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How to Be a Successful Franchise Owner

How to Be a Successful Franchise Owner

Transcription:

Lorraine Sheak

Why are some business owners more successful than others?

Mike Powers

Well, there’s a lot of variables there.

Mike Magid

There are a lot of variables.

Powers

Yeah, one variable is, and I think it’s probably important, is that they have a plan and they follow it. It goes back to what we talked about a franchise, having a plan, a track to follow and a focus. Taking the systems that have been proven that work, the resources that have been proven to work, and being committed to implementing them and following that process. That’s one just one of multiple variables. We mentioned the other is being undercapitalized, right?

Magid

Yeah absolutely.

Powers

We see a number of people that believe that they want. “I’m going to be okay.” I don’t need quite what they told me or what my business plan calls for. No, you’re going to need that, right? Because then you get into a situation you don’t have that capital. You have to either find it quickly at maybe a high cost. Or you have to close, that’s another variable. You, I’m sure you have many many more as well.

Magid

Yeah. You know, it’s funny. I, this, I get asked that question a lot. I’m sure you have to Mike, but Lorraine? When somebody says to me, you know, why do, why do businesses fail like. Why would I fail running a Griswold Home Care, or, you know, at McDonald’s or, you know, a Jiffy Lube, or Midas? Well why would I fail? And Michael said it a moment ago, the first and number one reason, they why fail is are undercapitalized. So I won’t belabor that point. And then I say to them, the number two reason that businesses fail is ego.

And they go, “Ego? What do you mean by ego?” And here’s the, here’s the, here’s the interesting dynamic between franchisors and franchisees. Franchisors look for people that are strong, they’ve proven track records of success, that have managed people, that have escalated in her career, have gotten to a point financially where they have success to be able to do what they need to do. And the other piece is that very few people, a very small percentage of people in this country, or in the world actually have the nerve to buy a business and put it all on the line. So, you’re only getting the strongest people out there that have the nerve and have the risk tolerance to invest in a business and put their money on their line. So when you have that franchisors seek them out, but the, the kind, or the converse to that is, because they’re so strong-willed because they are risk tolerant, they want to do things the way they want to do things.

And now, they’re in a franchise system, which has certain methodologies in which to do things. And those methodologies aren’t there because the franchisor says “Well we think it’s going to work.” They’re there because it’s worked and in many cases for years. And so, when you have a franchisee struggling, who was a successful business owner, or maybe a successful executive in a company and they, and they struggle and you as the franchisor want to reach out to help them, there, they’ll say to you something like, “Well, I’m failing because you’re not supporting me right. Your programs don’t work in my market. The market is too saturated. The market is this you’re that.” All the reasons that they’re failing are outward reasons. They’re all because of outside factors that impact their ability to grow a business, which you never hear or rarely hear from a franchise owner who had the nerve to buy a business and put it on the line.

When they’re failing is…I look myself in the mirror, and I don’t run this business, right. I’m not following your system. I don’t recruit people well. I don’t manage people well. I don’t market or selling my business. I’m, I’ve hired bad people. I don’t have a culture. They don’t know what they’re working. They don’t say that. They always blame outside factors, not themselves. So, when you think about that, how do you help somebody who’s struggling as a franchisor whose ego gets in the way of allowing them to accept help—when they’ve always been the one helping or driving.

And so the reason that businesses fail beyond finances, is purely about ego. And that is one thing that when we talk to people, I make sure they understand that their ego is going to get in a way. And at some point in time, their ego, and the company franchisor’s ego are going to butt heads and you need to understand that. But you need to understand that the franchise, they’re trying to steer that ship, trying to get your hands back to 12 and 3 because they’ve done it multiple times. And yet, if your ego doesn’t allow you to accept that help, you’ll typically fail.

Powers

That’s where I think it’s so important to have a board of directors because that ego gets neutralized when the board of directors meeting and they say, “Well, this is what your business plan says and you were supposed to follow that. Why did not you follow that?” And they said, well, well, well, the next question, I would ask, is, why did you invest in a franchise if you’re not going to follow the system that they prescribed and you agreed to? So that board of directors kind of neutralizes the ego, a little bit and it’s a little bit humbling. What is so important that you have someone to get you back on track? So what Mike says is right. I think you go and being undercapitalized those are important, but if you invest in a franchise, let them give you guidance and follow that guidance, right? I mean, it only makes sense.

