The journey of a franchisee
posted on 05-Mar-2008
In the first of a new series, Derrick Simpson, Managing Partner of Franchise Resales Limited, takes us through the journey of a franchisee
Welcome to a new series of articles exploring the various elements and complexities that comprise a successful resales system and which, when fully implemented, will enable franchisors to operate and manage an efficient and functional exit programme for their franchisees.
Over the next five issues, I will be breaking down the resales process into its core constituent parts. This will include, the franchise lifecycle, planning a sale, recruiting for resales, creating a resales culture and franchisor sales. Each will be discussed to provide the opportunity for franchisors to decide how they wish to implement this vital element of their franchise system.
Starting in this issue I will be addressing one of the real basics of franchising, the Franchisee Life Cycle.
Fleeing the nest
A wise man once said to me, “the only reason to start a business is to sell it”. Whilst this is not necessarily totally true for all businesses, I believe the overall sentiment to be correct and this applies to our franchisees and our own businesses, as much as it does to independent non-franchised ones.I have had thousands of conversations with franchisees over the years and the topic that was very rarely raised by them was the final goal, their game plan for exit. Some talked about handing their business on to their sons and daughters and yes, some have actually talked about an eventual sale of the business but, the vast majority have not. Nearly always the topic was raised by me. Later on in the series I will discuss creating a culture that accepts and plans for resales - but for now let’s think about why this should be an issue for franchisors.
Franchisors are naturally mostly concerned with attracting new applicants to their brand and developing their market in the target territory by taking on new franchisees. This is where the majority of advertising and recruitment activity lies and magazine publishers, exhibition organisers and recruitment brokers are all focused on achieving this aim. This is fine as a growth strategy but even in newer/younger franchisors it is essential to keep an eye on the early sign-ups, the franchisees that have been in the longest, because it is these who will be seeking to sell and leave and it is these who you need to support throughout the resale process.
Every franchisee will go through a life cycle and the length of this cycle will vary depending on the nature of the business, the returns that have been achieved and the personal circumstances of the franchisee. All will at some stage exhibit the various traits of the franchisee life cycle as they move from sign-up through launch, growth, maturity and comfort. The challenge for the franchisor therefore is to be able to address each of these stages and through their support system maintain the focus of the franchisee, so that they continue to develop their businesses and plan their eventual exit from the system as the cycle comes to it natural conclusion.
The start of the journey
At inception when a franchisee has just signed up they are raring to go, the adrenalin is flowing and both franchisee and franchisor are looking forward to a mutually rewarding future together; the franchisee is reliant on the franchisor for advice, training and guidance. This is the juvenile stage in a franchisee’s life and is a period that may only last a few weeks in fairly simple business models or may last several months with more complex systems. It is a time where the franchisor is giving training and guidance and the franchisee is taking and hopefully absorbing the knowledge. However, this can change as the franchisee gains in confidence.Making tracks
During the adolescent stage ,the franchisee feels they don’t need the franchisor’s help very much and possibly they start to exert a little of their independence; this is the first of the two danger zones in the life cycle. It is quite possible that the franchises will start to resent the franchisor and their fee payments, as their confidence grows; but it also quite likely that it is now they may ‘hit the wall” and say they want to leave. They are at the bottom of the emotional learning curve that every franchisee goes through. Now the euphoria of the start up has worn off, the realities of franchise ownership have hit home and the hard work has begun. There is a real risk at this stage of a franchisee wishing to quit and given this fairly early point in the business life cycle, it is highly likely that it is going to be too early to achieve a successful sale, and so closure is a real risk here.This is where having structured exit planning and providing information about the whole resales process from day one is important as it means a franchisee is aware of what their options are from the start.
