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Ray Borradale's picture

Fuzzy - OK

I take your point when I look outside of franchising and consider some small differences between the US and Aus.  Yes I would like to know more as this is not generally our approach such problems - a once rare but slowly growing tendency to sue is replacing a punch in the nose.  Our government has in recent times set itself up to act and eagerly awaits any opportunity.  Point taken - message to be sent.

This program is offered by

This program is offered by Liberty Tax, not Jackson Hewitt. While Liberty Tax's Founder and CEO John Hewitt also founded Jackson Hewitt back in the 80's, he hasn't been associated with that firm in 13 years.

FuwaFuwaUsagi's picture

If a standard loses some

If a standard loses some average/reasonable performers to avoid chancing brand failures I’m all for it.

Ray, I suggest you review what I wrote again, have a cold one and think it over carefully.  I find your comments interesting given our likely political affiliations.   In case I suspect you really are not seeing the forest for the trees. 

At least in the U.S. the only reason Craig can do what he is doing, is it is not on anyone's radar (not that I think a company should be prohibited from it either).   They likely outcome is some zor is going to have to grease Jesse Jackson or Al Sharpton's palm when they demand the courts give them access to his proprietary methodology and show it disproportionally effects a group of people the feign they represent.  Or when they send in plants who don't make the cut and are eliminated.  That will be one big ass check they write to right a wrong that is not really wrong but rather an outcome of environment and circumstance.  If you don't believe me, check out why companies like Aldi's stopped using personality and aptitude tests in the U.S, but still use them abroad (note the U.S. Government uses them all the time but prohibits businesses from doing so).

Anyways my point Ray is, you might want to think of the impact at the individual level.  If you want to continue that theme privately drop me a note and I’ll give you an example that might surprise you.

Regards,

The cute little fuzzy guy

FuwaFuwaUsagi's picture

but I would point out that in

but I would point out that in my ongoing reverence for political correctness the use of the term ‘fur’ is a no no.

Okay, I'll go with fuzzy in the future : )

Regards, that fuzzy guy

FuwaFuwaUsagi's picture

Yet mutual fund companies

Yet mutual fund companies continue to spend money on it.

The reason is the fund manager is a marketing tool.  Take a look at the expenses on maanged funds verses indexes.  The difference is substantial, hence the mutual fund industry has  a vested interest in keeping the active manager superiority legacy alive.   Part of it is feeding the fund manager's ego.

Regards...

Franchise Central and Navigator's picture

Franchise Navigator Methodology

Measuring bumps on the head?  That's funny, but very untrue.

When I started researching predictive models and personality profiles in 1986 I assembled quite an impressive team of Industrial, Clinical and Organizational Psychologists, with business experience, to assist in evaluating various tools and then, ultimately, created our own.  There are many other tools out there specifically designed to recruit employees.  If you have franchise experience then you know the motivations, decision making processes and values of a business or franchise owner are very different than that of employees.  Ours is designed for business and franchise owners.

Similar to the many other tools there are four profiles to the Franchise Navigator.  What we are able to quantify is which the Dominants are and which are the Subordinates.  We then look at the percentages their scores are for each on a scale of zero to 100%.  We then look at the combinations of the four.  Once we benchmark an existing franchisee population statisticians from the University of Rhode Island do the analysis and are able to differentiate what separates high from mid performers.  They create a range of recommended scores that candidates are then measured and compared against.  Further, as testified by a long list of satisfied clients, they are able to do two important things:  One, determine upfront if a candidates resembles a high performer and if not what additional coaching, supervision and training will they require and, two, work with and communicate better with the existing franchisees to help their own individual performance which generally has nothing to do with how to run the business but are, rather, behavioral issues or areas that the person needs help with. 

Consider this.  If a candidate clearly does not even come close to the profile why spend a lot of time, energy, effort and resources if there isn't a chance they could perform the business model and be the extension of the brand?  The lawyers will also tell you the costs related to poor selection and removal are high and growing every day.  Taco del Mar admitted they sold a lot of franchises to the wrong people when they filed bankruptcy.

