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Entrepreneurship

This Is Why Some Franchisees Fail

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Too often than not, franchisees are of the mindset that they’ve bought into a franchise system and just need to sit back and wait for the business to flow through their doors. Sometimes, it’s ignorance and perception that clouds their thoughts. Thinking that the brand name they invested in should be enough for instant business success at their location. But, most of the time, it’s just plain old arrogance that gets in the way.

It’s the arrogance of having committed hundreds of thousands of dollars to buy a franchise as being the sole reason for success. It’s also the basis of feeling that with this level of financial commitment, the franchisor should be solely responsible for making sure franchisees succeed. Almost demanding a guarantee of success!

Well, it is not the franchisor’s sole responsibility, under any circumstances, for making sure that franchisees succeed. Sure, the franchisor must provide franchisees with a proven system and field-tested tools, that when utilized diligently and effectively, should provide them with the foundation to succeed.

But, it’s just that, a foundation. And, the franchisor should have systems in place to monitor franchisees’ progress, provide additional training and guidance, and further the overall development of the brand which all contributes to solidifying that foundation. But, as detailed and comprehensive as all this sounds, it still is not enough for most franchisees to succeed without their own desire, drive and determination.

And, not just words, but actual action.

Failure or Success?

Years ago, I was working with a franchise group on a complex marketing project. The project was ultimately a success and achieved most of the goals and objectives that were established prior to launch. Most of the franchisees embraced the strategy and were extremely instrumental in executing the plan. However, there were five franchisees that just couldn’t get out of their own way to realize the benefits of the plan, and did not realize positive results as their fellow franchisees had.

As with many of my franchise clients, the franchisor requested that I work with these franchisees, ascertain the root of their problems, and develop an aggressive plan of action to move their businesses forward. You see, the franchisor truly wanted to see their franchisees succeed! By the way, these franchisees represented the bottom of the franchise group in average unit sales. Definitely, that was no coincidence. Well, to make a long story short, the obvious problem in each case pointed back to the franchisees working “in” the business, as opposed to “on” the business. Mix in some procrastination, entitlement attitudes, and of course, total denial, and the recipe for total business failure was complete.

I was able to determine that these franchisees were compensating for their path to failure by being at the business location longer hours, spending more and more time taking care of customers, while spending less and less time on anything else. All claimed to be working harder than they had ever worked before. Was it because they had to cut payroll and do the job themselves? Ironically, that was not the case as I found employees standing around while the franchisee did their jobs.

Often, I witnessed franchisees literally stepping in front of employees to take care of a customer. When I addressed the same with the franchisees, all were actually preparing for failure but didn’t want to be considered the actual cause of failure. All thought that by being seen at the business long hours every day and working non-stop behind the counter, no one would be able to say they didn’t work hard at making the business a success.

Certainly, they wouldn’t be blamed for failure.

Of the five struggling franchisees, all but one was anxious to listen and make firm commitments to improve their situations. The remaining franchisee was thoroughly convinced he would fail and there was nothing he, or anyone else, could do to change the situation.

He placed total blame on the franchisor, claiming they didn’t provide support, and strongly professed that he, himself, did everything humanly possible to succeed.

When I asked what he was referring to, he pointed to the long hours every day. When I asked about marketing efforts, he claimed he shouldn’t have to do anything in that regard and pointed back to the franchisor.

He ranted about how the franchisor should have spent money on his behalf in promoting the business and how he spent over $300K on build-out and equipment and that should have been more than enough to ensure his success. Further, he felt he should be able to open the doors everyday, and if the brand name was strong enough, success would occur in a relative matter of time.

As I indicated, four of the franchisees decided to move forward. Agreeing that failure was not an option, we developed and executed an extremely aggressive, yet cost-effective, plan of action centered around getting outside the business location every day to promote their business wherever and however they could.

They all agreed they should have been doing this all along but always seemed to procrastinate in actually getting the job done. They attributed a big part of their procrastination to a strong sense of entitlement that the franchisor should be doing more because they, the franchisees, were the ones that already made an investment to grow the brand. As such, they had convinced themselves that any possibility of failure would fall firmly on the franchisor’s shoulders. In turn, they buried themselves “in” the business and were awaiting the inevitable.

After many hours of discussion and debate about vision, passion, drive and determination, all four franchisees decided to take responsibility for their actions and would hold themselves to a high level of accountability, to their business, employees, family, and themselves.

Each was relentless in their quest to turn their businesses around. They spoke to whoever would listen about their products and services. They were tireless in their efforts to discover new groups and organizations that might listen and learn about what their business had to offer.

They were almost to the point of being ruthless in their desire to ask for referrals and recommendations. They were all thinking outside the box, always asking themselves, “What more can be done?” and never accepting a “nothing” answer.

Needless to say, their new attitudes became contagious and before they knew it, everyone seemed to be spreading the word. Nowadays, we would refer to that as a “viral” effect.

The Final Tally

One franchisee sold his business to an individual he met when spreading the word about his business. The new franchisee became a multi-unit operator and eventually sold the business for a significant profit.
Two franchisees took on partners they met in their efforts within the community. All are now multi-unit operators within several franchise systems.

