Lucas Frey

6 Reasons why franchisees need systems beyond the operations manual

In 1989, Stephen R. Covey published the famous book “the 7 Habits of Highly effective people.” Since then, it has sold more than 40 million copies in 40 languages.

So why is a book about personal habits in an article about business systems? The answer is simple; the systems, or “business habits,” you either intentionally create or are naturally produced, define your business and are a significant component of its value when you sell.

But you purchased the franchisor’s operations manual. Why do you need to create your business systems? The operations manual is just that: focused on delivering the product or service most efficiently to your customers. Operations are just one element of what makes your franchise successful.

6 Reasons successful franchisees create systems for their business that owns a franchise:

1Well-designed systems create repeatability for your products or services. The franchisor’s operations manual is the primary source for these systems. Wendy’s and other restaurant franchises have this down to a science. As a result, there is minimal variation on your Single Bacon-Cheeseburger, whether in Bangor, Maine, or San Diego, California. For many franchise systems, the operations manual doesn’t cover all or the operations necessary for your franchise. For instance, some franchisees, like me, are not the “ideal franchisee.” In my case, ImageFIRST wrote the operations manual for currently established businesses (regional dry cleaners) in the laundry industry looking for an additional revenue stream. They have processing systems, the equipment required, and their backof-the-house systems. My company had none of that during my 20 years owning the business. So along with our laundry contractor, we designed a system to track our product through their facility and avoid mixing with their hospital products.

2Your systems keep your team focused on the daily mission-driven activities that keep your franchise moving ahead. These systems also set boundaries for your employees. Checklists and follow-up systems indicate what is accomplished and what yet needs to be done. Documented procedures make it easier to look at your

Luke Frey improves franchise owners’ businesses where corporate support alone fails. He brings 26+ years of varied professional experiences including 20 years as a franchise owner of ImageFIRST Cincinnati, 6 years as an industrial engineer for a Fortune 250 company and 19 years as a volunteer firefighter. All of these experiences, in addition to his drive to learn, have brought him to be a positive driving force for other franchise owners’ successes. to learn more about Luke and how Bella vista executive Advisors can help, please click Here www.bellavistaexecutiveadvisors.com

business overall and ensure each design is aligned with your vision and incentivized to accomplish your goals. For example, what does your compensation system reward; individual success, team success, or a combination of both?

3Your systems that consistently deliver repeatable value to customers are sellable. When you’re ready to sell your franchise, the primary valuation is in your systems, customer contracts, and a dash of goodwill. The designs you create are valuable intellectual property and ensure the repeatability of your services. Without systems, businesses in the service industries typically have a 5-year earn-out. You take on the majority of the risk. Most of the pay-out is at the end of the 5 years, depending on performance now out of your control.

4The systems you create help define the personnel skills necessary for your business to succeed. Head Coach, Luke Fickell’s, systems for the University of Cincinnati Bearcat Football Team measure each player’s physical talent (strength, speed, size, and more) and mental abilities. Putting the proper skills in the correct roles leads to success for the team and individual.

5Like Grandma’s lasagna recipe, your systems allow your business to scale upward. A simple example: Your franchise currently serves a population of 1 million. Your business is most efficient with 3 outside and 2 inside salespeople. In the next 18 months, you want to expand your franchise population by 50%. As a result, your revenue should increase proportionately, and you have a proven sales ratio to customers required for peak profit. their current validity. The critical point is that you have a starting point based on your experience and past analysis.

6You and the franchisor have done your due diligence, and you purchase the operations manual and use of their brand and proprietary products and services. Follow the operations manual, and you’ll be successful like them and their other franchisees. And, when franchisees fail, the franchisor often blames the franchisee for not following their systems. Operations are one part of success for any business. Successful franchise owners create efficient systems for every aspect of their business. For example, administrative activities need systems for the consistent and open flow of information, most franchisees need systems for local and regional marketing, and the list goes on for your specific market.

The Terrace Park Fire Department developed a process to ensure all equipment was cleaned, inspected, and returned to its proper place on Engine 94, or taken out of service for repair after each emergency call. The goal was to have the engine ready for the next emergency within an hour of returning to the station.

There are many ways a franchise owner can create systems, and here are 3 examples:

• “How to” descriptions defining the inputs, processes done to the inputs, and outputs. Video documentation focuses on each step in the process. Your production quality doesn’t have to be Oscar-like.

The key is to start the process by documenting how and why your business is successful. particular tool helps you see what inputs you control and those dependent on others, like cut goods sent to the Red Kap facility in Honduras and made into work shirts.

• New technology makes it easier than ever to document your systems. Loom and Zoom are two examples. Value-adding systems have the 4 following elements:

• Repeatability: Your system is repeatable when the same techniques and identical inputs are given to 2 different people (with similar mental and physical abilities), and the outputs are within a specified range.

• Effectiveness: Does the system produce the desired output? Your customers’ requirements define the ultimate work of your franchise.

• Efficiency: Is the current system time and cost-efficient? What improvements can we make? A system can be repeatable and effective and not be efficient. You can analyze the elements of a documented procedure to ensure there are no gaps or unnecessary redundancies.

• Reliability: A reliable system produces the same output range over time when the inputs are within their scope.

Designs must be constantly measured to ensure effectiveness doesn’t drift. When the outputs vary within the range to one limit, drift occurs. Over time the system balances around the drift.

The systems you create for your franchise define your company’s daily habits. For example, the operations manual you purchased from the franchisor shows you how to deliver your service to customers. It is one system of many required to lead your business consistently over time. And, when it’s time for you to sell your asset, your financial reports and systems are the starting point for the buyer’s due diligence.

Bella Vista Executive Advisors has the proven framework to help you engineer, define, document, and communicate your systems to take your franchise to the next level of success. Email me today and start your discussion.