke is particularly dangerous, sometimes fatal, and can occur with no heat exhaustion symptoms occurring first. Immediate, emergency medical care should be obtained with any of these symptoms:

  • Confusion, anxiety, or loss of consciousness
  • Very rapid or dramatically slowed heartbeat
  • Rapid rise in body temperature that reaches 104 to 106 degrees Fahrenheit
  • Marked decrease in sweating accompanied by hot, flushed, dry skin
  • Convulsion
  • Other heat-related symptoms not relieved by shade or air-conditioning and fluids

OSHA also provides a Heat App for free download in English or Spanish for iPhone or Android. The app provides a heat index for a particular worksite and the related level of risk for outdoor workers.

Click on reminders--including drinking enough fluids, scheduling rest breaks, planning for and knowing what to do in an emergency, adjusting work operations, gradually building up the workload for new workers, training on heat illness signs and symptoms, and monitoring each other for signs and symptoms of heat-related illness--for that level of risk.

For the 5 Most Fascinating Stories in Franchising, a weekly report, click here & sign up.

Language underlies almost all other components of the customer experience. Yet, your company has probably given more thought to the language it uses in marketing campaigns than to the words employees use when having conversations face-to-face with customers.

That's a mistake, because customers don't generally get their make-or-break impressions of your company from high-minded branding exercises. They get them primarily from day-to-day conversations with you. And those are the impressions they spread to others.

If you haven't given much thought to selecting your company language--what your staff, signage, emails, voicemails, and web-based autoresponders should say, and should never say, to customers--it's time to do it now.

No brand is complete until a brand-appropriate style of speaking with customers is in place at all levels of the enterprise.

Which is why, whether I'm consulting with a law firm on building a client service initiative, speaking to a hospitality audience on building guest loyalty, or assisting a hospital in improving customer service for its patients, one of the first pieces of work I suggest we do together is focus on achieving a consistent style of service speech.

Develop a language lexicon.

A distinctive and consistent companywide style of service speech won't happen on its own. You'll need social engineering: that is, systematic training of employees.

Imagine, for example, that you've selected ten promising salespeople for your new high-end jewelry boutique.

You've provided them with uniforms and stylish haircuts and encouraged them to become your own brand's versions of a Mr. or Ms. Cartier, starting on opening day.

But they'll still speak with customers much the way they speak in their own homes: that is, until you've trained them in a different language style.

Happily, ''engineering'' a company-wide style of speech can be a positive, collaborative experience. If you approach this correctly, you won't need to put a gag on anybody or twist any arms.

Once everybody in an organization understands the reasons for language guidelines, it becomes a challenge, not a hindrance. The improved customer reactions and collaborative pride of mission are rewarding. As a consequence, it can be a relatively easy sell companywide.

What should be in your language lexicon?

Here, for example, are some good/bad language choices:


Bad: ''You owe . . .''
Good: ''Our records show a balance of . . .''

Bad: ''You need to . . .'' (This makes some customers think: ''I don't
need to do jack, buddy--I'm your customer!'')
Good: ''We find it usually works best when . . .''

Bad: ''Please hold.''
Good: ''May I briefly place you on hold?'' (and then actually listen
to the caller's answer)

The specifics of the lexicon you develop will vary depending on industry, clientele, and location. A cheerful ''No worries!'' sounds fine coming from the clerk at a Bose audio store in Portland (an informal business in an informal town) but bizarre if spoken by the concierge at the Four Seasons in Milan.

An alternative approach:

If this ''Say This While Avoiding That'' approach strikes you as too prescriptive
(or too much work), if you don't want to develop scripted phrases and specific
word choices for your employees, at least consider developing a brief ''Negative Lexicon.'' A Negative Lexicon is just a list of crucial language Thou Shalt Nots.

The Negative Lexicon is the Danny Meyer approach, the one used by that great New York restaurateur and master of hospitality. Meyer feels uncomfortable giving his staff a list of what to say, but he doesn't hesitate to specifically ban phrases that grate on his ears (''Are we still working on the lamb?'').

A Negative Lexicon can be kept short, sweet, and easy to learn. Of course, new problematic words and phrases are sure to crop up as time moves on.

Ideally, you'll update your Negative Lexicon as frequently as Wired magazine updates its ''Jargon Watch'' column.

P.S. For more on language engineering, learn about the Five Words You Can Never Say To A Customer

For the 5 Most Fascinating Stories in Franchising, a weekly report, click here & sign up.

