The Franchise Manual Podcast – Episode #9 – Franchising as a Partnership
Jim Richardson, a franchising veteran from Pizza Hut (20 years) and Panda Express (15 years) discusses some foundational franchising theory in a “Franchising 101” segment. Afterwards Jim expands on fundamental best practices for franchisors as they develop their franchise system.
Timestamp: 0:00:41 – Jim Richardson Introduction
0:03:15 – Segment 1 – Get to know Jim Richardson
0:16:58 – Bonus Segment: Franchising 101
0:40:00 – Segment 2 – Franchising is a Partnership (Business/Branding)
1:05:44 – Segment 3 – Quick Draw Questions
Segment 1 – Get to know Jim Richardson
Recorded on location at Jim Richardson’s house in Parker, Texas – just a few miles away from the famous Southfork Ranch (Who shot JR?)
Born in Rockwell, Iowa
Jim’s first real job was as a grocery man
Studied chemistry and finance.
Small town boy makes it big – Ford Motor Company, Pizza Hut, and Panda Express
Bonus Segment – Franchising 101
Franchising allows you to expand your concept by utilizing the resources of others.
The franchisee pays his part of the investment capital that is necessary to expand in exchange for the majority of the revenue.
In many cases, people is a more constraining resource than money
The franchisee will source the people that will make them and your brand successful
A franchisee can duplicate you, working on his/her side of the expansion investment as you continue to grow your business form the franchisor side.
In this conversation, the term connections refers to real estate connections. A franchisee will have a closer tie to the local market in order to maximize potential from the real estate selection. This is particularly important with international franchising.
When is a good time in the lifecycle of a business to start franchising? How do I know it’s time?
When you attempt to franchise before you have all of your systems in place then you are asking a prospective franchisee to take bet on you when you have taken only a limited bet on yourself.
Don’t franchise until you have the answer to all of the questions:
What has made me successful? Why is my concept successful?
When you know what it is that made you successful, then you know what you need to impart to others to make them successful.
Why do customers like you?
Why do customers come back?
Can I duplicate a customer experience?
Do I have what it takes to be a franchisor?
What is your leadership style?
Command and control versus collaborative
You will be entering multiple long-term relationships. Are you ready to do your part in the relationship? Can you work well with others?
Personality profile tests can help you determine your leadership style as well as evaluate how a new franchisee will fit into the system.
Biggest myth in franchising: I don’t franchise because I want to have total control of the business. Franchisees have more incentive to follow a system standard than an employee
If you are a command and control style of manager, you can still franchise but you won’t like it as much, and neither will your franchisees.
Command and control franchisors will also miss out on many innovations that come from franchisees (e.g. paper cups at Starbucks, pan pizza, and the Big Mac)
Most franchisee relationships last longer than the average marriage.
To be successful in franchising a concept, you have to have both a business that is ready for franchising and a leadership team that is ready for franchising.
What is your growth strategy?
Fail to plan, plan to fail.
Be able to pay equal attention to both company-owned and franchise locations.
Can you remove yourself from your business for 1-2 years and still have it operate efficiently? Do you have the infrastructure to franchise?
Segment 2 – Topic Segment
Franchising as a Partnership
Franchising is an extreme relationship and your franchisees will need your attention
Franchising is a bilateral relationship where each party should be able to learn from each other.
How to find the best franchisees: When you build a solid reputation, the people that you want will come to you.
Just because a prospective franchisee has something that you want (access to prime real estate or lots of money) doesn’t necessarily mean that they will be a good franchisee.
Look deeper into a prospective franchisee before you decide to accept of decline them. It is not just about access to money. It is about character and integrity. You want franchisees with the following characteristics:
Have something to teach you
Open to learn from you
The relationship between franchisor and franchisee must be complimentary. If they knew and had everything that you know and have then why would they need you? If you knew and had everything that they know and have, why would you need them?
If all you are looking for in franchisees are carbon copies, then don’t franchise. You probably already have that in your corporate staff.
After you have brought in franchisees that are unlike you, then don’t forget that they are unlike you.
Examples of how franchisees with complementary management styles can benefit the organization:
Price: Ted Swan in Lansing, Michigan – Introduced the coupon pricing model with pizza when nobody else was doing it. Ted had knowledge that corporate didn’t have.
Place: Dick Freeland in Ft Wayne, Indiana – Discovered a method of expansion that had his future customers paying for his expansion costs.
Promotion: P-zone by pizza hut – The campaign failed because the word P-zone was dangerously close to the Spanish word for nipple. The franchisees in Latin markets knew this – corporate didn’t.
Product: Many product innovations have come from franchisees versus corporate.
Purpose: The purpose of a franchisees business may or may not be complimentary to yours. This refers to the questions, “Why did they decide to become a franchisee?”
Accept the differences. Just because differences exist between franchisor and franchisee, this doesn’t make you unequal.
Demand that your relationship with franchisees be one of equality.
Franchising is where servant leadership thrives.
Success in franchising takes more preparation than success in your own business.
Inspect your success. What is it that made you successful?
Spend time reflecting instead of projecting forward.
Determine how you are going to transfer your knowledge to franchisees.
Franchising is all about knowledge management.
Know what you know. “If HP only knew what HP knows.”
Put metrics in place that measure the activities that lead to your success.
Know your benchmarks so that you can document them into a “playbook” that the franchisees can use to replicate your success.
Segment 3: Quick Draw
Jim’s favorite book – The Hobbit
Jim would love to travel back in time to see Leif Ericson – he is fascinated with archeology
Whataburger versus In & Out – WHATABURGER WINS!!!!!! Take that Mike!
Favorite movies: The Matrix and The Jason Bourne series.
iPhone all the way – Yahoo Sports is his most used app
If Jim had $1 billion, he would give it to his wife. Go figure.