While few franchisees fail, it’s important that franchisors learn from their mistakes to prevent it from happening again
It’s hardly a secret why the majority of startups collapse within their first few years. From establishing supply chains to attracting their first customers, getting every part right off the bat is a considerable challenge. Fortunately, budding entrepreneurs can reduce that risk by joining a franchise where the franchisor has already ironed out most of the creases. In fact, only 1% of franchises fail, according to the bfa / NatWest Franchise Survey 2015. And when they do fold, smart franchisors learn from the experience to prevent similar mistakes from happening in the future. Recognising this, we asked three franchisors to share the insights they learned when their franchisees failed.
Helen Gillies couldn't have been better prepared six years ago when she franchised Tots Play, the baby-development-play company. Having perfected the brand since its launch in 2009, the founder and managing director believed she knew how to make the franchise successful. “But when you start to franchise you’re learning just as much as your franchisees,” Gillies says. And what she came to understand was that it’s easier to stumble when you’re still learning to walk in the world of franchising. “That’s why you’re the most likely to make mistakes because you don’t have the knowledge not to,” she says.
She’d soon learn that lesson the hard way when she recruited her first franchisees. “There was this one lady in the early days,” Gillies says. “I kind of knew she wasn’t the right fit but I didn’t want to turn her away because she was so keen.” Unfortunately, it didn’t take long before it became clear that the franchisee lacked the skills essential to make the business successful. “She couldn’t promote herself,” Gillies says. Despite the franchisee’s eagerness to join the network, this inability to toot her own horn left the business without enough customers and eventually it had to close.
But disappointing as it was to let one of her franchisees go, Gillies ensured that the network benefitted from the experience. “I learned to trust my instincts more and know that if it didn’t feel like they were the right fit, then they probably weren’t,” she says. Keen not to repeat the mistake, she also made sure that Tots Play’s recruitment process evolved to reflect her new insights. “It’s not about us being right and them being wrong or anything like that,” she says. “It’s just about making sure that the two of us fit together and that we can offer each other what we are looking for.”
While these changes have meant that some hopeful candidates have been turned away at the door, it’s safe to say that Gillies taking extra care with her recruitment has worked wonders: Tots Play today has a flourishing 40-franchisee-strong network.
From setting their own schedule to benefitting from the sweat of their brow, it’s hardly a secret that the allure of becoming their own boss has persuaded plenty of people to take the step into franchising. However, not everyone is suited to run their own business. “There’s a world of difference between having a job description and being self-employed,” says Ian McIntosh, CEO of RED Driving School, the driving-school franchise. “Suddenly, your success depends on what you do and not what your boss has told you to do.” And failing to successfully make that mental transition is one of the main reasons why franchisees in his network have gone out of business. They stumble because not only do they have to teach the lessons but they have to do the managerial legwork too. “You must be able to handle the financial and customer side, plan your day and manage your area,” says McIntosh.
Given that franchisees buy into a business because of its proven concept, it’s surprising that many of the people who join RED Driving School opt out of following the beaten path. “The reason people fail is because they don’t know how to follow our model,” says McIntosh. For instance, in their eagerness to get customers, some franchisees sell their lessons cheaper than the franchise’s recommended asking price. Others change the length of their lessons, thinking that it could help them squeeze more of them into the day. Instead, they often earn less money because they end up wasting time driving between lessons rather than teaching them. “It’s amazing that despite us really hammering home these points, people still persuade themselves that they need to do their own thing,” he says. “Not everyone fails, of course. But the ones that do, that’s the mistake they make.”
Recognising this was an issue, RED Driving School has made efforts to reduce the risk of franchisees diverting too much from the model. “We are training people better and helping them more because we want them to succeed,” McIntosh says. For instance, the company has spent the last six years perfecting its franchisee support. Not only does it include a digital system where instructors can get referrals but it also offers a team that’s always on hand to provide advice to struggling franchisees, helping them to better transition into the world of self-employment. A big part of ensuring the survival of the network is to share the insights from when people’s businesses have collapsed. “Our failures are very few and far between these days,” he says. “And we make sure to share this knowledge with our franchisees. For instance, every year we do a series of talks around the country and these are the sort of things that we talk about.” By learning from the ones that crumble, RED Driving School has reduced the number of franchisee failures significantly.
No worry, no cry
Launching a business can be a nerve-wracking experience. Not only does franchisee have to attract customers but they also have to tackle a slew of other obstacles. And their attitude in dealing with these hurdles will determine whether they are successful or not, according to Ian Sharland, director and co-founder of the Wow World Group, the multi-brand franchisor that owns Baby Foundations, Baby Sensory, Toddler Sense, Mini Professors, KeepaBeat and Reading Fairy. “Every one of our franchisees that failed did so because they spent too much time worrying,” he says.
That was certainly the case with the first franchisee that folded. “They’d ring and tell me what they were worrying about,” he says. While there’s nothing wrong with franchisees calling their franchisor for support and guidance, Sharland quickly noticed that they seemingly didn’t listen to his advice. “They would almost always tell me why an idea wouldn’t work,” he says. “I can accept that it might be different in different territories. However, people who want to resolve the situation should at least start thinking about how to modify the idea to work in their area.” But the ones that struggled were the ones who kept worrying and didn’t look for solutions.
Having learned from the experience, Sharland has changed his recruitment strategy. “We consciously look for people who are going to solve and not worry about problems,” he says. While the WOW Group wouldn’t disqualify anyone who might worry a bit about the business, Sharland tells budding franchisees to be honest with themselves. “I tell them that there are going to be bad days running a business,” he concludes. “If you’re the kind of person who can’t leave your problems behind at the end of the day, then my advice is that you don’t just avoid buying my franchise but also that you don’t take on a role where you are self-employed. Life’s too short to lose sleep over problems every night.”