Published in "The H R Reporter"
August 9, 1999 issue

People factor critical to franchise success

BY JOEY GOODINGS

SELLING franchises is like selling anything else: as long as the customer has the money, that’s all that matters.

Wrong. A bad franchisee can cost a company dearly in legal fees and damage a brand name’s reputation, and a growing number of firms are taking the time to ensure that franchisees have the right soft skills for success.

“I believe that people selling franchises should definitely be trained in HR aspects. They need to be trained in behavioural interviewing,” said Fred Berni, president of the franchise consultancy Dynamic Performance Systems in Toronto. ”HR people have known about personality profiles for a long time, but the franchise community in the past took anybody who breathed and had the money, and some still do.”

Because disenfranchising a business typically costs more than $100,000 in legal fees, companies are becoming more selective. To do that, they have to know what makes a good franchisee.

A study conducted in 1996 for Dynamic Performance by University of Waterloo psychology professor John Michela and consultant Liane Davey, who was then a graduate student, found seven critical core values for franchisee success, ranked in order:

• a commitment to involving employees in the business;
• a positive attitude for success;
• independence;
• a sales orientation;
• responsive to customers;
• comfortable dealing with many people on a regular basis; and
• drive for success.

“Berni said he was surprised to see a commitment to employee involvement ranked as the top predictor for success, but on reflection it made sense.”

“How can you expect an employee to treat a customer right when they don’t get positive feed- back and when they don’t get treated well themselves?” asked Berni.

“Also surprising was to see drive for success rank at the bottom of the list. “It really didn’t differentiate people,” said Davey.

“Too much drive can actually be damaging,” said Berni, “Sometimes it can lead to pushing others too hard and can alienate employees, customers and friends if it’s not moderated by a belief that employees and customers are critically important.”

Having a positive attitude ranked a close second in the list of core values. “If someone doesn’t have a positive attitude they’re going to be blaming everyone around them, including the franchise organization,” said Berni.

Although being entrepreneurial would seem to many to be a good thing for running a franchise, being too independent can he harmful. “Independence has a curved relationship with performance. The optimal level is to have moderate independence,” said Davey.

“For people who are intimately familiar with franchising, that didn’t surprise them,” said Bemi. “Entrepreneurs, by definition, are going to try to change (the business format). Why would you want to bring an entrepreneur in?”

M&M Meat Shops Ltd, has made use of the Dynamic Performance Systems franchise profile and found it very helpful. Van Coskun, director of franchises for M&M Meat Shops’ head office in Kitchener, Ont., said the people factor is by far the most important concern when selecting a franchisee.

“Oftentimes we’ve put in people that haven’t had all the capital necessary, but we’ve believed in them so much we’ve given them a corporate guarantee on a loan.” said Coskun. “We find that if someone has too much money, they don’t have enough enthusiasm and motivation to make it work.”

When prospective franchisees are first interviewed, finances aren’t even discussed. When finances are discussed briefly during a one-day session at a typical store, the company doesn’t ask for a deposit.

“We always say leave your cheque books at home,” said Coskun. “We don’t want them to hang around because they have some money tied up with us.”

M&M Meat Shops also has a support program to give a boost to franchisees who get off to a slow start by providing extra money for marketing and consultants to hone skills that may be weak. The company, which began in 1980 and now has about 2,000 franchises across Canada, won the Canadian Franchise Association’s award for excellence in franchise relations.

The success of M&M Meat Shops, and other franchisors that put a high priority on the people factor when choosing franchisees, is eroding the perception that selling a franchise is only a matter of money.

“(A focus on HR issues) hasn’t traditionally been there, but when you see a study like (the one done by Dynamic Performance) it shows the importance of taking into consideration people’s work orientation and aptitudes,” said Davey. “There’s a big void if we ignore HR issues.”