Further, because of our backgrounds in franchising and lead generation we are oftentimes hired by clients to develop recruitment material that is profile specific.  They have the right words, colors and tonality to attract the profile that company should be seeking.  Visit our site to view our Portfolio.

There are some clients who truly get it while others don't or don't use it to the effectiveness it should be.  This is not attributable to the tool or the process but rather the personality and/or ego of the people in a company.  Some of them know everything and no tool or process other than what they have been doing for years is best for them. 

Finally, franchising is about people doing business with people.  The more you know about your franchisees the better and more effective your communications, training and support can be.  Now, how bad is that?

If we can improve a company’s store sales by 38% by putting the right people into the right position and if we can assist a company in creating better harmony and relationships with their existing franchisees and have done it for the past 12 years that is great validation. 

Say what you want and believe in what you want.  Just because you have been doing something for a long time doesn’t mean it is the way others have to do it. 

Our process is based on years of research and is not limited to retail as Fred’s is and is not based on lies and false statements, including education, work experience and background that others are doing on LinkedIn and FaceBook.

Ray Borradale's picture

I thank you Fuwa

It's been a long time since I’ve had any touchy-feely but I would point out that in my ongoing reverence for political correctness the use of the term ‘fur’ is a no no.

If a standard loses some average/reasonable performers to avoid chancing brand failures I’m all for it. I imagine illegitimate barriers in franchisee selection would be a concern for franchise sellers and I do wonder if there is an allowance for today’s performers in tomorrow’s evolved market/model. But that is a bit futuristic and I’m still wondering what happened yesterday.

FuwaFuwaUsagi's picture

I'll point out, I have never,

I'll point out, I have never, ever seen a single study that actually demonstrated the CEOs bring value that cannot be explained by other functions such as degree of financial leverage, industry, and economic cycle.  In other words not only is survivor bias evident, but you can most likely explain away the success of most organizations without the influence of CEOs.   The later is the study that needs to be replicated.   I guess no company will be funding it though.

FuwaFuwaUsagi's picture

  Ray: Profiling has its

Ray:

Profiling has its place, the problem becomes the application.  The U.S. military makes excellent use of profiling as DID many U.S. companies.  However the reality is, valid as the methodology may have been, it disproportionally effects certain groups.  And while profiling for national security and public safety makes sense as a filtering mechanism in business it can lead to stagnation or stratification of entire social ethnic niches.  If you look back, this is the point I have made to Do Diligence and others over time.  If zors would do what some of you implore the most likely result is what Craig is doing, profiling, and invariably such profile's do not weigh in innate drive or persistence as much as other factors that are far more likely to be related to who you are, what school did you attend, and what views do you hold (shaped by environment).    In large part this is what drove the expansion of the SBA into an evil entity that empowers the fleecing of the ignorant under the auspice of leveling the playing field, and the asinine financing of homes to those who had limited ability to repay their debt.

I certainly am not one for quotas or anything, I just simply prefer a system like we have now where ignorance is what is preyed upon, and the ignorant are present in all populations, rather than a locus of behaviors that may in fact tilt franchising into the hands of those who already have reached the brass ring or in all likelihood would obtain it anyway.  And of course, this ignores the fact this may be a pseudo-science or happenstance correlation and it could be effectively used to erect socio-economic barriers.

This B.S. touchy-feely moment brought to you by FuwaFuwa, the furry guy who cares...

Ray Borradale's picture

Academia in franchising

Academia in franchising is also responsible for some of the highest levels of BS in the industry.  There are basic ingredients needed in any franchisee eg if they can’t use the % button on a calculator or their personal hygiene is a disaster they are out.  Now if you go to a specific sector, say fitness, and the candidate is a porker he/she is out.

I realize that is understating but we can identify what potentially makes a suitable franchisee. How better to identify the ‘perfect’ candidate for a particular brand than to identify what makes the best performing existing franchisees tick. An academic would look at how the indicators are collected and applied but mostly base reporting on outcomes.  A franchisor must get better results when it makes an effort.

I don’t understand at all why there is criticism of a process to identify potential winners/losers and especially when franchisors need to be educated into understanding that wallet selection processes lead to failures, disputes and crappy, costly brand damage.