Magid

Yeah. And I think, I think it goes it goes to their ego, but I think a critical reason third reason why businesses fail. So, you know, when you’re in a people business, and it’s all about the quality of your people, if you’re, if you as the leader, don’t set, your culture, don’t understand your values, don’t have a true mission or purpose. And if you’re not and you don’t understand what your “why” is. And then you don’t hire people that they gravitate to your why, that will fit into your culture. So we call that getting the right people on the bus and then getting them in the right seat on the bus. If you’re not good at doing that, they will kill your business. If they don’t know what you want and what you stand for what you believe in and they are not a raving fan of what you believe in and what you stand for, they won’t work for your, their blood sweat and tears, the’ll work for your money and that you don’t want, right? So, you’ve got to be really good at setting that culture, setting your values, and making sure the people you hire align to that culture and your values.

Sheak

Some great stuff.

Magid

Are you impressed?

Sheak

I am.

Magid

Alright, Lorraine’s impressed everybody.

Sheak

You two know your stuff. Are there any final thoughts that you would like to share?

Powers

Mike?

Magid

Mike?

Powers

Mike.

Magid

Mike.

Powers

We have three Mikes here. We have one Mike, two Mikes, three mics. (Points to microphone)

Magid

Final thoughts is yeah, I mean, off the top of my head, Lorraine: franchising is not for everybody, and that’s okay. Business ownership is not for everybody, and that’s okay. And so anybody that’s considering an industry and a model and the company and the systems and support that go along with it, anybody that’s going to sign a contract to get involved with somebody for five, seven, ten years. It’s like a marriage, if you’re going to buy a business in franchising, think about it like a marriage.

You know, when you sign on the dotted line, you sign on the dotted line with all the blemishes and imperfections that your mate brings to the table. But if you signed on the dotted line, you accepted those blemishes and imperfections. And so two years later, remind yourself to continue to accept those blemishes or imperfections. Because if you don’t just like a marriage, you could get very contentious. And Mike said it a minute ago, why would you invest in a franchise company to be adversarial to the franchisor?

I mean, they’ve gone through the risk. They duplicated that success rate. They have a model, they have the system, they have the support that’s going to help you along those lines. Ego aside, don’t invest in a business and don’t sign an agreement to get married and then a year later, six months later, three years later, decide you don’t want to be in that marriage. It’s not a good experience once you’re in, because the contract is binding and the only way out is through legal recourse. And that doesn’t help you. And it doesn’t help the franchise company. So if you’re going to do this, do it seriously, make sure you know what you’re getting involved in, make sure that it’s a contractual agreement, and make sure you’re ready to do it. And if you’re not, walk away.

Powers

Yeah, they’re great points. And picking up from some of what Mike has said, I think, from our perspective, you know, as someone who’s thinking about investing in a business, take it and listen to those folks in the business. And utilize the time doing your due diligence, getting to know what the landscape has to offer, and then go through and with someone who’s going to help you look at the business, the opportunities, because not everybody is a good fit for a franchise. And not every franchise is going to look at that perspective candidate as a good fit for them. It has as Mike said, a marriage, there has to be alignment, there has to be alignment.

And I know we’ve shared a lot tonight with the, you know, business franchising the, the advantages and how we could help someone who’s interested in owning a business and operating a business. And hopefully they’ll be more where we’re excited about you being our hostess and coming up with the concept of the Mike and Mike show for future topics that will focus on business. But in my closing would be, you know, that old saying, you know, work your plan, you know, have a plan and work your plan. It’s so important. Plan your work, work your plan. It’s critical. That is important. I think is a very fundamental, but that is so meaningful. So, anything further Mike?

Magid

Yeah, I’d like to share a quote, and it’s around and we were talking about business ownership. You have to have the right mindset for business ownership. So, I’m going to share a quote with our loyal audience: “In times of change, learners inherit the earth, while the learned find themselves beautifully equipped to deal with the world that no longer exists.”–a quote by Eric Hoffer. And it is so appropriate for business ownership. Adopt a learner mindset. As strong of a background as you may have, as strong as a personality you may have, as successful as you may be, those people that continue to succeed adopt a learner mindset. Those that have a learned mindset or fixed mindset will fail.

Powers

Sometimes it’s better to take the road less traveled, right?

Magid

Amen, brother.

Sheak

Well, thank you both for all of your knowledge, and we look forward to the next one.

Magid

You’ve been a wonderful host, Lorraine.

Powers

You have been outstanding, great questions.

Sheak

Thank you.

Magid

Take care, everybody.

Powers

Thank you.