Lonnie Helgerson's Blog

New - "Never Seen Before" Event & Fundraising Business is Launched

2012-01-13T12:44:00.008-05:00

Helgerson Franchise Group launches IslandTime Treasures - which offers customers a uniquely fun and interactive experience to build their own products using a sandbox.

ELLENTON, FL -- Jan 11, 2012 / Not often does a business come along that provides something customers say they have never seen or experienced before. But that is exactly what IslandTime Treasures hears time and time again from customers young and old alike. Founded by noted franchising entrepreneur Lonnie Helgerson and his wife Linette - the IslandTime Treasures experience is offered at events, school & church fundraisers, weddings, corporate events, pre-schools, summer camps, and birthday parties.

When asked how it works, Linette Helgerson explained "The experience is much like ordering a sub sandwich, whereby you choose your bread, toppings, etc. Only here, customers can choose from a wide variety of products such as picture frames, Christmas ornaments, plaques, and other items. Then utilizing our sandbox, we create a mold for the chosen item. The customer decorates (bottom left photo) this mold with a number of objects including seashells, child-safe seaglass, or a wide variety of supplied Island bling. When they are ready, we then mix up a batch of our proprietary Island Mud plaster and pour it in the mold (bottom center photo). In about 15 minutes, the Island Mud is setup and we pull the item from the sand to finish it for the customer (bottom right photo). Customers have a blast and are always amazed that the whole process only took 15 minutes or so - which always leads to the usual 'I have never seen anything like that before!'"

IslandTime Treasures specialty is school fundraising events and has developed a special process to minimize out-of-class time for students and maximize revenue for the school. Students get to build a one-of-a-kind square or heart shaped picture frame that is ideally suited for their class photo. Participating schools receive a large percentage of the gross sales. The company already has schools booked for events and is seeking more. Linette Helgerson said "Our calendar is filling fast - so be sure to contact us quick to get a date scheduled."

For more information - visit IslandTimeTreasures.com or contact Linette Helgerson at linette@islandtimetreasures.com | 941-915-7240.

Decorate the Mold Pour the Island Mud Finished Product

Help Turn my new Book 5 Pennies into a Best Seller!

2012-01-02T16:55:00.000-05:00

Hello Friend's -

My name is Lonnie Helgerson and I have been in the business franchising industry for nearly 30 years. During that time I have started five franchise brands from scratch and been the CEO of others such as Ident-A-Kid Services of America. There isn't much in franchising that I haven't done, but to save time, I will let you read the rest of my background on my profile page.

For a number of years, many of my friends and acquaintances have been asking me to write a book about franchising. About a year ago, after some real prodding from an author friend - I decided to begin my own quest as a writer, which has been a very exciting challenge and learning experience.

The Book

Every year - tens of thousands of new franchisees open their doors for business looking to fulfill the American dream of success. And every year hundreds and hundreds of new franchise companies announce their plans to be the next McDonald's, SUBWAY, Marriott, RE/MAX, or Great Clips. But beyond the initial legal work, basic operations manual, some training, and a fancy logo to get started what does it really take to be a successful franchise brand?

My book 5 Pennies of Profit: 10 Road Rules of Becoming a Franchise Mega-Brand! is a book that I believe is long overdue to be written because if focuses on the core ingredient of franchising, which is franchisee owner profitability.

While most people think of Mega as something being very large, in my book it means something extraordinary and world class. If you like Good to Great by Jim Collins - my book translates this to "Good is never good enough, but Mega is great and sustainable." Franchise Mega-Brands continuously seek to excel to greatness.Throughout the book I use franchise Mega-Brand "Best of Class" examples that illustrate the 10 Road Rules for successful franchising. In addition, I start each chapter with a franchising Mega-Wreck story and then finish it at the end of the same chapter to illustrate the importance of each Road Rule. All of the franchise Mega-Wreck stories are true and because of the severity of some, I have not shared the names of all franchise brands, unless they are public companies or otherwise known.

Definition

Franchise Mega-Brand

- A franchise system that excels to greatness with a profitable and sustainable franchisee business model.

During the course of writing 5 Pennies of Profit, I interviewed a number of well-known franchise executives such as Fred DeLuca, the Founder & CEO of SUBWAY, Melanie Bergeron, Chair of Two Men and a Truck, along with many others because their companies are included in the book as "Best of Class" examples in various chapters. While conducting these interviews, I also had some of them read draft excerpts of my manuscript for feedback on the overall content.

Resoundingly - they have all told me that I am spot-on with the focus of the book and that it will tremendously help existing brands of any size shore up their foundation and formulate strategic plans. In addition, entrepreneurs growing their business and considering franchising as an expansion model will find 5 Pennies of Profit to be a "must have" strategic planning guide for doing it right the first time.

Many other books have been written about "how to" franchise a business, but none exist about how to effectively manage and grow a national franchise brand.