Academic research would possibly indicate some theoretical fine tuning that may or may not be of value in the real world of human franchisee selection but when academic stamps of approval have become an industry cost to doing business, I wouldn’t bother.  The effort has been made and I suspect that real time results refine the process where the alternative is much smoke about a signature.

Franchisors that employ Craig’s services must be looking for either a) a healthy brand reputation or b) Craig’s brand as a franchise sales tool. Craig; what happens when skippy with the fat wallet is rejected? Craig’s program isn’t the problem unless rejections are hard to find. The real problem is those that are not interested in successful franchisees and in this instance, alternatively use dumbed up selection processes to distract from proper franchisee due diligence.

The concern with prospects working in the business comes when they are there to ‘buy’ the business rather than the network model and the contract.  This has turned into a silly thread about something over nothing.

Re: Franchisees profile successful franchisor leaders

"Without overreaching Choice would be unable to do more than influence and advise the franchisee on the operational implications regarding John Q's performance." - Guest

Then why would a franchisor use a tool like Franchise Navigation to know whether the major shareholder and president of Yalpa Hotel (franchise) has the right skills and behavior to buy and run the franchise?

Re: Re: Franchisees profile successful franchisor leaders

"does Choice have no say in employee John Q running Yalpa"

Without overreaching Choice would be unable to do more than influence and advise the franchisee on the operational implications regarding John Q's performance.

Re: Franchisees profile successful franchisor leaders

Does that work the other way?

If President John Q runs Yalpa Hotel Services, which is licensed under Choice Hotels, does Choice have no business in employee John Q running Yalpa since they aren't a shareholder?

Re: Franchisees profile successful franchisor leaders

"Franchisees get to tweak the tools. They study the results. They approve the hire,"

Ridiculous, franchisees are not shareholders and have no business choosing or approving any employees of their franchisor.

Spoke with clients

and their opinion of your predictive results are not satisfactory. Must be they are using it incorrectly.

michael webster's picture

Roles

Fuwa is making the practical observation that people's capacities are easily categorized.  Good corporations try to continually challenge and improve - a person whose role was sales might very well excel at an administrative role.  The underlying psychology Craig appears to be relying upon is, in my view, suspect.

michael webster's picture

Public Criticism

Craig, all I want is some neutral third party research about the procedure.  If there is something, then share it with us. For example, Fred Berni's Dynamic Performance model was examined by Master's student in Psychology, University of Waterloo - that research provided some in depth understanding to what Fred was doing and why it may work.

Franchisees profile successful franchisor leaders

Mr. Solomon has a point. I'd love to see store owner-operators use Franchise Navigator-like profiling tools to select the CEO and franchisor officers who best fit the chain and can take it in the direction they want it to go. Franchisees get to tweak the tools. They study the results. And they should approve the hire, since they already pay franchisor employee wages through franchisee royalty fees.

Nah, never going to happen.

RichardSolomon's picture

Actually, I agree with Craig on this one. I know that other than

Craig's method, the selection process involves tests of body temperature and check writing capability.

The testionials do not come from bozo clients. Where someone has demonstrated success for serious clientele, some critic's knowledge of this or that theoretical mysteries seems like a lot of greybearding. Greybearding in the face of success don't cut it in Texas.

Now, if we can get Craig to do the same in the opposite directio.....NAH...Aint gonna happen.

Mutual fund manager's personality affect outcome

"it was and remains much ado about nothing." - FuwaFuwaUsagi

Yet mutual fund companies continue to spend money on it. Here's an interesting study that shows a fund manager's risk-taking preferences affects a mutual fund's performance. And another.

Re: Simplistic Retorts

Totally agree. Opinions are casting doubt on a system which has a chance to achieve what the standard selection process of no selection process can ever achieve. Who in this conversation is actually or has ever been involved in franchisee selection. It appears the critics have no experience at all in this part of franchising.

Simplistic retorts

Guest, your response is over simplistic and likely based on faux etiology. If you have a better methodology, then build it and sell it. Let's see.

