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Surveying franchise success
11/8/07 - Richard Slawsky
In the eyes of many franchisors, entering into a franchise agreement is akin to getting married. When the match is good, it can be very good, but when it's not so good it can be a disaster for both parties.
In an effort to maximize the number of successful partnerships they enter, franchisors have turned to a variety of profiling tools that purport to predict a successful match.
Atlanta-based Windsor Realty Group, which teams with franchisors to select sites for new restaurants, worked with a psychologist to develop a profiling and screening tool dubbed The Star Performance Inventory. The SPI is a set of 75 questions designed to uncover the attitudes and values of a prospective franchisee in order to ensure those qualities match those of the franchise group.
"You have to make sure you have the attitudes and behaviors of the people consistent with what you want to do as a corporation and as a franchisor," said Windsor Realty Group president Dan Wirtz. "The people you work with are the No. 1 reason you are going to be successful or not successful."
When employing the Star Performance Inventory, Wirtz's team first sits down with the franchisor to review the questionnaire in order to set a benchmark score. To validate that benchmark, Windsor also gives the questionnaire to several of the more successful existing franchisees of the business.
"We then compare those scores with the benchmark to verify that this is an accurate tool," Wirtz said.
What franchisors are mainly looking for, Wirtz said, is a validation of the reasons why they are bringing in that prospective franchisee. While a star performer generally needs little maintenance, a franchisee whose values and attitudes don't match those of the operator quickly can create problems.
Those franchisees also tend to be the most vocal and can end up banding together with other disgruntled franchisees to create major headaches for the franchise corporation, Wirtz said.
"Operators spend 80 percent of their time dealing with the problems," Wirtz said. "What they want to do is eliminate the ones who are going to cause problems."
Marc Geman, president and CEO of Denver-based fast-casual concept Spicy Pickle, uses a tool called Franchise Navigator to help him select new franchisees. Franchise Navigator was developed by Bannockburn, Ill.-based Franchise Architects, whose founder, Craig Slavin, worked with a team of psychologists in the 1990s.
"When we were looking at the profiling tools in the market, what we realized was that there were very good tools out there, but they were really appropriate for the employee-employer environment," Slavin said. "Those aren't relevant in franchising. The franchisee is not an employee."
Geman had his existing franchisees take the Franchise Navigator profile survey to set a benchmark; he then used that benchmark as a standard by which to rate new prospects.
Not only can the Franchise Navigator help franchisors identify the best prospects, it can help those seeking a franchise identify the type of business best suited for them, Slavin said.
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Personal touch still key
Along with the results provided by the Franchise Navigator, Geman also bases his decision to work with a new prospect on feedback from the Spicy Pickle corporate staff. Prospects spend time with people in various departments of the company, who later gather and discuss the strengths and weaknesses of particular candidates.
Spicy Pickle also looks at how active the prospects are in their community, such as whether they have children in school and whether they participate in community events or are members of a local church.
"I don't rate one higher than the other, but we want to know if people have that kind of involvement," Geman said. "One thing we have found is that even people who have significant restaurant experience often don't know how to market their stores."
Peter Birkeland, founder of Chicago-based business consulting firm The Birkeland Institute, said franchisors probably could determine if someone would be a good fit during the course of a 15-minute phone call.
"I'm not a great musician, but when I look at those people who sing on 'American Idol', I can usually tell within three notes whether or not they have a good voice, and I'm sure other people can, too," he said. "It might be that way in looking for potential franchisees."
Mario Altiery, president of the Scottsdale, Ariz.-based franchise consulting firm The Upside Group, takes a harder line when it comes to franchise profiling tools.
Such tools can be used by unethical franchise brokers to mislead prospective franchisees, letting them think they are the perfect fit for a particular business, he warns.
"People say you have to find the right people, but if that's true, then it doesn't say much for your system," he said. "The real goal of franchising is to take a system and work on it so that the average guy has a chance to have great success."