How I Need Your Help & What You Get in Return

5 Pennies of Profit is nearly complete, with only one chapter left to write. In true serial entrepreneur fashion, I have decided to utilize crowdfunding as a tool to raise money for putting the final touches on the book - which are professional editing, cover design, publishing, and distribution.

My fundraising goal is $7,500 and I have put together some really cool goodies for you to get in return for helping me out. All donation levels are graciously appreciated and will be put to use right away for editing and cover design. Because the book is nearly done you will receive your draft chapters almost immediately if you participate. View 5 Pennies crowdfunding page on IndieGoGo

Regardless if I raise all of the money or not, the project will be completed as I can personally fund it. For those of you that know me - it has to be perfect, so it will just take me a little longer to complete without the funding. And if you have contributed at some level, I personally guarantee you will still get your perks for helping me out.

Other Ways You Can Help

Lastly - I have one final favor to ask of you... Please share this with everyone you know, so that I can get the word out about this exciting new book coming called 5 Pennies of Profit. You can find social media sharing tools right here on this page!!

I sincerely appreciate all of the help you are giving me and hope that you enjoy reading and benefiting from 5 Pennies of Profit very soon!

Click here to start reading your copy of 5 Pennies today, view some great videos, and score some really cool perks too!

8 Technology Changes that will Impact your Business in 2012

2011-12-23T11:19:00.019-05:00

The Ever Changing World of Technology

While I don’t own a technology crystal ball, I can assure you of one thing… It will change - and so to must your business technology if you are to stay in the game.

I believe technology will play a larger role in business in the next few years than it has in all previous years of business history. At no time has technology evolved as fast and furious as mobile and online technology has in the last couple of years.

Recently there was an article in Wired Magazine that stated the Internet as we know it is dead. The article claimed that websites and browsing will migrate to a world of applications and dedicated connectivity, which means that the internet will be a massive nerve system that streams information at incredible speeds. So what effect does this have on your business? A huge one actually... Here are some technology areas that are starting to impact how we do business right now:

Cloud Computing - We are moving away from centralized in-house servers and systems to an internet cloud environment that provides storage, email, and other applications. If you are not exploring cloud computing for your company now - you should be or you will be left in the dust.
Mobile Applications - More and more companies are developing mobile applications for their business and customer interaction. A good example of this is the Great Clips app that tells you wait times for getting your hair done in salon's. You might want to start exploring apps for your business.
Mobile Content - Is your company website optimized for viewing on an iPhone/Smartphone, or listed on Foursquare? If not, you’re behind the curve already.
Mobile Payments - Is your business equipped to accept mobile payments? Google Wallet and Square are serious game changers and will impact your operations sooner than later.
iPad Menus - If you haven’t ordered a meal or viewed a wine list on an iPad yet - don’t worry you will soon. If your staff members and line workers are still carrying around clipboards, you have an iPad application waiting to be developed.
McTV - Call it gimmicky if you want - but don’t underestimate the power of digital TV or McDonald's. Deploying localized digital TV into restaurants is nothing earth shattering at first blink, but if they virally interact with their customers through it by conducting polls, customer feedback, music, and other social connections… this is a big deal.
Social Media - Just when you figure out one platform - along comes another. Social media is here to stay and you will need to stay abreast of it to compete online and offline.
Twitter - Easy to dismiss - but more and more executives are using Twitter to communicate with peers… including me. You need to pay attention to this movement and how it may play out for new business development and customer interaction.

While some or all of these technology changes may have an effect on your business at some point - the most important thing to remember is that they will affect you, your company, and how you do business. There is no escaping the moving sands of technology.

To prove my point - check out the video below. This is the future of staff training and customer interaction >>

Till next time... Be Bullish on Profits!

So what does your company do to stay ahead of the crowd with technology? Email me your tips for a chance to be included in upcoming articles.

Helping franchise brands, entrepreneurs, and small business owners grow and achieve! How can I help you and your business grow? Contact me today for a free consultation!

The Aha Moment of Best Practices

2011-11-27T17:27:00.004-05:00

The following is a two section excerpt from Chapter 5 of my new book 5 Pennies of Profit: 10 Road Rules of Becoming a Franchise Mega-Brand! due to be published this Winter.

To frame exactly what a best practice is – one of them that we as consumers use in our everyday lives are “business hours”.

At some point in business history, a merchant, probably at the urging of his customers, posted his business hours on the front door or window of his shop to inform everyone when he was open for business.

No doubt another business owner saw that sign and thinking what a clever idea it was, took it one step further by putting up a sign that said “open” in addition to his business hours. Before you know it, every business had an open sign and posted their business hours.

Today we take those two best practices for granted, but at one time in business history they were an “aha” moment. The same goes for making a motel reservation, point of sale systems, the Big Mac, and more recently fast food dollar value menus.