All rights reserved, expressly overriding the creative commons license.

It is common practice for employers to secure credit reports on current and prospective employees.

While this information can be easily obtained by subscribing to a commercial credit reporting service or by hiring a company specializing in conducting employment investigations, this practice has serious legal pitfalls.

Under the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq. (West, 2005), an employer is authorized to conduct a credit investigation to evaluate a job applicant for employment or a current employee for promotion, reassignment or retention.

In these instances, the employer is required to secure the individual's informed consent to the investigation in writing and to refrain from making an adverse employment decision based, in whole or in part, on a credit report absent full compliance with the safeguards set forth in this enactment.

The FCRA generally requires an employer to provide a copy of the report and a written description of the individual's rights under the Act before taking any adverse action against a current employee or job applicant based on information contained in the individual's credit report.

Within three days of taking adverse action, the FCRA additionally requires the employer to provide:

•Notice of the action taken;

•The name, address, and phone number of the credit bureau from which the report was obtained;

•A statement that the credit bureau did not make the decision to take the adverse action and cannot provide specific reasons why it was taken;

•Notice of the individual's right to obtain a free copy of his/her credit report within 60 days; and

•Notice of the individual's right to dispute the accuracy of the information in his/her credit report with a credit bureau.

While these provisions on their face may appear to provide meaningful protection, it is actually quite difficult to find out whether an employer has followed the letter of the law.

The employer always can claim that it based the turn down or adverse employment action on a reason that was separate and unrelated to any adverse information contained in the credit report. Even with its limitations, the FCRA has the potential of providing relief.

For example, it subjects an employer to civil liability for "knowing noncompliance" with these and other requirements. Remedies include "actual damages" (e.g., lost employment or promotional opportunities and job search costs incurred by the prospective or current employee), litigation costs and attorney's fees. In addition, willful failures to comply with the FCRA may subject an employer to an award of punitive damages and/or criminal liability.

There are several very simple steps that an employer can take to avoid litigation and potential liability.

First, the employer should advise the prospective or current employee that a credit investigation will be conducted and secure his or her express consent to the inquiry.

Second, the employer should inform the prospective or current employee of what type of a credit report will be obtained and how its results will be used.

Third, the employer should provide the affected individual with a copy of any report containing adverse information and invite his or her comments on the accuracy and completeness of this information before making a final decision on employment.

This information should be set forth in clear and concise language on a standard consent or verification form, and the prospective or current employee should be required to sign the form before any credit report is requested. In addition, the employer should refrain from saying or doing anything that might be construed as making an unauthorized use of credit information during an employment interview and/or reference check of any individual.

While these recommendations go beyond the current letter of the law, they make a great deal of sense from a public relations and human resources perspective. Since the law is still developing in this area, providing additional safeguards makes sense from the perspective of employers and employees alike.

For the 5 Most Fascinating Stories in Franchising, a weekly report, click here & sign up.

A Good Franchise in a Poor Location will become a Poor Business!

One of the most effective strategies to conducting site selection is not by looking for the proverbial needle in a haystack, but instead, by using the process of elimination.

The number one reason for a franchisee's failure or poor performance is due to a poor location. A poor location ultimately results from poor site selection. How else can you explain that identical stores from the same chain or franchise system will vary as much as 200% in sales volumes? Of course you will need to factor in store size, marketing budgets, management and so on; however, these are all secondary to the importance of location, in my opinion.

Essentially, there are three types of franchise businesses: profitable, break-even and go-broke. A truly profitable franchise location will make money and the business will appreciate in value. A break-even franchise location will pay the owner a small salary and pay the rent but not much more. The go-broke location that comes to my mind lasted less than three months from opening to closing for one unfortunate tenant. Despite my warnings that this was a go-broke location, the business owners poured in $80,000 into their store setup and couldn't pay their rent by the second month of operation. Usually, a go-broke location will not only steal your capital but also put you into personal bankruptcy - after you have maxxed out your credit.

If you thought that franchise site selection was all about location - location - location, you're right ... intellectually. However, when first-time tenants with limited leasing experience are involved in the site selection process, good old common sense often goes out the window. Consider for a moment that site selection involves both science (with part research and part timing) and good intuition (part luck). Franchise tenants, typically, will mistakenly rely on either a landlord's real estate agent or their franchisor (without a dedicated in-house real estate team) to lead them through the process.