Re: Comments are not based on fact

Craig your methodology seems overly simplistic and likely based on phrenology.

RichardSolomon's picture

You are correct, and wouldn't that be best practices today!

That in itself would tend to reduce short term franchise failure - unless the franchise itself were a FranWhack - like say a Dagwood Sandwich or Soupman deal.

Franchise Central and Navigator's picture

Comments are not based on fact

Michael, honestly, I think you should learn more about something before you make public comments and criticize without any basis of fact, logic or research.

RichardSolomon's picture

Aint that "The Peter Principle" at work?

Are you referring to the practice of promoting people until they ultimately achieve a position at which they are simply incompetent?

michael webster's picture

Cloning Success

Craig;

I think that we will have to agree to disagree, even though a Noble Prize winner says that is impossible!

But, perhaps I can get Melton to try your test.

 

FuwaFuwaUsagi's picture

<i>Why take a sales person

<i>Why take a sales person and place them into an administrative role?  Why take someone who is good at business administration and HR management and force them into a sales role? </i>

Large successful companies do this all the time.  Some organizations demand this type of movement for succession planning and also as par for the course (IBM, Michelin, and Lowe’s for example).   For one thing it helps fight burn-out, secondarily it gives a vital outsider look to company function silos and increases internal efficiency by dissolving barriers allowing people in verticals to establish networks in other verticals; this removes latency due to silo specific inertia.

The point is, it goes on all the time by leaders in their respective industry.

Franchise Central and Navigator's picture

Effectivess of Franchise Navigator

"The idea of profiling a success qua personality seems unlikely - given what I know about personality testing.  I would be less likely to make the same observation if the test was about what made a certain location successful.  Regarding success, I suspect that talent and not personality is highly correlated with success.  For example, Dave Melton of Dominos is highly successful spotter/manager of entry level talent.  I doubt that you could clone Melton with your test - and if you could, then I would be wrong."

Michael,  Franchise Navigator is not a personality profiling tool.  The reason is that I found, through 10 years of research, that personality does not mean much when it comes to ownership of a business as it does being an employee.  What the Franchise Navigator does is quantifies and identifies an individual's skills, values and behavior, key aspects of business ownership.

There are only 3 types of skills in any business model.  Why take a sales person and place them into an administrative role?  Why take someone who is good at business administration and HR management and force them into a sales role? 

So, first we match an individuals' skills to those of high performers.  Second, and most important are values or an individual's core set of rules for making decisions based on what is really important to them.  For some people it is image, while others it is safety and security and for others, contribution.  Other's core values are accomplishment. We measure, on a scale of 0 - 100% if an individual matches the scores of high performers and, if not, what coaching, supervision and training they need to perform better.

Mr. Melton could very well be one of those unique individuals who has great instincts and can do all of this naturally.  Sadly, franchising is not made up of Dave Meltons.  That being said, if Mr. Melton took the Franchise Navigator we could demonstrate why he is what is he and how he differs from thousands of others.

I am sorry you have "bundled" Franchise Navigator into a personality profile "label" but it is very different and the results are proven and demonstrated through measureable results.

View the demo if you would like to know more.  Most important view the demo so you accurately understand what Franchise Navigator is and how it works.

michael webster's picture

Substantive Issues with Navigator

Craig;

1.  You have misunderstood the reference to a 2 x 2 covariation table.  It has nothing to do with randomization; simple bookkeeping on your part would suffice.

2.  The idea of profiling a success qua personality seems unlikely - given what I know about personality testing.  I would be less likely to make the same observation if the test was about what made a certain location successful.  Regarding success, I suspect that talent and not personality is highly correlated with success.  For example, Dave Melton of Dominos is highly successful spotter/manager of entry level talent.  I doubt that you could clone Melton with your test - and if you could, then I would be wrong.

3.  Testimonials by their nature are evidence only in the top left corner of the covariation table.

4.  Again, all I wanted to hear is about whether there were any independent 3rd parties who could provide validation of your methodology.  Because I don't find the idea that there is a successful personality a plausible notion.  Of course, I could be wrong and was looking to be educated on this topic.