All of these examples were ideas at one time - and are now required business practices in franchise systems.

Creating a Best Practices Clock

One of the reasons business format franchising has catapulted to the success levels of today is because of the capturing, systematization, and sharing of best practices throughout an entire franchise system.

Franchise Mega-Brands instill a culture of continuous improvement with their franchisees and manage it by creating best practices programs and communication channels for sharing them.

In short – “they process the creation of process”.

In the book Built to Last, Jim Collins discusses the concept of clock building - which is about building a company than can tick along on its own momentum.

Having formal programs that plant, grow and cultivate best practices within a franchise system creates a clock of continuous brand improvement and dispels stagnation from setting in.

Till next time... Be Bullish on Profits!

So what does your franchise system do to promote best practices? Email me your tips for a chance to be included in upcoming articles.

Helping franchise brands, entrepreneurs, and small business owners grow and achieve! How can I help you and your business grow? Contact me today for a free consultation!

5 Ways to Grow Your Small Business in this Economy

2011-11-16T11:01:00.001-05:00

Being a small business owner is challenging enough - no less the pressure that difficult economic times burden you with. So why have some businesses thrived while others barely survive these times? Here are some secrets that national franchise chains coach their small business owners on to help stay visible and vibrant:

1. Focus on Value -

Some national franchise chains have actually grown sales through the last few years by focusing on stretching the hard earned dollar as far as they can for their customers. For example - McDonald's Dollar Value menu, Subway's $5 footlong, auto repair centers like Meineke, dollar store specials, and others have all benefited from providing value promotions borne from the tightening of consumer wallets. So what can you do to promote value for your business? Start bundling items together that promote value - which ultimately increase top line sales because bundles sell for more than individual items. Consumers want and need to feel good about the price they pay - they need to feel like they received a bargain - give them a deal. Consumer value focus is not going away anytime soon, so look around your business and start bundling for dollars! For example an automotive garage could raise the price of an oil change incrementally, but then throw in a free engine air filter, car freshener, or other small low cost accessory. Value perception is the key - get creative!

2. Rebuild Your Team -

While we may be facing economic uncertainty; now is the time for you to find superstars that will help grow your business to the next level. You can find them everywhere... next time that you're out having dinner somewhere and someone impresses you beyond belief with their customer service skills - that's your new hire. Hire for the customer service - train for the skills! Find them, recruit them, pay them well with strong incentives so that they don't have to worry about looking elsewhere for better opportunities. Build a team and give them a reason to help you grow your business. Document your requirements, train them, measure their performance, and grow your business to a higher level.

3. Clean up Your Act -

When was the last time that you freshened up your stores look? Or re-lettered your signs? Or re-painted your counters or installed new carpet? Major brands remodel on a consistent basis to keep their customers engaged and interested in their offerings. Businesses that look busy - typically stay busier. Inexpensive ways of freshening up could include a new vehicle wrap, branded shirts for staff, cleaning & re-striping your parking lot, washing the windows, sweeping the sidewalks, etc. By looking and acting like you want to do business with your customers - it will help drive business.

4. Focus on Your Neighborhood -

Studies show that most customers for a small business live within a 2 to 5 mile radius of a stores location. What are you doing to target those customers? Are you advertising beyond those areas? If so, you're wasting precious money from your ad budget. Focus on your market, by doing door-to-door gorilla marketing with coupons. For new customers - if they haven't tried your establishment give them a free coupon to try your products. If they have been a previous customer, give them a coupon for BOGO (buy 1, get 1 free) or receive 50% off on their next visit. Get creative and GET LOCAL!

5. Surprise With Fireworks -

Are you doing anything for your customers that's totally unexpected? Are you providing them something for free in addition to the service or product they ordered? For example if you're an auto mechanic - for any repair or service completed, wouldn't it be nice to surprise the customer with a freshly cleaned car that is washed, vacuumed, cleaned windows, and a nice air freshener hanging inside? That is something totally unexpected, exciting, and surprising! Fireworks make customers go "wow" this is really cool and give them a reason to tell their friends about it. Other ideas might be providing coupons for McDonald's, or maybe a free night motel stay for the single mother that really needs a break from the kids. There are tons of inexpensive items or products/services that you can provide your customers that will surprise with fireworks - use your imagination!

Till next time... Be Bullish on Profits!

So what are your ideas for a small business to grow in economic uncertainties? Email me your tips for a chance to be included in upcoming articles.

Helping franchise brands, entrepreneurs, and small business owners grow and achieve! How can I help you and your business grow? Contact me today for a free consultation!

Creating Partners in Growth

2011-10-23T17:26:00.013-04:00

The following is a two section excerpt from Chapter 8 of my new book 5 Pennies of Profit: 10 Road Rules of Becoming a Franchise Mega-Brand! due to be published this Fall.