In my book, Negotiate Your Franchise Commercial Lease or Renewal, I have dedicated an entire chapter to site selection. Here are just a few relevant tips from the expert:

1) Allow enough time so that you're not making decisions under pressure. Typically, for a new franchise business, you should start the site selection process six months or more in advance of when you want to open. If you find a prime location, usually the landlord will hold it for you for a few months. However, if the process takes longer, you may need several months to finalize the Offer to Lease, review the formal lease documents and/or build out the store.

2) Don't let a realtor show you space all over town. Franchise tenants often fail to realize that realtors/agents/brokers typically work for landlords who pay them a commission on lease deals signed and closed. When one agent shows you another agent's listings, this will effectively create commission-splitting between the property's listing agent and the leasing agent. This will also undermine your negotiating power since the landlord's real estate agent will know how you feel about every location. A realtor may be very helpful in pointing out a location you were unaware of, but remember who they are working for. While their advice may be sincere, it may be sincerely wrong.

3) Make your leasing inquiry by calling the "For Lease" number on the property sign. This way, you will meet and negotiate with the listing agent directly. Tour prospective sites in order from worst to best based on curb appeal. This way, you will become more confident, ask better questions and be more in control of the leasing process.

4) Don't telegraph your intentions by giving buying signals. Ask the leasing representative to e-mail you preliminary information before you agree to view the space. When viewing, stifle the urge to think out loud; subtle comments to a partner/spouse and overheard by the leasing representative can work against you. If you're asked how much you have budgeted for rental payments, remain vague. Not every question asked deserves an answer - not yet, anyway.

If you find yourself weighing a better location at a higher rent versus a lesser location at a lower rent, my advice is to go for the first option. When consulting to franchise tenants and doing site selection, my job isn't to find the cheapest location, it is to select a site that will help the franchise tenant maximize his/her sales.

Also remember that landlords sometimes prefer to lease their worst space(s) first and save the best space(s) for last. Usually, the individual unit or location you lease within a shopping centre or strip mall is more important that the mall itself - or at least equally important. Know that lease rates within a building can vary by 200% depending on unit desirability, walk or drive-by traffic flow, space shape, quality of neighbouring tenants, anchor tenants and your operating status as an independent or a national chain name. While you don't always get what you pay for in leasing commercial space, you normally don't get more than you pay for either.

Note that if you already own a franchise business but are considering relocating when your current lease expires, start your site selection at least nine months ahead. If you cannot get a satisfactory lease renewal, you will need this time to select alternative sites and negotiate a new lease elsewhere.

Franchise tenants need to know there is a great deal more involved with the site selection process than just what is explained here ... these pointers are just a few tips of the iceberg.

For the 5 Most Fascinating Stories in Franchising, a weekly report, click here & sign up.

"Would you like fries with that?" is a phrase you've probably heard a million times over. Once upon a time, that was considered the easiest, most effective cross selling opportunity.

Times have changed - menu offerings have expanded, and customers have become more health and money conscious. Cross selling and upselling opportunities have evolved, and training employees to handle this effectively can mean a world of difference in your bottom line.

Cross selling and upselling doesn't come naturally to some people, but if done in the right manner, it can become a comfortable process for staff.

Below are some tips to use when training staff to consistently upsell and cross sell to customers.

Don't do it for the sake of doing it: incorporating a standard cross sell to a cashier's order taking process won't work - it will sound mechanical instead of helpful.

Telling an employee to always ask, "Would you like fries with that?" no matter what the order will turn people off. Offering additional items or larger sizes in an attempt to meet the customer's needs will be way more effective in encouraging additional sales.

Value selling- make the customer see the value in a cross sell item, while letting them know their business is appreciated. Panera Bread does a great job with this.

When a customer orders a meal, the employee lets them know that because they did so, they are eligible to purchase any bakery item in the case for only $.99. It gets the customer thinking about dessert and looking at the bakery case.

Say it with pictures- a picture says a thousand words. Make sure you have visually appealing signage that is prominent on the menu board or at the speaker at the drive thru of high profit items.

People are drawn to visuals, and may be more likely to purchase these items, especially when the drive-thru employee starts off the conversation by asking if they'd like to try the promotional item.

If value meals show a high profit margin, feature images of value meals prominently - psychologically, the customer will perceive this as the item to order, even if that was not what they originally intended to purchase.

Show the savings- one way to resurrect the "would you like fries with that" mantra is to explain why you're suggesting that.

