It might have been around a year ago that I wrote that a shortage of prospective franchisees was not the end of the world, that it created space to refine and develop your system in readiness for the next 'round' and focus strongly on your individual franchisees' profitability and levels of satisfaction.
At PoolWerx, we have used the space to upgrade our IT, pour big effort into training and sourcing professional educators, get our Occupational Health & Safety systems clean, revamp our franchisee recruitment package, vet supplier deals, upgrade our insurance arrangements, change our masters system into employed regional development managers, and to get an export plan in place. I also spent months on the road meeting every individual franchisee (hundreds) and upgrading internal communications protocols - you know, all those things you can never find time to do when recruitment is running hot.
We also consolidated. We encouraged our poorer performing franchisees to sell out (fairly) to the guns so proven performers could apply their experience and skills to several territories. This is introducing new efficiencies both for emerging, multi-unit franchisees and PoolWerx as a franchisor i.e. having fewer, more competent and more mature franchisees with whom to communicate. We opened new, more effective lines of dialogue with our franchisees and gave great encouragement to female partners to become more involved. We revised our dispute resolution process so it became more mature, unemotional and user-friendly, and began a gradual process of making our system as a whole more self-governing. That is an article in itself.
It should not have surprised me that all this brought a few complaints out of the woodwork from a small group of franchisees — the first time this has happened to us - but I have to see that as a good thing. I would not want complaints festering and becoming emotional or irrational. It worked out there were good intentions on both 'sides' and plenty of room for compromise and a sensible system in place to create peace. It was one of the key things we had worked on, even though it was not a current problem. It's a matter of foresight.
Call this process a spring clean. It was chaos at the time but sparkling in the end, and a great employment of otherwise under-utilised internal resources.
Some franchisors followed suit in their own ways but I believe more rested on their laurels thinking 'how good is this?' Franchisees doing well; boom time; the comfort of knowing that everyone else was suffering a bit in terms of recruitment, so no blame to allocate. Phew.
But now, some alarmingly large chickens are coming home to roost. We're in uncharted territory. We have high interest rates, relatively low public equity, economic uncertainty, and yet still have record highs in employment. We have rapidly falling business confidence, mortgage stress, new and confusing government enquiries into the 'lightness' of franchising practices. We have some profiled systems crashing, and more to come. The banks need to lend to make money but are pulling back as a 'moral responsibility' and generating income 'on the sneak'. We have baby boomers with insufficient resources to find a comfortable retirement, or very worried about their superannuation nest eggs. The share market is bedlam.
This particular mix hasn't happened before and it's pretty confusing for franchisors and intending franchisees. Roughly, there is no similar precedent.
In the past, when economic times have got tougher, it was pretty simple. People who were retrenched received a golden (or brass) handshake and used that and their equity to move into a franchised business. But it's more complicated now. I am more confident than ever that franchising presents an excellent solution but there are more barriers — political, legal, financial, structural, emotional and age-related.
That means we have to change with the (uncertain) times — maybe each in different ways. The vital principles will remain the same, but systems will specialise in increasingly focused markets. It will no longer be the 40-50 year old staple. It will no longer depend on 'buying a job'. It will no longer become a desperation measure employed by the retrenched.
The potential franchisee demographic will expand dramatically and systems will have to adjust to suit re their offering and focus.
There will be ambitious kids needing finance. There will be equity rich parents seeking to create viable careers for their families. There will be people over the age of conventional employment who need to work to some degree into their retirement. There will be seriously skilled corporate players looking for an empire and capital gain. And there will still be simple people wishing to be their own bosses in simple businesses.
I wonder if you are seeing my point? Twenty-five years ago a potential franchisee was anyone with a pulse. It has not been that way for some time and it is becoming less so. My guess is the solution - the future - lies in configuring your system to meet very specific human and personal needs, related to viable consumer or B2B markets - most particularly the wants, resources, personality and ambitions of the person.
Get this right, and franchisee satisfaction will soar. Get it wrong, and the whole business system - and I mean franchising as a whole - might become untenable. We might find a circumstance where franchisors need to own 51 % of every outlet opened, to escape impossible regulatory minefields, which obviously will limit the expansion and brand presence that makes franchising effective.
The only thing certain is that change is in the wind, and that franchisors must become far more focused on satisfying the SPECIFIC ambitions, financial needs, emotional states, experience and talents, and end games of franchisee prospects in niches. Franchising, in principle, is a flanking strategy.
By John O'Brien - CEO, PoolWerx
19-Nov-2008