I grew up with Super 8 Motels - quite literally. As a youngster in my early twenties, I joined the company in franchise operations and spent eight years helping grow one of the largest and iconic brands in the United States today and am very proud to have been a part of it.

While we may not have exactly realized it at the time - there are two distinct initiatives that were implemented at Super 8 Motels that set us apart from the competition on a considerable scale, generated tremendous revenues for our franchisees, and were quite visionary.

Those initiatives are the national reservation system and the V.I.P. customer program. During the 1970-80’s it was virtually unheard of to have an in-house reservation system, as most lodging chains outsourced their reservations to companies that specialized in that process. As well, the V.I.P. club, better known today as a “loyalty program” was even way more advanced and visionary for its time. Today, both these types of programs are taken for granted and utilized by countless numbers of businesses in varying sectors.

As you might expect - both of these programs were more happenstance than strategically planned initiatives - but none the less were smashing successes that still thrive today.

Let’s examine them as they are perfect examples of franchisor sponsored initiatives that benefited all franchisees and created partners in growth.

Superline - The Super 8 Motels National Reservation System

In 1974 the very first Super 8 Motel was built in Aberdeen, SD and in 1975, the toll-free national reservation line was launched and handled by a single operator. She would receive the call from a guest, write the reservation down on a scrap paper, and then call the motel to book the room.

Starting in 1977, the system was named Superline and was “upgraded” to a large wheel with hundreds of slots that spun in a circle. Operators on one side would receive the reservation and then stick it in a correlating slot for the motel. Operators on the other side would spin the wheel, pull the form and call the motel to book the room. Believe it or not- this was a highly efficient system.

By the early 80’s the daily call volume was exceeding a 1,000 reservations per day and a computerized system was required. By the end of the 80’s over 325,000 calls per month were coming through Superline and being dispatched directly to franchisees properties.

Super 8 Motels was the first national economy lodging chain that offered a centralized toll-free reservation line. Not only did Superline generate direct revenues to franchisees for being a part of the system - it was also a tremendous value proposition for joining the system.

The Super 8 Motels V.I.P. Club

Another program that benefited and created partners in growth with the franchisees was the launch of the Super 8 Motels V.I.P. card in 1977. Initially conceptualized by then brand President Dennis Bale after he noticed another motel that had a frequent customer program - the V.I.P. program was launched with nothing more than applications at the motels. An applicant had a credit check ran on them and then received a paper card that was typed out with their name, address, and member number. Yes - this was all done with a typewriter at the time.

V.I.P. members received a 10 percent discount on rates at participating locations and could cash checks at those properties. The program grew like wildfire - as within a few months, the membership count was over 1,000 and by 1983 had grown to over 60,000 members. In two more short years, the count had grown to over 207,000 members and gaining speed. Not many years later the count had grown to over 6 million people.

The guests that carried these cards were people who stayed frequently at franchisees properties and were fiercely loyal. This program, along with Superline played a major role in the growth of Super 8 Motels and continues that success today.

Authors Note: I still have my original V.I.P. card. Back in the day, Super 8 corporate staffers carried special issue cards that had a denotation of “S8” with a corporate number on them. I always got a chuckle when desk clerks would get extremely nervous after they noticed my number at check-in. On another note, I also know the whereabouts of the wheel that was used in the early reservation center. Wouldn’t that make for an interesting conversation piece?

Helping franchise brands, entrepreneurs, and small business owners grow and achieve! How can I help you and your business grow? Contact me today for a free consultation!

A New Book by Lonnie Helgerson: Buying a Franchise - Is it Right for Me?

2011-10-04T10:12:00.000-04:00

The Top 10 Mistakes List

Being an Entrepreneur vs. Frantrepreneur

- Franchise systems don’t want their wheel reinvented; they want people who can make the wheel turn faster.

Confusing a franchise with a job

- If you only want to work 8-5, don’t apply for a franchise.

Assuming you can just try it out awhile

- Franchise Agreements typically average 10 years in length, so be prepared for a long-term business.

Not being financially prepared for the investment

- Starting a business takes cold hard cash - be ready for that.

Working in the business – Not on it

- Franchise systems want business builders - not business workers.

Going it alone

- You will be doomed for failure if your spouse or partner does not support your business interests.

Sticking to what you know

- What you’re good at doing today, may not be the best franchise for you.

Having lone wolf syndrome

- Franchising is about consistency and teamwork – you will need to get along with others.

Not sharing your information

- Be prepared to share personal information with a franchise company.

Expecting automatic success

Franchise systems provide you the tools – you still need to use them and build a business.

(An excerpt from my new book Buying a Franchise - Is it Right for Me?)

Available in paperback and ePub at www.HelgersonFranchiseGroup.com

Has the Geek Squad Run it's Course?

