While franchisees have a higher success rate than other startups, they still have to work hard to cash in
Almost all the franchisors I’ve known over the years have a common rhetorical question: “Why don't franchisees try harder?” The answer of course is that many franchisees enter the business with the impression that, having paid their joining fee, all they have to do is sit back and wait for the business to be handed to them on a plate and for the money to roll in. For many, no matter how much the franchisor tells them otherwise, this is the view of the business relationship they've entered into. And therein lies the root cause of many failed businesses, including many that are fundamentally sound franchised businesses.
This isn't of course to suggest franchising is high risk, far from it. Franchising has an impressive success rate with over 95% of new franchised businesses still operating profitably after five years compared with only 5% – yes, just 5% – being new non-franchised startups.
But back to my narrative: the phenomena I’ve outlined is less of a problem with franchised businesses that require franchisees to generate all their own sales. The trend, however, is going in the opposite direction as the growing importance of online shopping makes it more likely the franchisor will generate sales through a main website and pass the resulting work to the franchisees. Similarly, the same scenario is likely if the franchisor has national contracts executed by the franchisees. All too frequently the result is that the franchisees don't remain hungry for new business. They don't keep searching for sales opportunities or continually try to develop new business contacts –both of which are a vital part of maintaining the growth and vitality of a business.
The answer to this perennial problem is for the franchisor to make it clear from the outset – at the initial interview with the prospective franchisee – that the business is not going to be one in which the franchisee can sit back and see the money stack up. The franchisee also needs to realise that starting a new business is going to be far from easy, even with a first class franchise, and that a great deal of personal commitment is going to be needed. Any new business will not be a nine-to-five walk in the park. It’s going to be long hours and require a huge amount of effort.
Just as difficult is the task of maintaining the initial enthusiasm and hunger to succeed; the desire to continue growing and develop a bigger, more profitable business and the determination to keep trying really hard.
Every franchisor wants to see their franchisees in that situation because success breeds success for all concerned. For franchisees who are willing to make this commitment the rewards are too numerous to count.