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Navigating The Road To Franchise Success

There are many reasons an entrepreneur chooses to engage in business with a franchise as opposed to going out on their own. Just like personal relationships, most franchisees are drawn to a franchise because they like how the brand looks and feels. Maybe it was the brand marketing that caught their eye. Maybe it was an experience they had with the company. Maybe it was a product or service that blew them away. No matter what it was that attracted them to the franchise, it was something they believed others would find equally appealing.

In most cases, the attraction to a franchise comes through a product or service experience. Humans are fairly consistent when it comes to identifying differences in experiences. For example, most people can quickly describe the differences between K-Mart, Walmart and Target. There is no doubt that product pricing will come up in the conversation. However, if product pricing were the only deciding factor when it comes to business success Target wouldn’t exist today. There is much more to business than price. People are willing to pay more if a company can make a case for the added cost. For example, corporate culture, brand image, established systems and processes, customer experience and etc…all contribute to the overall experience and either draw the consumer in or pushes them away.

Those factors and many more are reasons an entrepreneur may be drawn to a franchise. The idea of owning a “turn key” operation with a proven business model is extremely attractive. Knowing that someone has not only figured out what makes for a sellable product, but they’ve also figured out the branding, marketing and systems that are necessary to support that product can be worth every bit of the royalty fee a franchisee will be asked to pay. After all, the percentage of sales a franchisor will demand for having done all that work to develop a successful business model may pale in comparison to the work, financial investment, and risk one might have to take on if they were to do the same on their own.

That said, not all franchises are created equal. Therefore, a prospective franchisee must be vigilant in their assessment of not only the franchising opportunities that are out there, but also with their understanding of what it will take to succeed. While much of a franchisee’s success lies with a quality franchisor, a franchisor can only do so much. Even the most successful franchisors have some dogs in their portfolio. In most cases, the dogs are not because the brand is weak or the product stinks. It’s usually because the franchisee failed to hold up their end of the bargain. Some franchisees just don’t do what needs to be done to succeed. I would venture to guess that had the dogs in many franchisor portfolios gone it on their own and not engaged with a franchise they would have died the same death, only quicker.

No franchisee that I know wants to fail. However, just like franchises, not every franchisee is created equal. Not every franchisee is built for business.  We’ve all seen examples of a business failing under one person, only to succeed under another. Some people are naturally built for business and some are not.  However, this does not mean that someone who is not a natural cannot learn to be a successful business owner. The difference is in behaviors. The great thing about behaviors is that they can be taught and learned. Therefore, there are certain behaviors that every franchisee can learn from those who are successful. Once learned they can greatly increase their odds for success. However, the identification of the behaviors alone will not lead to success. Its the execution of those behaviors that garners results. Anyone can create a plan, but not everyone can execute the plan.

Below are some behaviors that I have found to be present in successful franchisees. I consider them to be the differences between those franchisees who DO succeed and those who DON’T.

What Successful Franchisees DO:

  • They read and understand the Franchise Disclosure Document (FDD) and Franchise Agreement (FA), ask questions about both and seek legal opinion before contractually engaging with the franchisor. A good franchisee knows the rules of the game before playing. There should be no surprises after you’ve signed the agreement. A franchisee must know all the financial obligations, as well as all of the limitations and expectations being set forth by the franchisor before they sign on the dotted line.
  • They confirm in writing any oral representations that are made. A good franchisor will not make any claims that cannot be backed up in the FDD. If claims are being made that you have not read in the FDD or FA, hold the franchisor accountable for putting it in writing. If they won’t then that will tell you all you need to know about the character of the organization’s leadership.
  • They interview current franchisees. Don’t just rely on the list of franchisees that the franchisor may have given them as possible contacts. They look in the FDD and call a few that are not on the list. Then they ask some very pointed questions about the franchisor and their experiences. One very telling question to ask is this, “Knowing what you know today, would you engage in business with this franchisor again?”
  • They seek to understand how many multi-unit owners there are. Multi-unit owners telegraph satisfaction. If there are many one unit owners it could be for a reason, which may be dissatisfaction. After all, you don’t typically invest in more units unless you are a satisfied franchisee.
  • They seek to understand why franchises have failed. Every franchisor has some number of failed franchises. This is part of doing business. Some people who get into business had no reason for doing so in the first place. Many franchises fail because the franchisee did a poor job of running the business. That’s not totally the fault of the franchisor and in many cases shouldn’t be held against them. However, a franchisee should try to figure out the cause of the failure. Even if failures were the fault of the franchisor, it is worth understanding why they failed. I wouldn’t throw the baby out with the bath water because some franchises have failed. Maybe you’ll learn it wasn’t the franchisee. Maybe you’ll learn that early on the franchisor had some poorly designed systems that contributed to some of the failures. Maybe you’ll also discover that the franchisor learned from those early mistakes and rectified those errors. Almost every company makes execution mistakes. Companies like GM, Ford, Toyota, and Apple have all screwed up in their history. It doesn’t mean they are bad investments today.
  • They know how much capital it will truly take to succeed. Every business, franchise or not, must withstand the test of time. In my analysis, the most successful units are those that have been given time to become established. There are few overnight successes. Even some of the most iconic franchise brands needed time to establish themselves. Having enough capital on hand to carry the franchise through that growth stage is critical. Cash-flow is king in small business. However, it may take a few years to get to a point where enough cash is flowing for the business to support itself on its own.
  • They interview the corporate personnel before agreeing to become a business partner. A franchisee must get to know those who are making decisions about his/her future. If there is not a feeling of trust and confidence in the ability of those at the top to take the organization where it needs to go, then it is a marriage that is doomed to fail. You need to know and understand the strategic vision of the organization. You also need to know where their passion lies. If it’s not with the brand, then it will come through in their leadership. Passionate and smart people at the top should work as hard as you when it comes to making the business work.
  • They analyze their market in advance. A franchisor may help with site selection, demographic analysis, and real estate acquisition. However, it is the responsibility of the franchisee to decide whether or not a particular location is the right location. Know the competition, market receptiveness for your product or service, and how much advertising and marketing will be necessary to break through. Not all markets are the same and some will be easier than others to succeed in. Knowing this up front can be the difference between success and failure.

What Franchisees DON’T Do:

  •  They don’t only work in the business, but work on the business (E-Myth Revisited)
  • They don’t operate without a strategic growth plan that also incorporates actionable items to be completed within a specified timeframe
  • They don’t let the established systems and processes to become bastardized
  • They don’t let things slide. They know that accountability and execution are critical to business success.
  • They don’t ignore the numbers. Due diligence in financial management is as critical to success as execution. Knowing that the product, employee and rent costs are within specified limits is key to keeping them there.
  • They don’t stop marketing. Marketing can be expensive and it can feel as if it is not worth the investment. However, they also know that when you are out of sight you are also out of mind. There is a reason McDonald’s, Taco Bell and Apple continually market the way they do.
  • They don’t ever forget who the customer is and that if it wasn’t for the customer they wouldn’t be in business.
  • They don’t underestimate the value of hiring the right people and training them accordingly. They know that the right people can be a differentiator.
  • They don’t ignore culture. They know that a culture exists in every organization. They also know that they must develop that culture or someone else will. The right culture can bring out the best in people and lead to a highly disciplined and motivated team.
  • They don’t shy away from the tough decisions. Successful franchisees do what needs to be done, whether they like doing it or not. Accountability, adherence to systems, and spending what needs to be spent to survive are not always fun or easy. However, the successful franchisee knows that success hinges on the “how” of business. Execution is key to operational excellence and operational excellence is key to success.

Owning a business isn’t easy. But then again, neither is working for someone else. If you have a desire to be your own boss then franchising may be your ticket to professional, personal and financial freedom. To achieve those goals, you need to be clear about the fact that it will require a lot of hard work. However, the rewards of business ownership can greatly outweigh the risks.  The question is most likely not whether you can do it or not. The question is most likely whether you truly want to do what it will take to succeed. That, my friend, is a question only you can answer.

Big League Networking

Networking can be overwhelming and your mind can be racing with questions:

What events should I attend? Are they a good use of my time? What do I say? What do I want to achieve?