2011-02-25T18:30:00.001-05:00

This blog post isn't so much my opinion, but more of a question. As a tech pioneer, and the guy that set in motion the phenomenon known as Geek Squad, did Best Buy make a mistake?

Mobile technology is upon us, and I find it interesting that I don't see the Geek Squad in the new small footprint Best Buy Mobile stores.

How about you readers, what is your opinion?

RadioShack (NYSE:RSH) is Asleep at the Wheel!!

2011-01-20T19:27:00.025-05:00

You may have heard the story about how someone wants to die peacefully in their sleep like their Grandpa did... Not screaming like the passengers in his car as he barrels over the cliff!!

This is probably a fairly accurate description on how the shareholders of RadioShack must feel these days as they watch management continue to ignore the painfully obvious. Let's take a closer at what everyone else seemingly notices, while the "Shack" continues its plummet over the cliff:

RadioShack is seriously hung up on legacy products.

According to RadioShack's annual report, technical platform sales are less than 5% of sales, yet when you visit the stores approximately 20-30% or more of floor space is dedicated to legacy products.
Note to CEO Julian Day: Get in the field and actually spend some time in your stores!

RadioShack has made nothing more than a “token” attempt at taking advantage of the mobile technology space.

The front of current stores are dedicated to phones/smartphones, however there is very little space allocated to tablets and other mobile computing products.

The current “Bullseye Mobile” initiative with Target Stores is good - but too small in scale and lends most of the brand goodwill to Target rather than RadioShack.

I'm sure the Target shareholders are very happy with this arrangement!

The current RadioShack management team and Board of Directors are not “technology geared”.

Another note to CEO Julian Day: Time to geek seed your Board and Management!

RadioShack has no social following:

155,549 Facebook followers vs. Best Buy with 2,350,778 followers.
OK - Come on?? Do we have a serious lack of business execution problem here? Again, no geeks on board!

Let’s face it, while we all like Lance Armstrong, he is not exactly someone who will attract the crowd that will buy mobile technology. Nothing personal Lance!
Company has made no investment or initiatives with franchised dealers, in some cases allowing them to operate almost autonomously.

Another note to CEO Julian Day: Get someone in management who knows franchising and fix your company!

Other than buying RadioShack Mexico, no attempts have been made to take the brand global.

Guess only U.S. citizens buy technology huh?

Believe it or not, I do not own one red cent of stock in RadioShack as you may think. I just hate seeing a company that could become a dominant player in the mobile sector go down the tubes because of complacency!

Personally, if I had the money, I would buy this company and turn it into a category killer in short time. However, right now I don't have an extra couple of billion laying around.

But you know.... if I wait long enough - I might be able to pick it up for pennies on the dollar. mmmm....

The Biggest Mistakes Made by Franchise Companies

2010-12-30T13:18:00.000-05:00

Have some franchise companies learned any lessons from the harshness of the great recession?

Since the time I initially wrote the original Top Ten Franchisor Mistakes in 2006; to say that things have changed in franchising is a gross understatement.

Considering the great recessions affect on franchising, I felt it was time to blow the dust off and see if these mistakes still hold true as they did in the pre-recession high-flying times.

The Top Ten list is growing and therefore I have had to re-title it from its original in 2006. Unfortunately, it appears the great recession has magnified some of the mistakes that franchisors make, and even invented a few new ones as well. I still see some franchise companies cut corners where or when they shouldn’t be; or alternatively, bulldoze over their franchisees, staff, and in some cases, everyone they are involved with.

And believe it or not, for the first time in my career, I actually witnessed a franchise company commit suicide this year for no reason whatsoever. If you are wondering which company this is; you will have to guess at it, as I am withholding all names to protect those that are already collateral damage. Individual people do all types of crazy things when under tremendous stress or duress, and the great recession proved this happens with companies as well.

On the highly positive side however, I have witnessed many franchise companies go from good to great during the great recession by concentrating on franchisee profitability, support, and significantly adjusting the way they do business. As we continue to emerge from the economic darkness, there will be more franchise companies that will join those as they emerge much stronger and better than they were before the recession.

Fundamentally, there are a myriad of mistakes and missteps, both large and small, that franchisors can and will make along the way. Some of them seem to fix themselves over time; some are fixed by sheer luck; some are corrected by training; and some by throwing a whole lot of money at them. Some unfortunately, never get fixed at all.

However, there are basic foundation items required of every good system, and franchisors that do not heed these criteria will certainly share the bad results with their franchisees, stakeholders, and their own checkbooks.

Throughout my almost 30 years in franchising, I have seen all of these mistakes made, and of course made a few of them myself.
The important thing is to learn not to repeat them, and to pass that knowledge on to others so that they can avoid making them as well.