If a customer orders a sandwich and beverage, the cashier can easily say, "if you'd like to add a side to that, it's only an additional $.99 and you'll save $1.25 if you purchase it as a meal."

Be specific and enthusiastic- Instead of asking, "Would you like a drink with that?" offer specific beverages as suggestions. It could sound something like, "If you'd like to add a drink to your order, we have a great new Smoothie - you can choose Strawberry, Raspberry, or a Hawaiian blend.

I tried one and they are really good! They're on special for only $1.99 with any order."

Psychological upsell- this is a unique opportunity that can work wonders with upselling. When customers are placing orders for items that have more than one size, but they don't specify a size, training your employees to confidently suggest the larger size by saying, "That will be the eight piece order of mozzarella sticks, right?" while nodding their head in confirmation.

This can encourage a larger purchase, even if the customer only intended on purchasing the four piece order.

Know the menu- Employees need to listen to the customer orders and make their suggestions based on that, not what is "easy" to suggest.

You don't want to suggest a triple chocolate brownie pie to someone who just ordered a low calorie salad. Instead, focus on other healthy, low calorie items as a suggestion.

Indecision can increase sales- if a customer is unsure of what to order, this is a great opportunity! Teach employees which items or combination of items yield the highest profit margin so they can suggest those to the undecided customer. If customers are unsure what to order, they will often times take the employee's suggestions.

They are usually pressed for time and don't want to hold up the line by reading the entire menu board.

While the value of these additional sales is a known fact, seeing the actual impact can drive home the point even more of why this is so important.

Consistency is key. No matter which of the methods above are used, an attempt to either upsell or cross sell should be done during each and every transaction. If you're thinking that your employees do this all the time, just because you've trained them over and over on this matter, you may be surprised.

With many of our mystery shopping clients, including those in this industry, they are often times very surprised to find that the question on their mystery shopping program pertaining to this issue is only answered "yes" at 50% of the time!

Train your staff, remind often, and reward when effective techniques are used.

The tips are rather subtle methods to use so that it doesn't seem like a sales pitch. It will also give value to your customer's visit - they will feel as though the employee wants them to have the best experience possible.

This may not only lead to increased revenue, but customer retention and repeat business.

For the 5 Most Fascinating Stories in Franchising, a weekly report, click here & sign up.

We run a pretty good sales team at Telephone Doctor. Several team members have been with us over 15 - 20 years. One even longer. Some have left after 3 weeks. My guess is those that have left, left due to one of these 'reasons.' Actually it's not a guess. One of these reasons is definitely why they left.

Like all lists, it's not final. There are other reasons, however, I believe you'll agree this is a good start. Share with your sales team.

    1. They don't practice their skills
    2. They're not flexible
    3. They're not a team player
    4. They don't use their sense of humor
    5. They don't use their imagination
    6. They don't listen to management
    7. They make no effort
    8. They get too comfortable, too fast
    9. They interrupt too often
    10. They don't ask enough open-ended questions
    11. They make too many assumptions
    12. They're not sales minded in all areas
    13. They're not able to handle corrective criticism
    14. They don't have enough enthusiasm
    15. They have poor time management skills
    16. They don't use their Saturday night personality during the week
    17. They don't have a "Whatever It Takes" mentality
    18. They lose their focus
    19. They're not able to deal with personality conflicts
    20. They don't truly believe in their product
    21. They don't understand rapport building
    22. They don't understand ongoing customer service
    23. They have too many unqualified leads
    24. They lack confidence
    25. They don't have long-term commitments
    26. They're short sighted
    27. Honesty is a problem for them
    28. They don't do any self-improvement
    29. They refuse to follow scripts - even loosely
    30. They don't understand this list
    31. Wanna add your own?

Could this be YOUR franchise?

Common scenario: Franchisees phone rings with a potential customer. The caller is put on hold (often curtly). Or it rings too long. The caller waits five seconds, hangs up. No sale. No second chance.

Uncommon solution: The Customer Service Expert: Nancy Friedman, speaker, Telephone Doctor Customer Service Training. Rapport building, retention and engagement a specialty.

I shoot down bad habits and punch holes - using humor - in the mistakes we all make in customer service and sales offering the positive alternatives to be used immediately and forever.

Results? ROI, increased customer service, more sales.