One franchisee continues to operate her business and although happy to have survived, never had the desire to open additional locations.

And, the franchisee, who said he would fail… was absolutely right!

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About the Author

This article was written by Paul Segreto of Franchise-Info. You can find more of his work here.

Entrepreneurship

Is There A Coworking Space Bubble?

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An annual growth rate of nearly 100%, almost five years in a row? More than 60 coworking spaces in a city like Berlin? Are these the characteristics of a bubble? Nope, these are characteristics of a lasting change in our world of work, which has been further catalyzed by the recent economic crises in many countries. But what makes this change different to a bubble? We’ve summarized some arguments of why the coworking movement is based on a sustainable change. However, that doesn’t mean it’s an easy job to open a good working coworking space.

Five reasons why the growth of coworking spaces is based on organic and sustainable growth: 

1. Coworking spaces invest their own money and create real wealth

Already, there is a convincing argument supporting why coworking spaces are not developing in a bubble: the fact that they create real wealth.

Whether referring to the dotcom bubble a decade ago or the real estate crisis in Spain or the United States, the crisis originated in a glut of cheap money, in an environment in which the sender and the recipient were unacquainted. From funds and banks, money flowed in steady streams to investments which offered little resistance and the most promising returns – which only a little while later turned into delusions and ruined investments.

Redistributed risks create illusions. Those people who distributed the money rarely wore the risk of investment decisions. The risk was mainly taken by small shareholders or people who bought parts of those investments. This was because either both parties’ (better) judgement was drowned out by the noise of the market, or because shareholders were unaware of the risk, and were at the mercy of banks and funds for reliable information.

Another fundamental condition for the creation of bubbles are the sheer amounts of money that flow from various locations globally and are concentrated, by comparison, in much fewer places.

Most coworking spaces, however, receive their funding from local or nearby sources and do not operate within this financial system. In fact, the founders mainly inject the bulk of the required investment, and turn to friends or relatives for additional support. They wear the full brunt of the risks that are involved in small-time investment.

They have access to much more information, because it is their own project, rather than a foreign one thousands of miles away. This also includes failures and mistakes that are encountered along the way, but the risk is less redistributed, thereby decreasing the probability of failures.

2. Labor market changes demand on certain office types lastingly

Most users of coworking spaces are self-employed. The proportion of employees is also on the rise, in many cases simply because they work for small companies that increasingly opt to conduct their business in coworking spaces rather than in traditional offices. The industry of almost all coworkers fall within the Internet-based creative industries.

With flexibilisation of work markets, new mobile technologies that are changing work patterns, and the increase of external services purchasing from large and medium-sized enterprises (outsourcing), the labor market has changed radically in many parts of the world.

The long-term financial and emotional security of becoming an employee no longer exists, especially for younger generations of workers. Bigger companies are quicker to fire than hire, and precarious short-term contracts are on the rise. Promising options on the labor market are more often recuded to freelancer careers and starting your own company.

And that’s possible with less money to invest. All you need is a laptop, a brain and a good network. For years, the number of independent workers and small businesses has been growing worldwide – particularly in internet-based creative industries. Anyone who has sufficient specialized skills and the willingness to take risks may adapt more quickly to market conditions if they own a small business or are self employed; more so than if they were to work in a dependent position in an equally volatile market.

Coworking spaces provide an environment in which to do this. Once they have joined a (suitable) coworking space, these factors become apparent to coworkers, who will remain in their space for years to come.

Furthermore, independent workers rarely fire themselves in crises, and even small companies are less likely to give their employees the boot – compared to their large counterparts. This combination enables more sustainable business models – and less business models à la Groupon.

3. Coworking spaces don’t live on crises

Global economic growth is waning while the number of coworking spaces is continually growing. Do coworking spaces thus benefit from this crisis?

The current crises accelerate the formation and growth of coworking spaces, because they offer solutions and space for the resulting problems. Coworking spaces are therefore not a result of a crisis, but the product of change that pre-dates their existence. A crisis is simply the most visible expression of change.

The first coworking spaces emerged in the late 1990s; the movement’s strong growth started six years ago – before the onset of economic downturns in many countries.

4. Coworking spaces depend on the needs of their members

Most coworking spaces are rarely full. Does this mean they are unsuccessful? On average, only half of all desks are occupied. But the average occupancy rate of 50% refers only to a specific date.

In fact, coworking spaces generally serve more members than they can seat at any given time, since members do not use the spaces simultaneously. Coworking spaces are places for independents who want to work on flexible terms. Smaller spaces rely more on permanent members. Larger spaces can respond more flexibilty to the working hours of its members, and, can rent desks several times over.

If a coworking space is always overcrowded or totally empty, the purpose of said space would be defeated. Firstly, it is rather impossible to work in an overcrowded room. Second, it’s impossible to cowork in an empty room. Given the nature of flexible memberships, a coworking space only can survive if they fit the needs of their members. Members would otherwise be quick to leave, and membership would be much more transient.

5. The coworking market is far from saturation

Less than 2% of all self-employed – and even fewer employees – currently work in coworking spaces. Reporting on coworking may increase, but inflated reporting on the coworking movement in the mainstream media is still far away.