Ray Borradale's picture

In what cannot be an exact

In what cannot be an exact science it is a positive to have franchise companies looking for more than a heartbeat and a bank account.  Whenever humans are involved there can be no absolute certainty however if we look to the fundament characteristics of prospective franchisees that a franchise should avoid then we might all agree that isn’t that difficult.  Amongst other attributes I tend to steer away from people who don’t like people.

Conversely, basic skill sets indicated by such things as communication skills, employee management style, employment/performance history and personal standards should allow us to eliminate many candidates before or after getting down to model specific needs.  It makes sense to look at successful franchisees within a system to determine like characteristics and therefore desirable to necessary characteristics.

In Australia we have Greg Nathan who sells psychological profiling to some well known brands and some producing disastrous outcomes for franchisees.  A lot of that happens in franchising and we have a small market with few interested franchisors.  As an old school friend once suggested and living on in franchising; ‘one you turn away is one you never get back’. With poor selection criteria you never know what you might pick up.

I would think that the equally valuable assessment of worthwhile franchise investments comes with the same human uncertainty e.g. will the franchisor sell up to an unfit franchisor – a growing trend.

Franchise Central and Navigator's picture

Abstract and Generalized Statement

What you have not indicated is what tool they used; what model they used to construct a “profile;” the size of the population they used for the model; what their performance metrics were and much more.

Provide quantitative data, much the same way I have, and we can have a constructive conversation.

Look at Domino's Pizza

Hey Richard you go back almost as far as I and you must remember Domino's Pizza selling method. They would only sell to people who work first in the shop for a set period of time and if they did ok they would 100% finance them. Check with them on how well their program worked,
DonBeau Omnifran

FuwaFuwaUsagi's picture

I am not attempting to put

I am not attempting to put words in Michael's mouth but I believe his point is analogous to what has transpired in the financial industry for decades.    Many of the large mutual fund companies built profiles based on what they deemed successful managers and screened trainees based on that, and then reselected before turning the portfolios over to the mangers.   They were able to demonstrate the effectiveness of their model against their peers and all seemed well until they tested the performance of the managers against unmanaged portfolios.  Turns out it was and remains much ado about nothing.

Franchise Central and Navigator's picture

Franchsie Navigator Response

Michael, the problem with your comments is that they are largely rhetorical and do not engage with substantive issues about selecting franchisees.  First, you state you have "doubts about the methodology" but do not state what they are.  The idea of developing a selection procedure that focuses on the franchise industry is a new one, but the idea that you should select candidates based on how closely they resemble people who have been successful in a position (rather than those who have been unsuccessful) is, with all due respect, quite old and established.  If you have doubts perhaps please express them so they can be addressed.

Dismissing the testimonials as mere confirmation bias is unconvincing as we cite hard data from sales, turnover, and other outcomes.  If all we had were verbal testimonies unsupported by data, then I could see a case for confirmation bias as clients would generally have nice things to say about services they had purchased (to justify the purchase in their mind).  However, the numbers for sales, closings, and other hard outcomes are not things that change because a franchisor wants to feel good about spending money on the Navigator.

Calling for a 2 by 2 matrix is quite unrealistic as you cannot randomly assign companies in an experimental study.  The evidence we do have are the results from the turnaround of companies, as well as the associations found between the franchise Navigator and franchisee ratings.

Regarding our methodology, we first benchmark a franchisor’s existing franchisee or business owner population.  We currently are averaging approximately 74% of a company’s owner population.  Once these owners have taken the survey we create a scorecard in which each company grades or rates each owner based on their own internal performance metrics, such as unit sales, sales per sq. foot, operational adherence, speed to the market and many other categories.

This information is then delivered to an independent team of statisticians who, using statistical analysis process, such as CART, create a segmentation model that clearly separates a company’s High, Mid and Poor performers, and why.  From this information we create a statistically valid High Performer Profile, along with recommended scores, that all inbound candidates are compared to.  We also deliver a “gap” analysis that identifies what behavioral coaching, training and supervision each candidate should receive if they are not within the “sweet spot” or recommended scores.  We can also create training programs to help convert Mid performers productivity, resulting in increased sales and profits to each party.

