Franchises and Basic Concepts of Business
In order to truly understand the concept of Franchising, an
exploration of the basic concepts of business is required. There
is no magic in that. It just makes sense in order to provide
clarity about the Franchising strategy.
Franchising is not a business in itself. It is a business
strategy. It's a business system. That's a significant
distinction that isn't always clear. McDonalds is in the fast
food business - although many people feel they are really in the
real estate business, while others think they're in the
entertainment business. Regardless of that discussion, they are
not in the business of Franchising. Schooley Mitchell Telecom
Consultants is in the business of telecom consulting. Ramada is
in the business of operating properties. Snap-On Tools is in the
business of selling tools. Each company uses Franchising as its
strategy to penetrate and dominate the marketplace. However,
their core business relates to the products and services
provided to their customers, using the Franchising strategy to
deliver those products and services in a consistent manner. A
more in depth discussion of the Franchising concept will follow,
but first we need to delve into the basic concepts of business.
If someone says to you that they're in the business of
Franchising, they don't really get what they're doing. It's all
about the customer, and if the focus is not on the customer and
their needs, then something is awry. Customers don't need a
Franchise. They need hamburgers, telecom consulting, hotel rooms
and tools. So therefore Franchisors are not in the business of
Franchising.
It has to be about the customer doesn't it? After all, the
customer pays for everything. They pay for salaries, they pay
the rent, they pay the utilities, they pay for the costs of
delivering the product or service, and they pay the profit. In
businesses using the Franchising strategy, the customer pays the
royalties, the customer pays for the development of the system,
including support and operations, and they pay for everything
the business does in its day-to-day activities, both Franchisor
and Franchisee.
At Schooley Mitchell, we have a credo that says that 'Good is
the Enemy of Great'. It's not absolutely original, but we hope
our approach is just that. First of all, if greatness is to be
achieved, focus must be completely on the customer. We have to
continue to strive to have our customers clamor for our
services. If we're satisfied with being good at it, we'll never
be great. I want to be great. We want to be great. Our focus
must be entirely on the customer to achieve that goal.
Purpose of Business
O.K, so let's look at the purposes and objectives of business,
regardless of whether the goal is to be good, or great. I don't
think anyone has a goal to be bad, so we'll leave that one out.
First of all, the basic purpose of business is to make money. It
is not about your way to give back to humanity. That's a
charity. People that wish to be in business for themselves are
doing so in order to make money. That shouldn't be a surprise to
anyone.
So how do all businesses make money? As stated above, they focus
on the customer. Therefore, the purpose of daily activities, the
objectives of business, are to get new customers, satisfy those
customers, keep the customers, and grow business, either with,
or through those customers.
Get, satisfy, keep, and grow. There you have it. These are the
purposes of business. They form the first set of four in a
concept we have developed at Schooley Mitchell called our 4 By 4
Concept. The other four will be discussed at a later point. You
can't think of a transaction that happens in business that isn't
aimed at one of these four things. The key is to understand that
they are four distinct things, and they each require distinct
strategies designed to achieve excellence in all four areas if
greatness is to be achieved.
Get
Most people 'get' this one. This is sales and marketing. Peter
Drucker said there are only two things that create value in
business - sales and innovation. The rest are costs.
I would suggest that many companies tend to become happy with
their existing suite of customers. Or they land the 'big one'
and all is good. I would also suggest that if there are not
constant strategies put in place to continue to get new
customers, to get new blood, then stagnation will follow.
Landing the 'big one' can actually put the business in a very
precarious position. It's called over-trading. If the business
relies too heavily on one source for its revenues it can be in
big trouble if something goes wrong with that customer.
The solution to over-trading, and to keep generating a steady
stream of new customers in order to keep any business vibrant
and moving forward, is to implement great 'get' strategies. And
never quit. That's certainly not rocket science, but it is a
basic tenet of long term survival.
General Motors should have been trying to figure out how to
'get' Japanese customers in the 1970's. That would have led them
to understand how to 'keep' North American customers. Enough
said.
Satisfy
A lot of people really miss the boat on this one. I actually saw
a truck drive by me recently that had a slogan on the side in
proud, bold letters that said 'We Deliver Satisfied Customers'.
They seemed to be quite proud of the fact that they actually
provided what they sell. All customers for all businesses expect
to be satisfied or they wouldn't complete the business
transaction in the first place. Boasting that customers are
satisfied is like saying, 'we don't rip you off'. Well, big deal
and thank you.
Satisfaction must be a given. It is required for survival. It is
certainly one of the four main purposes or objectives of
business, but it is so often misunderstood. Satisfaction is what
people buy, so they expect it to be delivered. Michael Vickers,
one of our Sales & Marketing instructors at Schooley Mitchell,
says that 'Whatever company, in whatever industry, sets the
standard in customer service, moves the bar up for all of us.'
It's a great message. We must constantly be wary of what
customers expect in order to be satisfied, and it's an
ever-increasing standard. However, it's nothing to brag about.
It's just what you sell.
In a book called 'If It Ain't broke - Break It!, Robert Kreigel
wrote, "Embrace the unexpected. The only thing that won't change
is that everything will keep changing. Today's skills,
knowledge, and products live fast, get old before their time,
and die young. The overnight letter, which was the innovation of
the 1980s, is now used only when you're not in a hurry." He
wrote that message 15 years ago! It's a clear, and still valid,
indication that we need to continually re-tool to meet customer
satisfaction goals.
Keep
If satisfaction is a constantly moving target, and satisfaction
requires ever-increasing effort and commitment, then to keep
customers requires more than just satisfaction. Customers expect
satisfaction. They buy satisfaction. People will copy
satisfaction. If that's all that is provided, then it comes down
to price, and that's a losing game no matter what business is at
hand. Therefore, strategies are required to provide more than
what the customer buys, in order to maintain long-term trusting
relationships. Michael Vickers says to "take a standard service
offering and up-level it." That defines the 'keep' strategies
that a business must employ. Ignoring this one will again create
stagnation or denigration.
Grow
Most of us have heard that it is less expensive to do more
business with existing customers than to obtain new ones. It is
my belief that you must do both.
In order to do more business with existing customers, there have
to be consistent strategies in place to educate them about new
products and services. In addition, you must understand their
business, particularly as it changes, so that it becomes
apparent when your products and services can be provided. You
must also put practices in play to ask for more business.
Complacency is too often the norm when opportunities are in
front of us. Companies that implement processes to ensure these
things are managed will continue to grow business via the grow
strategies.
The grow strategies also include asking existing customers to
support you in your business growth through others. It's
surprising how many people would be willing to help if they are
requested to do so. Things like referrals, testimonial letters,
agreeing to act as a reference, and introductions to their
association are all offshoots of this strategy.
So there you have it. These are the four basic objectives of any
business. Business needs strategies and formulas to continually
get new customers, satisfy them, which is an allusive and
demanding standard, keep them, which requires more than
delivering what you get paid for, and grow business with them or
with their help. These are the basic concepts of business, and
they must be at the heart of every good business, and every good
Franchise system. Evaluating a Franchise system should include
an assessment of how well the Franchisor understands these
concepts, and how well they execute strategies to make them
happen.
To receive a free copy of an E-Book titled 'Franchise
Opportunity - Making The Right Decision' by Dennis Schooley,
email that request to corp@schooleymitchell.com.