So here are the big ones, and they are in no particular order:

Not having, or committing enough cash to start and grow the franchise system until it sustains itself with royalty flow.
Of all the mistakes on the list, this is a huge one and probably the one that irritates me the most. There is no easy way to say what needs to be said nicely, so here goes and listen up… First, if you don’t have the funding to properly develop your franchise and get the system to royalty break even, do yourself and everyone else a favor and don’t even begin to franchise at all. You cannot, and should not, expect to grow and sustain your system on franchise sales alone!

Secondly, if you’re a big company with deep pockets, there is no such thing as “we’re just testing viability of the concept”. If you franchise and contract with franchisees, you had better be committed to growing the company with them. Otherwise you’re misleading good franchisees who have invested significantly into your little test.

Speaking of test, and as I mentioned earlier, I unfortunately witnessed a franchise company commit suicide this year. Now I have seen companies go broke, close their doors, declare bankruptcy, or just plain quit. But this is the first time in my life that I have ever witnessed one commit hari-kari for no logical explanation.

This particular company was already very successful with an operating franchise system. To expand their holdings, they decided to launch a new franchise brand in a different category. They initially capitalized it and had expert franchise management develop and operate it. After selling a few dozen franchise owners and area representatives, they for no apparent reason, removed the expert franchise management one month, and then a few months later, quietly shut down the franchise by taking down the web site overnight. As you might imagine, this created absolute anarchy within the system and adverse reaction from the franchisees. Imagine that?

No one really knows why this company did such a bizarre thing, other than some speculate it was because they had reached their “budget”. Budget?!?!... I wonder if they thought about the franchisees budget after having invested with good faith into their franchise.

Here is some sage advice concerning capitalization. My experience is that a new franchisor can never have enough cash. A good rule of thumb for cash availability is six months of operating expenses. However, as a new franchisor, it could realistically take a year to get your franchise offering put together before you are even ready to sell franchise one. Because of this, plan on long-term cash flow needs and you will be much better off. Even though you are eager to get growing with new franchise sales, counting on them is a very deadly mistake and one that could take your entire concept down.

Having the wrong partners and/or investors involved.
Nothing can derail a franchise plan faster than investors or partners that do not understand franchising or the business that you are in. Your partners and investors must understand that it takes time to grow a franchise system and that the “riches” of franchising are NOT the franchise fees. If they insist, have them read the “not enough capital commitment” mistake referenced above. If you are busy battling your investors, you cannot keep your eye on the ball of growing and supporting your franchise system.

An old friend of mine once told me when I was raising money for a new franchise brand “Don’t be blinded by the money, be sure the deal is good and makes sense first”.

Personally having been there and done that, seeing a bunch of zero’s behind a big number is very compelling. However, be sure that that there isn’t a higher price to pay for it than the term sheet specifies.

Growing your system too fast.
Recently I attended a franchise conference where I met a couple of guys that were brand new franchisors. As we were talking, they were telling me how fast they were growing by selling large area representative contracts requiring dozens of stores to be opened by each one. However, they were running into huge challenges with their area representatives meeting single store development and opening requirements and didn’t know how to get them on track. In other words, they were selling lots of store opening commitments, but not getting them open with operators.

I said OK, and then asked them how well their single unit franchisees were performing. They replied that once their single unit franchisees opened they did quite well because of the strong support and training they provide.

Again, I said OK and asked them who directly supports their area representatives. This resulted in a blank stare and a long pause of silence from them. With a sheepish reply, and somewhat of an epiphany at the same time, they indicated that was probably the root of what was wrong with their system, as they didn’t have any sales or operations support for their area representatives at all. As they grew, they built training and support for their stores, not realizing that area representatives also need support, albeit a different type of support.

At the stage of life this new franchisor is at, it is going to be an expensive lesson for them to implement support and training for their area representatives. Some of their area representatives that are currently in the system may not be the right people for the job, which means they will need to figure out a way to get them growing or find an exit out of the system for them. In addition they indicated that most, if not all, of the area representatives were behind on their development schedule which means they will need to get current with their agreements or face termination.

No matter how you slice it, fixing this problem will take their eye off the goal and set them back for an extended period of time. The lesson learned here is that you can quickly outstrip resources and support mechanisms in your franchise system if you grow too fast. As well, a few dollars spent early in the company lifecycle on a reputable experienced franchise consultant may have prevented this from happening at all.

Bottom line - high sales growth does not equal success. Planned “getting your locations open” growth does.

Not having franchise experience or hiring people who have it.
This is a very common mistake I see happen. Most companies that utilize franchising as a growth strategy quickly find out that they are in a brand new business. They may figure this out in a number of ways, including attending franchise events such as the International Franchise Association’s annual convention and being overwhelmed with the information, receiving expensive legal lumps on the head, or pushback from the franchisees that don’t jump when they bark orders at them.

