EXPERT ADVICE: Jason Gehrke | Director | The Franchise Advisory Center
Better-educated franchisors attract better franchisees
Education alone may not be a determinant of business success, but it can be an essential element. Unsurprisingly, a desire to learn and a commitment to ongoing professional development (in addition to formal qualifications) are commonly seen as highly desirable attributes in potential franchisees. Franchisors like having franchisees who are prepared to learn. But by the same token, why should franchisees invest in franchisors that aren’t prepared to learn themselves? Many highly successful entrepreneurs who start franchise systems have little or no formal educational qualifications. However just because they might not have been to university doesn’t mean they aren’t continually learning, and prefer instead to attend short courses and workshops, and read books written by other successful business people. 42 Franchising MAGAZINE USA
Furthermore, as their business develops, such entrepreneurs often surround themselves with highly-qualified talent because they are savvy enough to realize the limitations of their own skills and hire staff with the smarts to fill the gaps. But equally, the use of education and professional development as selection criteria for franchisees could also be used by potential franchisees to assess what franchisors are worthy of their investment. A study conducted back in the early 1990’s that tracked start-up franchisors in the United States over a ten-year period indicated that failure rates among startup franchisors were as high as 75% - a figure surprisingly similar to frequently quoted failure rates for independent small businesses, commonly understood to be approximately 85% over five years. This potential failure rate, combined with the severe consequences of a system’s failure on its franchisees (who lose part or all of their investment, if not their entire business), would suggest that education
in franchising principles and techniques is necessary for franchisors prior to and during the use of franchising to expand. Yet too often business owners start franchising their concept, and then realize after they receive complaints from franchisees and problems emerge in the network that they don’t have the answers for everything and need to learn more about the business of franchising. For example, important franchisor processes such as field support, site selection, financial benchmarking of individual and group performance, and franchisee selection are just a few areas where franchisors can flounder. For those franchisor personnel with previous work experience in, and an understanding of the operations of large company-owned chains, a passing familiarity with these concepts overlooks the one key difference between corporate and franchised chains – the franchisee who has invested in the brand and expects to get a return on their investment. Managing and supporting franchisees is a world apart
