Back to Previous

How to avoid a Blockbuster fail

Sarah Stowe

Could it be time to change? When is the right time to address a shift in focus in your franchise? If you don’t recognise the signs and take action, the change can be made for you –  think Kodak and Blockbuster for instance.

So what are the practical ways to you keep your business away from a major fail?

Steve Hansen, former franchisor and now king of strategy at Think Done Management Consultancy, says “I suppose it depends on whether one is seeking to not become another Blockbuster as in the video chain, whereby new technology disrupted the industry and therefore the business model could no longer work.

“Ironically there are still video rental outlets still operating, but my guess is that they will be in demographics where change has not been adopted by everyone at this stage, and they have adapted other products by being innovative to their individual market.”

These of course are extreme high profile examples of a failure to move with the times. But minor disruptions can still have an impact on the success of a franchise network.

Hansen believes in order to avoid any fail in business the reality is that change is inevitable. What’s important is to look for trends, at whatever is new and exciting in any market that the consumer wants to test and trial, irrespective of whether the product or service catches on and becomes needed and wanted.

“If sales are in decline and promotion has been kept at the business model level, then it is time to look at the product to determine whether or not, it is needed and wanted by the consumer, because it may have had its lifetime,” says Hansen.

“Surveys of the customer base will tell you what the consumer thinks, providing you ask the right questions.”

The key is to take decisions on the product and then act to make it happen. So while video stores are few and far between today, older and more traditional purveyors of moves have turned around their businesses. Once in decline cinemas are now flourishing in many areas, Hansen points out.

Why, because they have boosted the movie-going experience with a comfortable environment, food  and drinks.

Ongoing business analysis is crucial

All franchisors must be constantly reviewing all facets of the business including overall business plan and strategies, product, service, image, delivery and marketing, Hansen suggests.

Key statistics must be available weekly in graph form for comparative analysis, the same week last year for instance.

“Basic information of sales, cost of goods, wages, outstanding creditors, debtors and cash versus bills, weekly can assist the business manager to take better decisions knowing what the real situation is from a management perspective as opposed to an accounting perspective which is reporting history and in many cases this can be too late.

“Review and be prepared to change, delete products that do not sell, or are not cost effective for profit, introduce new products and if they fire then make them mainlines.”

Hansen says how the business looks and feels is not dissimilar to a new car vs older car comparison. “Customers buy from perception and should they perceive that your product is old and tired then it most likely will be.

“Most businesses will have different/diverse income streams so that if one is not so strong then the others are doing well then there is a strong case to stay in business. Making sure that the streams that you choose are aligned to the business and a general fit to your customers’ demands.

“Never be scared to increase prices when costs are passed on, just inform your public as to why and when. The customer knows that the price of fuel, freight or wheat or whatever, has gone up and therefore understands [the price rise] but does not like to just see an increase with no justification.”

Hansen adds, “Focus on those things that you have direct control over, like increasing sales, controlling cost of goods and purchasing, and of course wages.

“Always seek out the best people to do the job required, make sure they are going to a better job for that role than you would do, and pay them accordingly.”