5 minute read
Peter Buckingham
The 8 most expensive words in the English language are said to be: “because it has always been done that way”! This can have 2 reasons:
1. New management who know no different, and stick to what they are told. 2. Established management and a reluctance to change
the new operator syndrome
In franchising, we are heading into a new era as many franchise systems have reached a stage where the ownership is transferring from often “The Founder” to a new set of managers. This can be either: a. A succession plan approach and you will see stability and hopefully a gradual change of ideas.
b. A full blown sale of the business and this can lead to a radical change, or a more fiscal approach eg a Private Equity
Company, mainly interested in the overall figures and the bottom line. Due to the value of the franchise (such as a large QSR business), the value is normally beyond an individual businessman, and in an attempt to gain the best possible value, many businesses are sold to another company or a Private Equity company. They rely on forecasts of additional value for the brand by taking both long term and short term steps to improve the bottom line, and they may have a plan to float the company on the stock market in the short to medium term. If a company is viewed only as the results in the financial reports, the long term direction of the business could be in doubt, or maybe there is more on the table if a more rigid data based approach is taken? Areas such as Strategic Network Planning or Territory Planning may have been very much in The
Founder’s head, and little has been done to have a structured approach to some of the most important long term directions of the business. If you are going to purchase or take over an ongoing business, you need to look at many of the individual component parts in a critical manner. This may involve a major accounting company reviewing the business, but does this cover some of the more specialist areas that offer the largest potential growth? Our view is that as well as the $ numbers we should be considering questions like: 1. What is our market share and store numbers in each state? 2. Where we are under-represented and should look for growth? 3. Where we are over represented, and do we want more stores or sales in those markets? 4. Is there a Strategic Plan for our future stores roll out and how do we evaluate new location opportunities? 5. Are we offering franchisees a territory or an Exclusion Zone, to ensure their security with our brand? 6. Are the territories we have previously given as part of our franchise agreements of similar opportunity? 7. Are our existing territories properly mapped out with no gaps or overlaps? These type of questions should be raised as part of due diligence, but it is often only when you gain control of a business that you can really see underneath to know what you have purchased, and what needs to be done.
Old habits and a reluctance to change
I worked in an oil company for many years, and this 8 word statement was drummed into us from the start of our training. I am sure we all can think of real life cases where this applied, and most wish we had taken steps to make changes earlier than we did. With the huge expansion of the digital world into business, now is a good time to
Peter Buckingham CFE CMC, is the Managing Director of Spectrum Analysis Australia Pty Ltd, a Geodemographic and statistical consultancy. Peter is the Go To person as to where to open new stores in Australia and New Zealand. Peter is both a Certified Franchise Executive (CFE) and a Certified Management Consultant (CMC). Spectrum Analysis is the winner of the FCA 2021 Supplier of the Year. To contact Peter email peterb@spectrumanalysis.com.au or call on 0411 604 921.
revisit, no matter what the reason. It could be simply that as an existing manager you feel that things can and should be done better. Maybe due to a retirement or other staff changes, you now are in a new position and see a need for change. Many of these cases come about where an elderly employee, highly respected in the company has left, and with them has gone all the localised experience they had, and had used well in the past. Unfortunately you cannot just acquire 30 years of experience! What is often required is to make that change in direction from a “one man band” of expertise to a more data driven approach, so that the processes and logic are transferrable in the future.
If we are considering the Strategic Network Planning and Site Selection area, which is for many a crucial part of the business, then using mapping and data to help support the decisions is essential.
Questions you need to ask within the business may be:
1. Do we have mapping to show our locations (and / or territories) along with our retail competitors? 2. Do we have a nominated territory / exclusion zone or trade area around each of our stores?
3. Are we sure there are no overlaps or small unallocated areas between territories?
4. Do we have a Strategic Network Plan for our senior managers to look at so we are all clear on our direction?
5. Are the people in charge of finding new locations working in line with the Strategic
Network Plan?
6. If not, can we fix this internally, or do we need assistance?
Summary
The 8 most costly words in the English language can be applied to almost any decision making process in business. We are reflecting this in the property side of your business and you may conclude that you may have a deficiency in this area, or other parts of the business.
Whether it is because of an acquisition, new managers being appointed, or just trying to improve the bottom line, just remember the 8 most costly words in the English language are: “because it has always been done that way”! v
