EXPERT ADVICE: Lucas Frey | CEO | Bella Vista Executive Advisors
3 Intentional Actions Reduce Your Franchise’s Risk A Fire Chief’s Method to Identify and Minimize Inherent Risks
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Superman bias is a franchise owner over-estimating their abilities and span of control. A brutally honest organizational assessment is required to understand your boundaries.
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Business is risky. More than half of new companies don’t last 5 years. You have decreased your operational risks buying a franchise. The franchisor’s operations are tested and proven successful. However, even the most complete operations manuals do not eliminate the leadership challenges and risks you face. This article helps the successful franchisee develop systems to identify, evaluate, mitigate effectively, and sometimes use risk to your advantage. The 3 general types of organizational risk as defined in the article Managing Risks: A New Framework by Robert S. Kaplan and 56 Franchising MAGAZINE USA
Anette Mikes (June 2012) are: • Internal controls, such as checklists and the operations manual details, broken down as minutely as possible for a given task, manage preventable risk. o Your company’s missions and values play an essential role in keeping your employees focused. As a result, free-lancing within your franchise is reduced. • Strategic risk is in your control. This risk includes your assumptions (as CEO of your franchise) on past performance to predict future growth. For example, from the outside, it appears Peloton committed significant resources based on the assumption that home gyms (required when gyms shuttered for the flu) are the growing trend. As mandates were rescinded and gyms re-opened,
customers have proven Peloton’s assumptions invalid. Assumptions used to establish your business model need to constantly be challenged. Ask yourself and your staff, “What if we’re wrong? What is the franchise’s financial vulnerability if we are?” o Systems are critical to determining your assumptions’ credibility when establishing future goals. In addition, higher-level analyses help the successful franchisee identify, evaluate, mitigate and contain risk events, i.e., create “pre-plans.” • External risk is out of your control. Weather, politics, riots are not within your sphere of control. How your franchise prepares for external risk is ultimately your responsibility. In 2008, hurricane Ike blew through Ohio and