Being a franchisor is not the same as it was running the successful business that you are franchising. Your first indication to this might be – franchisees don’t respond like corporate employees. The phrase “herding cats” couldn’t be used in a more appropriate example than working with franchise owners.

Pushing a metal linked chain also comes to mind… If you try to push a metal linked chain, it quickly collapses, however if you lead the chain, you generate consensus through the links and you can pull it along with you anywhere. Franchise chains react in exactly the same way.

Franchising is first and foremost a relationship business. Seasoned franchise people know this and they also know how to coach franchise owners to make things happen. Do it right by hiring people that have been at executive levels in franchising and if possible have CFE (Certified Franchise Executive) certification.

Strong franchise experience will grow you faster than any amount of advertising will, and also keep you out of hot water with your franchisees and state regulators.

Not having good training and operations manuals.
Strong training and usable operations manuals are key ingredients to franchising success. You can never train enough! Trust me on this - I have never ever heard a franchisee say “Stop Please! I’m over-trained and cannot take one more ounce of it!”

If there is one thing that is fairly inexpensive and provides incredible value for royalties paid, it is training. In addition, keep in mind that franchisees have different needs based on the lifecycle of their business.

New franchisees need different training than operators who have been open for 3-4 years, or owners that have been operating for a long time and are looking to sell or exit their business.

When it comes to franchise operations manuals, they should be a tool that franchise owners can turn to for almost any question or problem. Additionally they need to be an integral part of your training and daily operations. With today’s technology, you can host your manuals online in a user friendly tab driven menu and do away with the antiquated PDF’s. To do manuals the right way and get your franchisees to use them, I recommend working with a reputable consultant that specializes in manual design and creation.

If you’re a new concept, spend the majority of your development time and money in these two areas. It will pay incredible dividends to your franchisees and your system. If you are an emerging or mature system, it’s time to ask your franchisees how often they use their manuals.

I’ll put my money on that the majority of them probably don’t even know where they’re at.

Not having an operating concept that allows your franchisees to make money.
I wish that I had a nickel for every time that someone approached me with a great idea for a franchise. For the record - ideas sometimes build good businesses. And sometimes… just sometimes… good businesses build great franchise systems.

You cannot just leap from an “idea” to a “franchise system” without a profitable proven business format to build upon. If you do, it spells major disaster for everyone involved! And I mean disaster… You don’t see too many eBay auction stores around anymore do you? For those readers new to franchising, there used to be hundreds of eBay auctions stores operating just a few years back. Prime example of a neat idea - but fundamentally a bad business model.

Unfortunately, the current franchising landscape has a few questionable concepts which were launched with the “I have an idea” model.

I cannot stress enough, that it is imperative for a company looking to expand through franchising that they have proven operating stores or locations. From that starter base, best practices can be gleaned and developed for replication.

If at all possible, the best test store results will come from developing locations in various demographics and geography. The results from these locations can then be measured and compared to all of the operating locations for any number of operating metrics.

Great franchisors continue, and will deepen this habit of measurement and comparison with all of their corporate and franchised locations.

Not recruiting adequately capitalized franchisees.
Those of us that have been in franchising for any length of time have heard the “fog a mirror” statement. For the record, it means if a person can fog a mirror and has enough cash in the checkbook for the initial franchise fee, they will find themselves a franchisee before you can clean the mirror off. My friends, this is not a blueprint for sustainable franchising.

Because of the lack of available financing the recession has afflicted upon business the last few years, and the overwhelming urgency of getting a deal sold, I am concerned that some franchisors may have brought the mirror out from the attic. Time will tell if this prophecy is true. Regardless of the temptation, it is a dangerous move to skirt your financial requirements for new franchisees.

If you’re not sure why this is a bad idea, just consider the pressure that a shortage of cash will put on the new franchisee. That is, if they are somehow lucky enough to get financed and open. If they do open, it will not be long before you have a store going dark and customers calling headquarters because of it.

If you are a smart franchisor and stick to your new franchisee financial requirements, I commend you! A trend that I have seen because of the tight lending environment, are franchisors that are increasing their financial requirements for new franchises. The premise behind this is that if they have more cash up-front, it should make it a little easier for them to attain financing. I couldn’t agree more, however make sure your franchise sales people know the impact this will have on their development plans for the year, as there will be less candidates that meet the new criteria.

Good franchisors annually review their Franchise Disclosure Document (FDD) Item 7 “Estimated Initial Investment” requirements and make windage adjustments if needed. If you are a new franchisor, absolutely expect your FDD Item 7 to change during the first few years of operation and need adjustment as you will discover what you initially thought your franchisees would spend to open has changed.

Not having or providing field support to your franchisees.
Every franchisor at some point needs to have a strong field support system. Yes, I do recognize that there are some systems that are very unique, have very small unit economics, are a home operated concept, or have some other reason that having an actual field support team might be challenging.

