I might be dating myself by recalling the anti-drug ads from the ‘80s and trying to relate them to franchising. The relevancy in my mind comes from the fact that restraint and saying no to something that feels good in the near term but will cause long term pain is much easier said than done. For franchisors, it feels good to sign up a new franchisee and collect a check that can do so much short term “good” even if deep down we know we may be letting someone wear our team colors who is not a good fit.
As a franchise lawyer who does a lot of work in the startup and emerging space, the questions I am asked the most by new franchisors is: “What is the secret to building a successful system?” and “Why do only two out of ten brands break out and turn themselves into a generational wealth event for the founder?”
Of course, there are many reasons, but in my experience, the single most significant impact on success is the quality of the franchisees joining the system. Those first few magnify the impact as they will set the tone for the entire system and culture moving forward. If you feel in your gut that the person you are about to take a check from and hand over your secret sauce to won’t be successful, then “Just Say No!”
A fun exercise I ask my clients to do is to think about the transaction in reverse. Would you write this candidate a $30,000 check to join your system? That, of course, doesn’t work economically, but it’s an excellent exercise to change your perspective from franchise sales to franchise recruitment. Those of you who have not been wise gatekeepers and have let in some troublemakers, think of the pain those wrong franchisees have caused. Returning the initial franchise fee to get rid of one probably sounds like a bargain.
If you are using a consultant network and an outside sales team, your payout from the initial franchise fee won’t be that large anyway. That should give you even more incentive to only say yes to people you believe will be great brand ambassadors and will do what it takes to succeed in your system financially.
– Tom Spadea, Franchise Attorney and founding partner of Spadea Lignana, LLC
Tom Spadea is a franchise attorney and founding partner of Spadea Lignana, one of the nation’s premier franchise law firms representing over 250 brands worldwide from emerging concepts to elite brands that are household names. Tom is a Certified Franchise Executive, speaker, author and key advisor to many high level executives and entrepreneurs in franchising. Visit www.spadealaw.com or reach out to Tom directly at tspadea@spadealaw.com.