Coverage of coworking space are most likely to be found in the career or local sections in larger publications – front cover coverage remains the dream of many space operators. This is because the whole coworking movement can’t be photographed in one picture. What appears to be a disadvantage, however, is actually a beneficial truth: niche coverage allows the industry to grow organically, and avoid over inflation.

Conclusion

Coworking spaces don’t operate in parallel universes – like the financial market. Demand and supply are almost exclusively organic and operate in the real world economy.

For the same reason, there is no guarantee that opening a coworking spaces will be automaticly successful. Anyone who fails to learn how to deal with potential customers in their market, or is unfamiliar with how coworking communities function, will have a difficult time of making one work. In the same way that business people in other industries will fail if they do not understand their market.

Those who simply tack on the word ‘coworking’ to their space’s facade will need to work harder. The structure of most coworking spaces is based on real work, calculated risk, and real-world supply and demand.

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About the Author

This article was produced by Deskmag. Deskmag is the magazine about the new type of work and their places, how they look, how they function, how they could be improved and how we work in them. They especially focus on coworking spaces which are home to the new breed of independent workers and small companies. see more.

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Callum Connects

Dextre Teh, Founder of Rebirth Academy

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Dextre Teh is a consultant and marketing guru, helping F&B businesses to tighten their operations and grow their businesses.

What’s your story?
I help frustrated F&B business owners stuck in day to day operation transform from a glorified operator into a real business owner. I’m a 27 year old Singaporean second generation restaurant owner and a F&B business consultant. Entering the industry at 13 years old, I have always been obsessed with operations and systemisation. At the age of 25, I joined the insurance industry and earned a six figure yearly income. However, I left the high pay behind because it was not my passion and returned to the F&B industry. Now I help other F&B companies to tighten operations and grow their businesses with my consulting and marketing services.

What excites you most about your industry?
The food. I’m a big lover of food and even have a YouTube show on food in development. But that aside, it is really about impacting people through food. Creating moments and memories for people, be it a dating couple or families or friends. Providing that refuge from the daily grind of life. So in educating my consulting clients and training their staff to provide a better experience for their customers, I aim to shift the industry in the direction of creating memories instead of just selling food.

What’s your connection to Asia?
I was born and bred in Singapore. I love the culture, the food and travelling in Asia.

Favourite city in Asia for business and why?
Singapore hands down. The environment here is built for businesses to thrive. The government is pro business and the infrastructure is built around supporting business growth. Not to mention the numerous amount of grants available in helping people start and even grow business. If I’m not mistaken, the Singaporean government is the only government in the world that offers grants to home grown businesses for overseas expansion.

What’s the best piece of advice you ever received?
Learning to do things you do not intend to master is a BIG mistake in business. Focus on what you are good at and pay others to do the rest.

Many business owners including myself are so overwhelmed by the 10,000 things that they feel they need to do everyday. We try to do everything ourselves because we think it saves us money. The only thing that, that does for us is overload our schedules and give us mediocre results. Instead we should focus on what we do best and bring in support for the rest.

Who inspires you?
Christopher M Duncan.

At 29, Chris has built multiple 7 figure businesses. He opened me to the possibility of building a business on the thing that I loved and gave me a blueprint of how to do it. He also showed me that being young doesn’t mean you cannot do great things.

Imran Mohammad and Fazil Musa
They are my mentors and inspire me every single day to pursue my dreams, to focus on celebrating life and enjoying the process of getting to where I want to be.

What have you just learnt recently that blew you away?
Time is always more expensive than money. Money, you can earn over and over again but time, once you spend it, will never come back.

If you had your time again, what would you do differently?
I am a firm believer that your experiences shape who you are. I am grateful for every single moment of my life be it the highs or the lows, the successes and the failures because all these experiences have led me to become the person I am and brought me to the place that I’m at so I will probably do things the same way as everything was perfect in its time.

How do you unwind?
Chilling out in a live music bar with a drink in hand, listening to my favourite live band, 53A. Other than that I’m big on retail therapy, buying cool and geeky stuff.

Favourite Asian destination for relaxation? Why?
Bangkok. It feels like a home away from home where the cost of living is relatively low, the food is good and the people are friendly.

Everyone in business should read this book:
Everything you know about business is wrong by Alastair Dryburgh. It is a book that challenges commonly accepted business “truths” and inspires you to go against the grain, think different, take risks and stand your ground in the face of the challenges that will come your way as a business owner.

Shameless plug for your business:
I’m the creator of the world’s first Chilli Crab Challenge. It gained viral celebrity earlier this year with 3 major newspaper features and more than a dozen blog and online publications featuring it in the span of two weeks. In the span of the two weeks, the campaign reached well over a million people in exposure without a single cent spent in ads.

Now I help F&B companies to tighten operations, increase profits and grow their businesses with my consulting and marketing services. Chilli Crab Challenge (https://www.chillicrab.com/nationalday)

How can people connect with you?
You can connect with me on Facebook (www.facebook.com/djtehkh) or visit www.rebirthacademy.sg for more information or book a 10 minute call with me @ www.tinyurl.com/dexclar

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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