Again, I welcome you or anyone to attend a demo on why over 130 brands are using Franchise Navigator and the affects it has had on their entire franchise growth strategies.

michael webster's picture

Franchise Navigator Testimonials

Craig;

I don't doubt that you can find customers giving your product great testimonials.  And they might even be right.  Absent a 2 x 2 covariation table which shows the number of people using FN who didn't improve, and the number of people not using FN who also improved, I have no reason infer any correlation.  And I will treat the testimonials as just another example of confirmation bias.

But, I also have doubts about the methodology -which is why I asked about third party verification.

On the other hand, it is very refreshing to see in the franchisor channel, a vendor or supplier willing to answer hard questions in public about their product.  And of course, I may be entirely mistaken in my skepticism.

Working in before hand

Would help a lot of Franchisees understand where the Franchisors are coming from

Better franchisee selection method

Isn't it a LOT cheaper for the Zor if this process weeds out the folks who aren't cut out to own and operate the business?

Sure, you forgo that fat franchise buy in fee up front, but you avoid the harm to your goodwill that lousy operators that you eventually have to sue cause to you and the good zees.

It saves the lousy zees from getting bankruupted and sued and teaches them that the best way for them to earn is to work for someone, or own a completely different kind of business (hopefully your competitor's!)

Franchise Central and Navigator's picture

Independent Client Verifications

Michael Webster has asked for independent verifications as to the validity of the Franchise Navigator profiling system.  After performing over 18,000 surveys of either existing or potential franchise and business owners, we have many testimonials as to the impact benchmarking, recruiting and training candidates who have the "right stuff" to operate a particular business model.  Here are just a few:

A great example is Great Clips for Hair.  They initially sold a lot of franchises to the wrong type of profile.  They needed a profile that could develop a market and instead were selling to sales people who would open one or two locations, then crash and burn.  Locations were closing faster than they could sell new ones. We came in and benmarked hundreds of their existing franchisees and identified what characteristices their High Performers had that separated them from the rest of the group.  Then, at the 2007 Franchise Update Conference in Atlanta, Charlie Simpson, COO of Great Clips, had this to say:

  • New franchisees leaving the system was reduced by 50% in less than two years,
  • Salons opened by new franchisees in their first two years increased by 68%,
  • The time it takes new franchisees to open their second salon was reduced by 6 months.

Another great example is how we helped Sears transition from Catalog Stores to a new retail sales concept.  They converted over 150 catalog stores to this new concept and then begain growing it through a Dealership.  When they reached 190 locations, we were brought in because their locations that their sales forecasting model said would be high weren't, and locations they didn't think would do well did.  We benchmarked over 160 of their Dealers and created a High Performer Profile for further recruitment.  We took Sears from an accomodating profile (Associator) to one that had greater sales skills.  Here is what Mr. Steve Titus, General Manager of this new division, which now has over 1,000 locations and over $2B in sales, has to say:

  • Based on performance we sorted the owners as high, mid and poor performers,
  • Franchise Navigator helped us ONLY bring on candidates that matched the DNA of the top tier owners (we immediately started rejecting approximately 33% of the candidates that we would have brought on in the past),
  • The results were amazing:

        -   Average store sales went from $1.2 - $1.8M in around 18 months  (a sales increase of over 38% per store)

        -   Average ticket improved by $75 in Home Appliances

        -   Service contract ratio sold doubled

        -   Failure rate of stores went from 10% to 6.4% (a 35% improvement)

        -   This lead to a great deal less legal activity against us and my P & L

        -   Saved us $3M - $4M a year in legal fees.

If you access our blog at www.franchisecentral.com/blog, you can read independent stories about how profling has greatly enhanced a company's ability to grow a distribution system with the right people.  Del Taco, Money Mailer, Potbelly and Bark Busters are some of the organizations on our blog.  Further, if you visit www.franchisenavigator.com and click on TESTIMONIALS you can read what our clients have to say.  You simply cannot put a round peg into a square hole.