Networking can be used to find a new job, drum up new business, but successful networking all starts with a plan.

1. Determine success for the night

  • Before selecting an event to attend write down: Who do I want to get in front of? What do I want to achieve? Can my goals be achieved at this event? If the answer is no, DO NOT GO!
  • Set a specific goal: “3 new contacts”
  • Quality of contacts must be the mindset- not quantity of business cards collected
  • Work the room until you find your targets- takes practice

2. Interaction

  • The effectiveness of the networker is about the quality of questions they ask (this helps take off any pressure- make it about them)
  • Direct the dialogue to learn about the person you are conversing with to find out if they are a prospect
  • Follow what I believe to be the golden rule of networking:

“How can I help you?”
Sample questions to ask:

  • How did you get involved with this group?
  • What brought you here tonight?
  • Why did you get into your line of work?
  • What separates your company from the competition?
  • What is 1 thing you hope to accomplish tonight?

3. Slay Moby Dick

  • Attend networking events where a major target will be in attendance
  • Set the goal of making contact with this prospect or center of influence

4. Follow up

  • The new contacts do not mean anything without the proper follow up
  • Follow up with each contact by including: “I really enjoyed speaking about..” “Could we schedule a coffee to continue the dialogue on?…
  • Pro tip- write a few takeaways about the conversation on the back of their business card to keep the conversation fresh
  • Connect with them on LinkedIn the next day

Hope these tips make your networking more effective. Get out and attend an event or two; you never know who you may meet!

Remember: “The richest people in the world look for and build networks, everyone else looks for work. Marinate on that for a minute.” Robert Kiyosaki

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Ryan Rao is a Principal of Apex Franchise Development Group and is a franchise development expert who has grown multiple franchise based businesses into national and international brands. Franchising has allowed him to help individuals realize their dreams of business ownership, while permitting them to experience the independence, flexibility, and freedom that comes with being a business owner. He also serves as a franchise consultant, and is a personal growth advocate.

Follow or Connect with Ryan on LinkedIn at https://www.linkedin.com/in/ryan-rao/

Evaluating Investment Opportunities

As Romeo’s Pizza and Pizzafire have been accelerating in growth we have had the opportunity to structure alternative investments for a number of individuals. The appetite of the investment can be drilled down to 3 points.  The answer to these three points are a necessity when considering the investment.

1. Evaluating the Leadership Team

“Leadership is the capacity to translate vision into reality.” – Warren Bennis

Does the Leadership team have the capacity to pull this off? The only way to evaluate the leadership team is to ask them questions.

Questions to consider:

  • Who are the founders and key team members?
  • What relevant experience does the team have?
  • What key additions to the team are needed?
  • Why is the team uniquely capable to execute the company’s business plan?
  • What motivates the founders?

 

2. Evaluating the Product or Service

“The more alike two products are, the more important their differences become.” Regis McKenna

Will there be a demand for this product or service today and in the future?

Questions to consider:

  • Why do customers care about your product or service?
  • What are the major milestones thus far?
  • What are the key differentiated features of your product or service?
  • What have you learned from early versions of the product or service?
  • Provide an explanation of the product or service.
  • What are the two or three key features you plan to add?
  • How will the company market its product or service?

 

 3. Risk and Reward

“If you risk nothing, then you risk everything.” — Geena Davis

Does the risk of the proposed investment match the reward?

Questions to consider:

  • What are the company’s three-year projections?
  • What are the key assumptions underlying your projections?
  • How much equity and debt has the company raised; what is the capitalization structure?
  • What future equity or debt financing will be necessary?
  • How much of a stock option pool is being set aside for employees?
  • What are your unit economics?
  • What are the factors that limit faster growth?
  • What are the key metrics that the management team focuses on?
  • How much is being raised in this round?
  • Will existing investors participate in the round?
  • What is the planned use of proceeds from this round?
  • What milestones will the financing get you to?
  • What is the likely exit – IPO or M&A?
  • When do you see the exit happening?
  • Who will be the likely acquirers?
  • How will valuation of an exit be determined given market comparable?
  • What structure is the payback for investors?