A 2015 IFA annual conference attendee said: "WOW! Exceptional does not even begin to cover how magnificent (Nancy's) presentation was. Funny, engaging, insightful, helpful, and downright phenomenal! Nancy's session was worth the trip & conference alone!"

Call me personally for more information.

Nancy Friedman | President | Speaker
Telephone Doctor Customer Service Training

314-291-1210
www.nancyfriedman.com

With the constantly evolving atmosphere of the business world, understanding the particular nuances of brick-and-mortar stores is imperative to establishing an image within consumer market any size.

This is where Geo-analytics (also known as location analytics) becomes an effective way to optimize a business' location. Geo-analytics equips businesses with the tools and knowledge to plant and grow effectively.

Before deciding to invest in a geo-analysis for a business, you may want to ask what makes geo-analytics so beneficial. To help understand how Geo-analytics could be a "game changer", here are a few important points:

  • Information is key to building a new location for your business, and a geo-analysis of your immediate area allows you to see numerical and graphical representations of what you need to know.
  • Geo-analysis supplies detailed information about spending patterns, consumer needs and wants, and other information about the demographics in your desired area.
  • The shifting web-based consumer market can seem like a threat to many physical stores, but geo-analysis gives you a visual of how to create an environment to communicate with your locations demographics.
  • With the knowledge about your specific location, you can make important and educated decisions about implementing a new business model.

Consumers seek businesses that seem to understand them and their needs, and having the proper information about the location in which you plan to build a business is key.

Whether you're building a franchise or starting up a business from scratch, knowing exactly what the community around you needs can give you an edge over your competition.

The post How Geo-analytics can Improve Your Business appeared first on Predict and Prevent Business Failure.

For the 5 Most Fascinating Stories in Franchising, a weekly report, click here & sign up.

No risk no reward it is often said. Franchise ownership is definitely not for the faint at heart. Owning your own business has incredible rewards and can represent everything about yourself professionally.

The old saying of "you'll never work a day in your life if you love what you do" certainly applies to many small business owners.

However, the same passion Franchise owners have for their core business does not necessarily translate well to other areas outside their core competency.

Welcome to the world of indirect costs.

It does not matter if you are restaurant, medical office, manufacturer or a retail store, indirect costs can eat right through your profits in no time.

Indirect costs include many areas that are not a deliverable to your customer such as transportation, merchant services, electricity, gas, fuel, insurance and office equipment or supplies.

Franchise owners struggle in these areas because of a lack of expertise, leverage and most importantly the lack of time. The indirect cost providers have no such lack of expertise or time compared to the small business owner. This usually leaves the Franchise owner with the least amount of leverage. Kind of like a nail to hammer relationship! Not much leverage for the old nail.

However, Franchise owners do have options to increase their leverage if they choose. Here are three ways they can increase their leverage with indirect costs:

  1. Open up negotiations - there a lot of indirect expenses in which there are no restrictions to competition so rebidding the service is a very viable option. This even includes using your current provider. There is nothing wrong with checking the marketplace for updated pricing and service plans. Service levels, service providers, technology and your own needs change over time. You just might be surprised to find key savings right in front of you.
  2. Buying groups - buying groups add value to their members through essentially group discounting. These groups are often associated by industry and can be a very effective way to increase leverage with providers to the industry. There can be costs associated with joining these groups, but the cost of membership can easily payoff in the savings associated.
  3. Strategic partnerships - there are strategic partners that specialize in indirect costing solutions that give small business access to negotiation leverage they just can't get on their own. These partners add leverage to the Franchise owner through their expertise and their relationships with these types of providers. They can provide preferential pricing to the Franchise owner because of their track record and relationship with these providers and pass these savings onto the Franchise owner. These partnerships not only pass along savings to their clients, but they also allow Franchise owners to leverage time because they act on the behalf of the small business owner allowing them to focus on their core business. Some of these partners specialize in one are while others can provide a one stop shop for all indirect costs.

Franchise ownership requires maintaining cost to keep you competitive in the marketplace.

While you can't save your way to higher sales, you can price yourself out of the market.

Indirect costs are just part of doing business so make sure to review those costs for opportunities that just might give you an edge.

If it has been a while since you reviewed those contracts the investment of time could pay off exponentially.

Search for Articles

Follow Us

About this Archive

This page is an archive of entries from July 2015 listed from newest to oldest.

June 2015 is the previous archive.

August 2015 is the next archive.

Find recent content on the main index or look in the archives to find all content.

Authors

Archives