6 ways to make sure your employees are happy
By Denis Shmidt
While technology continues to change and evolve, we are constantly reminded that human nature remains the same. The Founder, the story of the man who took McDonald’s from a single obscure location and turned it into a household name, has the same themes as a modern-day tech startup: high hopes, best intentions, friction between the “engineers” and the business, betrayal, a power struggle, and ultimately the rewriting of history.
For those who haven’t seen it, it chronicles the story of the Richard and Maurice McDonald, two brothers who engineered an unprecedented system to create fast, cheap, consistent, and “delicious” burgers. When their attempts at expansion fell flat and they were relegated to a single California location, in stepped Ray Kroc, who partnered with the brothers to expand their system and name nationwide.
What starts as a promising partnership, ends with the McDonald brothers losing their restaurant, the right to use their own names, the control of a multi-billion dollar empire, and even their place in the McDonald’s origin story. But did it have to end that way? Just as with countless startups where one founder is pushed out and erased from history, the McDonald brothers had multiple opportunities to stop their own demise. By waiting until it was too late, they sealed their own fate.
Here are five things entrepreneurs can do to avoid stumbling in their footsteps:
The last thing co-founders want to do is fight. They have a million things to take care of, and addressing internal strife doesn’t even make the list. However, just like in any relationship, a disagreement that remains unspoken doesn’t disappear. It grows, festers, and ultimately spills over into every other part of your life.
In The Founder, every argument is cut short by a slam of the phone. Unsurprisingly, even when the two sides are not speaking, the disagreements continue and lead to lost sleep, spoiled relations, and even a heart attack. Sticking it out until a compromise is reached may seem like torture in the moment, but it could end up saving your business, your relationships, and maybe even your life.
You may have been an indispensable member of the team in the early years, but as your business grows, that could easily change. Staying within your comfort zone and ignoring how your business is evolving is the surest way to become obsolete.
In The Founder, the McDonald brothers insist on maintaining control of their national franchise while remaining in California. This quickly creates a gap between what they believe and the reality of how their business is expanding. Without this knowledge, they constantly butt heads with Kroc, miss opportunities that Kroc is able to capitalize on, and ultimately become a hindrance to progress rather than its catalyst.
No successful business survives without change, innovation and growth. M&Ms began as an efficient and cheap way to transport chocolate to the U.S. military during World War II. Today, the candy has successfully shirked its militaristic past and targets families and children with an endless assortment of colors. After the war, anyone who worked at the candy company and started out in military procurement would have had to change and adapt quickly, or move out of the way.
The same goes for you. If your business started as B2B but is now marketing directly to consumers, you either need to change with the times or watch as someone else takes the reigns.
There’s a difference between being combative and standing up for yourself. Not everything needs to be a fight, but allowing others to walk all over you is just a prelude to having them walk you out the door.
In The Founder, Kroc continues to push the limits of his agreement with the McDonald brothers without any negative consequences. He publicly announces himself as the sole founder of McDonald’s and inventor of the McDonald’s method, calls the first store he opens the original McDonald’s, and consistently ignores the brothers’ instructions. The more he gets away with, the more he pushes, until he finally pushes the brothers completely off the map.
Picking your battles is important. Not every perceived slight is a potential coup for your company. However, being a doormat is the surest way of being left behind. Deciding when to stand up takes experience and perspective. Having an outsider, such as an advisor, mentor, or advocate, who is not mired in the day-to-day politics, and who can help you see the big picture, can be the best way of making sure that you’re protecting yourself without becoming the problem.
If a dispute does develop, it’s time to stop seeing your co-founders as partners and start seeing them for what they are: adversaries. If they are trying to push you out, everything they say is designed to do just that. Just because they frame your options in a certain way, doesn’t mean you have to accept them. Get outside professional help and explore all options before making a decision.
In The Founder, Kroc makes his final power play after having established a large corporation and with significant resources at his disposal. He freely admits that he violated his written agreement with the McDonald brothers and that they would likely win in court, but convinces them that they just don’t have the resources. Believing him, the brothers sign away their rights in exchange for a miniscule fraction of what their shares are worth and deprive themselves, and their descendants, of billions of dollars in future revenues.