Investing in a company can be a tremendously exciting time for both the investor and growing business. The prospective investor needs to keep a few factors in mind when considering the investment. Can the leadership team pull this off? Will this product or service be demanded today and in the future? Does the risk equal the reward?

Happy investing!

Here are some great links on investing:

http://www.investmentnews.com/article/20140527/BLOG09/140529947/4-considerations-when-evaluating-alts

http://www.forbes.com/sites/allbusiness/2013/06/10/65-questions-venture-capitalists-will-ask-startups/

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Ryan Rao is a Principal of Apex Franchise Development Group and is a franchise development expert who has grown multiple franchise based businesses into national and international brands. Franchising has allowed him to help individuals realize their dreams of business ownership, while permitting them to experience the independence, flexibility, and freedom that comes with being a business owner. He also serves as a franchise consultant, and is a personal growth advocate.

Follow or Connect with Ryan on LinkedIn at https://www.linkedin.com/in/ryan-rao/

Motivate your staff

The most important factor in scaling your restaurant from one unit to multiple units is the staff.  There is a tremendous need in the restaurant industry for professionals who buy into the process, develop their staff, and grow sales. The days of expecting clock punchers and “you should be thankful for just having a job” are gone with the baby boomers.

So, how do I motivate my staff?

1. Perception

“Limiting beliefs are a virus of the mind. They decline your success and happiness.” – Maddy Malhotra

  • Shift perception and titles to reflect empowering positive positions. For instance GM of a pizza shop to CEO of a small business which does $650,000+ in revenue.

2. Bonus

“Let your performance do the paying” – Charlotte Bronte

  • The pay for management should be a scorecard bonus program correlated to store performance. Management should understand the companies P & L and what affect food cost and labor cost have on the bottom-line. The bonus should be structured on the control of food and labor cost in addition to hitting and surpassing sales numbers.

3. Purpose

“As we look ahead into the next century, leaders will be those who empower others.” – Bill Gates 

  • Define a purpose for your management. People are motivated by interesting work, challenge, and increasing responsibility.  Provide opportunities to multi-unit management and store ownership.

4. Work Life Balance

“The measure of intelligence is the ability to change.” – Albert Einstein

  • Offer flexibility. Small gestures often make a big difference.

5. Listen

“ Most of the successful people I’ve known are the ones who do more listening than talking.”  –  Bernard Baruch

  • Empower. Create mediums for employees’ ideas for job improvement.

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Ryan Rao is a Principal of Apex Franchise Development Group and is a franchise development expert who has grown multiple franchise based businesses into national and international brands. Franchising has allowed him to help individuals realize their dreams of business ownership, while permitting them to experience the independence, flexibility, and freedom that comes with being a business owner. He also serves as a franchise consultant, and is a personal growth advocate.

Follow or Connect with Ryan on LinkedIn at https://www.linkedin.com/in/ryan-rao/

Disciplined Innovation

How creative is your company? A 2010 study of 1,500 CEO’s indicated that leaders rank creativity as the No. 1 leadership attribute needed for prosperity. It’s the one thing that can’t be outsourced; the one thing that’s the lifeblood of sustainable competitive advantage. Hyper-growth companies such as Zappos, Groupon, and Uber credit a culture of innovation as their primary driver of success. They take a deliberate approach to fostering creativity at all levels of their organizations, and deploy creative thinking to attack problems big and small. (Inc)

Check out these 7 ways to breed creativity

1. Question

“He who has a why to live for can bear almost any how.” -Friedrich Nietzsche

Breed a culture of asking “Why”? “Why” does your organization exist? “Why” do you do it this way? Create a “What if…” board in your workplace, where employees can pose outrageous “What if” questions.

2. Purpose

“Creativity dies in an undisciplined environment.” – James C. Collins

Every task must have a clear purpose and expected outcome. Purpose magnetizes passion throughout the workplace.  Steve Jobs purpose was to put a computer in every home. Your specific purpose must be your own, but the bigger and more important your purpose is, the more passion it has the potential to create within your team. Passion breeds creativity.

