One of my favorite things about being the CEO of BodeTree is the fact that I get to spend my days working with fellow entrepreneurs.
It provides me with a special kind of inspiration that can only come from surrounding oneself with passionate, creative individuals.
For those of you who aren’t aware, BodeTree is a franchise services company, and we serve as an extension of a franchisor’s team to help with sales, marketing, and technology.
As a result, we develop intimate relationships with the various franchisor brands we represent, and get to know the inner workings that take place behind the proverbial curtain.
While I was writing my latest book, I spent a lot of time thinking about these relationships and just what separates a good franchisor from a great franchisor.
The goal of this exercise was twofold: First, I wanted to help potential franchisees identify the best brands to join. Second, I wanted to know what we should look for when vetting potential clients.
I quickly discovered that every great franchisor has three things in common.
#1: They’re committed for the long haul
As I’ve written about in the past, entrepreneurship is one of the most difficult and most rewarding journeys anyone can undertake. It will test you in ways you never imagined, and in doing so reveal the true nature of your character.
We live in an age where entrepreneurship is glamorized, and the line between business leader and celebrity are blurred. People gloss over the uglier and more challenging aspects of the lifestyle, which often results in unrealistic expectations.
These individuals are known as “wantrepreneurs.” They’re enamored with the allure of striking it big but aren’t committed for the long haul. They tend to crumble at the first sign of adversity.
Unfortunately, the wantrepreneur phenomenon is quite common in franchising. When sales get off to a slow start, or other challenges emerge, these wantrepreneurs run for the hills, or worse, look for someone to blame.
When evaluating a potential new client, we look for founders who embrace the truth of entrepreneurship and are willing to commit to their business. They’re the type who put in long nights, make hard sacrifices, accept the responsibility/accountability, and have a willingness to invest.
It’s this commitment that positions a brand for long-term success, and it’s a trait I see time and time again in the franchisors.
#2. They’re interested in building royalty streams, not pocketing franchise fees
There is a particular moral hazard baked into the very structure of franchising: franchising fees. While there’s nothing inherently wrong with the nature of these fees, they do tend to warp the perspective of franchisors and others involved in the business.
With the prospect of a quick payday dangling in front of them, many franchisors lose sight of the real value creation engine: royalty streams.
Future royalties may seem less attractive in the moment, especially compared to a fat check for an initial franchise fee, but it is this recurring cash flow that drives value in any franchise business.
Banking on royalties requires a lot of hard work and needs franchisees to be successful. The key to this success, of course, begins with finding the right franchisees in the first place. From there, franchisors must focus on execution and long-term support.
The problem with all of this is that it takes time to build up a steady royalty stream, and many franchisors lack the necessary patience. The best operators, however, recognize the value of a long-term strategy and focus on the fundamentals.
They often partner with external groups, like BodeTree, to drive sales while putting their efforts toward making franchisees successful.
The resulting long-term perspective leads to a culture of transparency, commitment, and support that leads to sustainable success.
#3) They possess the right combination of passion and pragmatism
Finally, and perhaps most importantly, the best emerging franchisors strike a delicate balance between passion and pragmatism.
Passion is essential to any entrepreneurial venture. Without it, there’s little chance that anyone would be willing to endure such a challenging journey for long.
However, unchecked passion leads to unrealistic expectations, short-term thinking, and irrational decisions.
On the same note, unchecked pragmatism can quickly lead to cynicism and a tendency to default to the path of least resistance, which is equally as damaging.
Success in franchising requires the perfect blend of each. Founders must be passionate enough to endure whatever comes their way and create excitement for franchisees while remaining realistic about what needs to be done to find success.
I’ve seen a lot of franchise brands come and go over the years. As a result, I now find it easy to spot the concepts and founders that have staying power. They consistently demonstrate a commitment to their brand, focus on long-term value creation, and strike the right balance between passion and pragmatism.
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