We have created High Performer Profiles for over 120 divergent brands.  Where there is some similiarity in business models and profiles, each profile is based on a company's required skills, values, behavior and culture.

If anyone would like to see a demo on how Franchise Navigator works, please email me at craig@franchisecentral.com.

michael webster's picture

Agree with GB

I haven't looked into this in great detail, but I am inclined to agree with Granville_Bean on this one.  Working at this franchise over tax season would be a good exposure to the pros/cons of the franchise.

However, there are a number of misleading claims in this article.

1.  Without the FDD, we don't have any idea about how many of these franchisee's are one year wonders.

2. The Jackson Hewitt franchise system is on the brink of disaster, and even its reports to the SEC admit that over 30% of its franchisees have not renewed but are going day to day, waiting for JH to obtain a refund anticipation load from a bank.

3. It would also be helpful if Craig Slavin could produce independent verifications of his profiling theory, how it has worked in practice, and whether there is such thing a successful franchisee profile which is system independent.

I think you misunderstood

There is some question as to whether this is a good move for the zor.

The potential zee gets a salary, and can walk away if they so choose without making any kind of investment. Plus they get managerial experience on the zor's dime if they stay, as well as help on the front-end costs. There's not much question that this is good for a serious potential zee.

The question is whether the zor is spending a lot of money when they could get better results for a lot less. They're spending money to pay the potential zee to work, and then helping out on the front-end costs as well.

But what seems to be missed by those who think the zor is wasting money is that if they didn't spend money to pay a potential zee a salary, they'd be paying someone else who's not a potential zee to manage the store. So while they're spending extra money on franchise sales, they're saving money in operational costs.

It's not as insane of a move for the zor as some analysts who are forgetting that are saying.

Ray Borradale's picture

Set ups

In the good old days when Midas Oz threw someone in to sell them a site they were prone to spend on local marketing and direct national calls away from other locations. You cannot get reliable bottom line financial performance in short time spans. Especially when the tendancy is to assist a bottom line.

Old Sword's picture

Re: Some franchisors I worked with (Simon Young)

Simon, I do believe that franchisees should be required to manage a site for "x" many months prior to being allowed to purchase.  Unfortunately, I think most franchisors have concluded it is not a good idea.  Now, I am not talking the "McDonald's" of the world - just the other 70-80% of franchising. 

Yes, the potential franchisees you spoke of left after seeing it not go well.  Not because they lacked "skin in the game" but rather, they realized it was more like being skinned alive.  Franchises are sold as a "PROVEN, SUCCESSFUL business model".  Exactly why people are willing to pay hundreds of thousands of dollars to just open the door.  In reality, these are just regular businesses with a set of Standard Operating Procedures that have higher costs of entry, higher costs to open, higher monthly expenses and a overly burdensome contract for (in most cases) 10 years.  These managers found this out first hand.

As many franchisees here have stated; the franchisees they called prior to signing on all spoke of how great the system was.  Not until afterwards did we realize the truth was far from it.  Working inside the system prior to signing a contract would reduce the "potential pool" dramatically and drive down sales significantly. 

As you stated above "To the best of my knowledge there were only a small number of franchisees actually found through the process."

simon young's picture

Some franchisors I worked with in the late '90's

had a moderately successful system of a "Management Services Agreement" which provided all of the practical elements of the franchise system (including the 'management fee' equalling 100% of the net profit of the store) but noactual ownership.

It was designed to recruit franchisees who either had no money to put down up front or to vet marginal applicants.

It was only moderately successful (none of the franchisors continue the practice now) becuase without 'skin in the game' the first set back would result in the 'manager' walking away.  To the best of my knowledge there were only a small number of franchisees actually found through the process.

Sometimes people without capital have no money for a reason - it is often hard to break people into a franchise as well as educate them on business matters all at the same time. 

Granville_Bean's picture

so what?

"Let's not forget that these trial zees are also managing the location for the company. If they weren't paying a trial zee to manage the place, they'd still have to hire a manager to keep the doors open."

So what?  I and others have often said that before people put down a big fee and agree to pay a % off the top to be in a line of business that they have never before been in, that they should "work as a manager in that industry for six months"  This program formalizes an opportunity to do just that.  I don't see anything wrong with the idea. 