3. Empower

“Happiness is not the absence of problems, it’s the ability to deal with them.”  – Steve Maroboli

According to a 2008 study by Harvard University, there is a direct correlation between people who are empowered to make their own decisions, and their creative output. An employee who has to run every detail by for approval will quickly become numb to the creative process.

4. Expression

“Where all think alike there is little danger of innovation.” – Edward Abbey

Creativity is self-expression. Imagine a typical manager hovering over Picasso, barking orders, tapping his watch, questioning the return on investment, and demanding a full report on why he chose a certain brushstroke technique. Picasso’s creativity would shrivel.

5. Fearless

“The essential part of creativity is not being afraid to fail.” – Edwin H. Lane

From Benjamin Franklin to Henry Ford nearly every breakthrough innovation in history came after countless setbacks, mistakes, and failures. The great innovators and achievers weren’t necessarily smarter or inherently more talented. They simply released their fear of failure and kept trying. They didn’t let setbacks or misfires extinguish their curiosity and imagination. Employees should not fear sharing their thoughts. Embrace their ideas and the idea process. It should be accepted to say what you think, even if it is controversial. “We tried that; it doesn’t work” is not an acceptable response to brainstorming sessions.

6. Act Small

“If you want something new, you have to stop doing something old” – Peter F. Drucker

Smaller companies tend to be more curious and growth oriented. They have a stronger sense of urgency and are not afraid to embrace change.  In contrast, larger organizations often exist to protect previous ideas rather than to create new ones.

7. Nurse

“To have a great idea, have a lot of them.” – Thomas Edison

Innovation often starts with one idea and comes to life being something completely different. Create mediums to nurse ideas to life through the input of the team. Start an idea whiteboard and collaborate.

Here are some great links on innovation:

http://www.inc.com/articles/201106/josh-linkner-7-steps-to-a-culture-of-innovation.html

http://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action?language=en

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Ryan Rao is a Principal of Apex Franchise Development Group and is a franchise development expert who has grown multiple franchise based businesses into national and international brands. Franchising has allowed him to help individuals realize their dreams of business ownership, while permitting them to experience the independence, flexibility, and freedom that comes with being a business owner. He also serves as a franchise consultant, and is a personal growth advocate.

Follow or Connect with Ryan on LinkedIn at https://www.linkedin.com/in/ryan-rao/

Why do your employees leave?

Why are employee’s leaving your company?

Let’s reverse the question; Why do your employees stay?

How much does your company spend on recruiting? Interviewing? Onboarding?

The golden rule of being with one company for a career is retiring with the baby boomers. Much of the knock on millennials entering the workforce is the lack of “loyalty” to the company. To plug the holes of employees vacating, companies spend a considerable amount of resources on recruiting new employees.

Perhaps the model as we know it is flawed. Instead of accepting the turnover and spending resources on finding the next employee; let’s refocus our efforts on our current employees. Does your organization understand what your employee’s desire? Do you understand how to create an environment where very few employees would ever leave? Do you understand how to get the highest level of performance out of your employees? This type of environment entices top performers to FIND you, rather than going out to find them.

According to a recent survey by Time Magazine here is why employees stay:

  • I enjoy the work I do (67%)
  • My job fits well with the other areas of my life (67%)
  • The benefits (60%)
  • The pay (59%)
  • I feel connected to the organization (56%)
  • My co-workers (51%)
  • My job gives me the opportunity to make a difference (51%)
  • My manager (40%)

So how do you create a culture where employees stay?

  • Start with an extensive interview process ensuring you have the right candidate for the job.
  • Work life balance. Refrain from the rigid clock punching mentality and let employees work on their own time.
  • Create mediums for employees to have a voice in the company’s future
  • Help employees find their passion. Work closely with employees to ensure that each employee is engaged, excited, and challenged to contribute, create, and perform.
  • Understand your employee’s skills and abilities. When employees are in a position based upon their skill set they feel prideful, accomplished, and self-confident.
  • Train and Develop. Employees want to develop and grow their skills. Invest in it!
  • Employees need to understand their contribution of work to the organization’s goals. Discuss the relevance of the employee’s job, key contributions, and deliverables to the overall organization. Employees need to feel connected and that they are part of an effort that is larger than just their job. This creates the sense of meaningful work.
  • Organization’s financials- Employees who are worried about getting paid tend to leave
  • Finally praise goes along way. Praise employees for all accomplishments (big or small)!