As the past CEO of Ident-A-Kid^® which is a home based, small unit economics franchise operation; I can tell you that the unit economics simply do not afford a “typical” field support specialist. However, that did not preclude us from providing world class support to the franchisees via daily phone support, intranet, webinars, training, conferences, and so forth. Actual “at the franchisees location” support, if needed, is typically sales and marketing oriented within their markets.

Over the years, one of the most common complaints that I have heard from franchisees is “The home office staff has never operated a location and doesn’t understand my business”.

All corporate staff must spend time working in the store and franchise operations. Some franchisors make it mandatory that all new corporate employees spend time working behind the counter before they start their corporate duties.

For smaller franchise companies, getting out from behind the desk can be a challenge, but one that I have grown to appreciate. There is no substitute for field experience and the franchisees will appreciate the effort more than you know. Besides, this is where the rubber hits the road and can it be a lot of fun doing as well.

If there is one thing that the hit series “Undercover Boss” on CBS has taught us; is that it is amazing what you discover when working in the trenches with the owners.

The bottom line is - if franchisors do not spend time in the field or provide field support, they will ultimately pay the price through diminishing royalties, customer complaints, and bad franchisee relations.

Not communicating with your franchisees.
A long time ago, I attended a break-out session at the International Franchise Association’s annual convention. The session was geared towards franchise system turnarounds and one of the speakers was Sid Feltenstein. At that time, Sid had acquired, turned around, and then sold A&W^® to Yum! Brands^®. The A&W^® turnaround was, and still is a very successful story in franchising.

One of the attendees asked Sid what the “secret was” to the successful turnaround of the company. Sid’s reply was simple and one that I have never forgotten – He said “I asked the franchisees what needed to be fixed and provided it for them”.

Since that time, I have utilized the “Sid Feltenstein communication strategy” in managing the brands that I have been involved with. And let me tell you, it’s amazing what we accomplished together with the franchisees.

An incredible by-product of this strategy is when franchisees are directly involved with decisions of the brand; they become evangelists and perpetuate communication even quicker through the system.

As a new franchisor, you must develop and foster a great communication platform to your franchisees as soon as possible. This should include headquarters personnel training, creation of a franchisee advisory council, internet communication tools, newsletters, and every other conceivable tool available.

A bad habit that I see franchise companies acquire is they are really good at “pushing” information out to the franchisees, but are not very good at “pulling’ feedback from them.

A very effective way of pulling information from your franchisees is to poll them once a year on your performance. As brutal as having your franchisees grade you may sound, this is an essential way of finding out the problem areas that need to be fine tuned or overhauled completely.

Some franchisors frequently poll their franchisees on singular items in their intranet system. While this gives good incremental anonymous feedback, it won’t provide you with comprehensive feedback like the annual report card poll. It does however; provide you with good feedback and shows that you care about your franchisees and their success.

Just remember, you can never over-communicate with your franchisees. To be a great franchisor, you must master this art.

Not having a great information system.
Not so long in the distant past, you could actually run a franchise brand without a sophisticated information system. Let me be the first to say that it is not possible any longer.

Today, you cannot compete or succeed as a franchisor in any category without knowing your store unit economics, system key performance indicators (KPI’s), franchise development/sales metrics, and corporate accounting metrics – period!

With current technology, it is even possible to do this live time with sophisticated dashboards giving you immediate vital signs. Unit economics are the life blood of the franchise system and franchisors must be able to react and help franchisees that are missing the mark quickly. Dashboards give you this ability.

Because of the importance of technology in franchising today, it has also become a very strong value proposition during the franchise sales process. If you have it, bring your franchise development team up to speed and flaunt it. If not, make the investment, as the ROI to the system is almost immediate.

Think about this for a minute… if you don’t get your technology act in gear, I can assure you that your competitors are.

In Summary

There are many mistakes and blunders that a new, emerging, or even a mature franchisor can make and I didn’t, or couldn’t list them all. But be assured; these are some of the biggest there are, and I hope this information is beneficial enough to keep you, or others you know from making any of them or help to identify them and make corrective action.

Building and growing a franchise system correctly takes significant commitment, discipline, and education. If you don’t do it right, it will be an expensive proposition for everyone involved.

Personally, I have found franchising to be a lifelong learning experience and very rewarding career. I have also found that there is no other business sector that shares information as readily as people in franchising do, so take advantage of that and build a circle of advisors that you can reach out to when you have questions.

Very early in my franchise days, a close friend of mine told me to “build my rolodex of contacts.” That was some of the best advice I have ever received and heeded from anyone. Over the years, I have reached out to my contacts many times when I had questions. As well, I have developed incredibly rewarding lifelong friendships with many of them.

If you find this information valuable, let me know. I am always excited to hear from my readers.

All company, product, and brand names mentioned are trademarks, registered trademarks and/or service marks of their respective owners.