If you don't want to work as a manager of a company owned store, you don't have to.  But why not learn on their dime rather than making newbie screwups in your own store.

Let's not forget that these

Let's not forget that these trial zees are also managing the location for the company. If they weren't paying a trial zee to manage the place, they'd still have to hire a manager to keep the doors open.

Mr. Solomon, The prospective

Mr. Solomon,
The prospective franchisees do not have to put any money up front in this program. As stated by Mr. Hewitt in the article, if they are successful and show that they can run the operation, they will be given a no money down deal if they choose to take it.

While Mr. Hewitt is a pioneer in the income tax industry and has been called the "grandaddy of the income tax business" by CNBC, he hasn't been a part of Jackson Hewitt since 1997. He left that company after it was acquired by venture capitalists. It has taken 13 years since he left but you are correct, that company may be possibly "almost defunct". Mr. Hewitt founded Liberty Tax Service after his non-compete from Jackson Hewitt expired.

Franchise Central and Navigator's picture

Valid question

I too am an advocate for franchisees working in the business before they sign a contract. However, regardless of the business model, you will never be able to force a round peg into a square hole.  If the candidates resemble the company's high performers then there is a likelihood they will be able to execute the business model regardless of the radious.

To just put anyone into the business model could prove to be more disastrous than not having a location in the first place.

After performing over 18,000 behavioral surveys on existing and prospective franchise and business owners we are convinced there are behavioral characteristics that allow one to measure sales ability and leadership, business acumen, people development skills, accounting acumen and many other characteristics that can be identified well up front instead of after the fact.

Granville_Bean's picture

try before you buy?

Being that there have been so many posts on this forum from disgruntled Zees (in all segments) crying "but I didn't know" and/or "nobody told me" (or "they told me lies"), a program that allows a potential Zee to try before they buy sounds like a good idea.

But of course it's STILL "all in the execution".

RichardSolomon's picture

And the questions to ask include:

Don't these "trial" franchisees have to sign NDAs and non competes in order to get this "trial" arrangement?

Since these "trial" franchisees are financially vetted for ability to buy the franchise before being allowed into the program, do they also have to post the up front money before the training, subject to a "promise" to give the money back if they decide not to buy the deal?

At what point do they get an FDD? What does the FDD say about these "reacquired" locations?

Are these Liberty folks affiliated with the almost defunct Jackson-Hewitt tax service franchise? If so, then these locations are not "reacquired" but in all likelyhood simply failed, busted ex franchisees of the J-H franchise system.

Will Mr. Hewitt respond to these questions? Who knows what lurks in the heart of the man?

Ray Borradale's picture

Good question

This is obviously an expansion program and I have trouble condemning a franchise from seeking growth.  

Craig Slavin’s recommendation that franchisees be profiled to ensure quality in that network development would seem to be best practice. But it might not work so well in a 2 mile radius.  

Liberty Tax seems to have sacrificed ‘prime’ candidacy for locals to train up to either be successful or one of the ‘handful’. I really, really want to know how many locals accept free accommodation?

When I first read this article my initial thoughts were;

I could transpose a number of brand names in this incredibly well written article and there would still be authority in content but most would not think very kindly of the offer.  

What a ‘win/win’ this is! Sell a ‘handful’ of company locations or sign up the odd Greenfield franchisee.  That is 2 wins and an odd franchisee.

A great franchise product gambling wages would not be looking for less sophisticated investors to become brand dangers.

And then I read it twice more to be sure and to end some confusion.  Company operations in a hole typically means more frontline thought, more or better resources or the model is a useless whack.

I am an advocate for franchisees working in the business before they sign a contract. The obligations to the term of any contract offers very few an opportunity to change one’s mind. Local smoke, any smoke, should never blind the fullest of due diligence processes.

Liberty Tax might be a wonderful investment. With 2,000 franchises you would have to have some confidence and there are many franchises that are worthwhile investments. How do you tell the difference?  That’s the # 1 good question.

How many franchises does Q have left today?

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