Recruiting is expensive. Give retaining a shot.

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Ryan Rao is a Principal of Apex Franchise Development Group and is a franchise development expert who has grown multiple franchise based businesses into national and international brands. Franchising has allowed him to help individuals realize their dreams of business ownership, while permitting them to experience the independence, flexibility, and freedom that comes with being a business owner. He also serves as a franchise consultant, and is a personal growth advocate.

Follow or Connect with Ryan on LinkedIn at https://www.linkedin.com/in/ryan-rao/

How to prepare for a career after college in just three steps

Step one

Ask your professors, career services officials, family/friends, etc. if they will grab a cup of coffee with you (they will).

Start off asking about their background:

  • How did they get into their field?
  • Where did they go to school?
  • What was their major?
  • In hindsight, what would they tell their 18-year-old self?
  • What was their first job?
  • How did they get their first job?
  • What did they like and dislike about their first job?
  • How did their career progress from there and why did they choose that route?

Next, explain what you are passionate about:

  • This is what I am passionate about and why.
  • I am motivated by these three things…. (Money, status, decision-making ability, development, making a difference, etc.)
  • I want to be with this size of company.
  • Ideally I would like to live in this part of the country.
  • I would prefer to travel or not travel.
  • Then ask them what career field they feel could align with your interests.

After the conversation, ask if he/she knows anyone in the career field you discussed. Then kindly ask for an introduction.

Step two

Meeting with introduced professional in your ideal field.

Start with their background:

  • Where they went to school?
  • What was their first job after graduation?
  • How did they find it?
  • What did they like and dislike about it?
  • What advice would they give their 18-year-old self?

Then learn about their current job:

  • What is their average day like?
  • What traits/qualities do they feel is a requirement for this field?
  • What do they enjoy most about their job?
  • What do they find most challenging?

Ask for Referral to HR/Recruiter:

I truly appreciate your time and insight today. It was extremely helpful speaking to you and I feel the company you work for aligns well with my personality and aspirations. Would there be any opportunity to speak with a hiring decision maker?

Step Three

Interview with hiring manager:

Build Rapport:

I have heard so many great things about your company through (referral source). Specifically (something about company you have learned) is why I am so passionate about exploring a career with this company.

Ask questions:

  • What do you enjoy most about working here?
  • What does a typical day look like for the position I am applying for?
  • What skills and experiences would make an ideal candidate?
  • What will be considered success for this position in 90 days?
  • What is the top priority for the person in this position over the next three months?
  • Do you expect the main responsibilities for this position to change in the next six months to a year?
  • What are some challenges that will face the person filling this position?
  • What, if any, are your hesitations about my qualifications?
  • What is the single largest problem facing your staff and would I be in a position to help you solve this problem?
  • Do you offer continuing education and professional training?
  • Can you tell me about the team I’ll be working with?
  • What can you tell me about your new products or plans for growth?

Reinforce why you are a good fit based on the above answers:

  • My skills are (repeat skills for ideal candidate).
  • Address how you could help the team.
  • Address their qualification concerns if any.
  • Stress your work ethic, grit, positivity, reliability, resilience, competitiveness, ability to adapt, trustworthiness, ambition, and ability to work well with others.
  • Most importantly explain your PASSION and enthusiasm for this position.

Next Steps:

  • What are the next steps in the interview process?
  • Is there anything else I can provide you with that would be helpful?
  • Can I answer any final questions for you?

Congrats- Chances are, you are hired!

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Ryan Rao is a Principal of Apex Franchise Development Group and is a franchise development expert who has grown multiple franchise based businesses into national and international brands. Franchising has allowed him to help individuals realize their dreams of business ownership, while permitting them to experience the independence, flexibility, and freedom that comes with being a business owner. He also serves as a franchise consultant, and is a personal growth advocate.

Follow or Connect with Ryan on LinkedIn at https://www.linkedin.com/in/ryan-rao/