As a litigator, this deal had me wanting to shout at the screen. The myth that a larger company cannot be beaten is just that, a myth—especially when the stakes are so high. Had the McDonald brothers sought competent legal counsel rather than being convinced by Kroc’s self-serving statements, we’d all be eating at…well, it would still be called McDonald’s, but you get the point.
Despite countless stories of co-founder disputes, a “gentleman’s agreement” continues to be a common and popular method of “formalizing” a partnership. Whether it’s the romantic notion of a “handshake” deal, the want to avoid awkward conversations, or just being too busy to sit down and hammer out a formal written agreement, these verbal agreements continue to persist. Having a written partnership agreement is the single smartest and easiest thing you can do to protect yourself.
In The Founder, even after Kroc has lied, cheated, stole from, and taken advantage of the McDonald brothers, he proposes a “handshake” agreement for their stake in McDonald’s Corp. Miraculously (for Kroc), the brothers accept. As the movie ends, we are told the obvious: The handshake deal was never honored, could not be enforced, and today would have been worth billions of dollars.
If your partner is willing to make you a promise verbally, they also should be able to put the promise in writing. If it’s put in writing, make sure you understand what you are signing. After spending years of your life and all of your savings creating a company, don’t cut corners at the finish line. Get someone who can help you understand the agreement, negotiate to make sure you get the best deal possible, and who will ensure that the agreement is honored.
If history has taught us anything, it is that the great thinkers are all too often pushed aside by the ruthless. The difference between those who are left standing and those that fall is whether they’re prepared to push back.
Post by: Denis Shmidt
Denis Shmidt is the founder of Orsus Gate Law, a litigation boutique that helps companies recognize, mitigate, and avoid risk. After working for an international law firm and the County of Los Angeles, Denis now focuses on emerging to mid-sized organizations with a specialty in founder disputes.
By Bruce Hakutizwi
There’s no doubt that buying into the right franchise at the right time can be a fantastic business opportunity for numerous reasons:
However, it would be naive to assume that every franchise is a potential good buy. Just like any other aspect of business, “consumer beware” holds true in the search for a valid and promising franchise opportunity. Sad to say, there are companies peddling franchise opportunities with no goals beyond collecting upfront franchise fees and moving on. And then even more common, there are franchisors that really want to help their franchisees succeed, but are struggling to support their franchisees effectively.
In either case, sincere entrepreneurs who are looking to invest in a franchise opportunity they can rely on for steady income over the long term will need to identify and avoid bad franchise choices, or they risk wasting time, money, and effort sailing a sinking ship.
The following are eight warning signs that can help you identify a franchise you shouldn’t buy.
1. A high-pressure sales pitch. Worthy franchises that have proven track records of success also have reputations to uphold. When you’re investigating a franchise, you should feel like you’re at a job interview, not a get-rich-quick real estate seminar. If the franchisor’s representative seems desperate to get you to sign, pressures you to make a quick decision, or keeps throwing discounts in to “sweeten the deal,” politely take your leave.
2. Inadequate, incomplete, or missing paperwork. The law is on your side if you’re buying a franchise; the sale of franchises is highly regulated on both the federal and the state level. There are important documents that a potential franchisee should receive, including a Franchise Disclosure Document (FDD). If any vital documents are missing, unprofessional in appearance or content, or intentionally vague in how they’re worded, there’s a very good chance the franchisor is hiding something or hoping to find buyers who won’t know there’s a problem.
3. Salespeople and paperwork that don’t sync up. In some cases, the salesperson can be very professional and helpful, and the documentation can seem perfect, but if they’re telling two different stories, it raises a serious red flag. Legally speaking, you’re going to be bound by what’s on paper. Good salespeople who work for bad companies can make a franchise opportunity seem more secure, less expensive, or more lucrative than it actually is.
4. A checkered past. Just by doing some basic Google searches, you should be able to determine what kind of reputation a franchise company has. Is there a long history of legal problems? Are other franchisees complaining about the company? Has the franchisor recently experienced serious financial trouble or some sort of public relations nightmare? It’s important to recognize that no company is perfect and you’re bound to find the occasional negative review no matter how trustworthy a company is, but if you’re seeing a troubling trend, pay attention.
5. An age-franchisee imbalance. Generally speaking, the older and more established a franchisor is, the more franchisees you should expect to be on board and succeeding. If those two metrics are highly unbalanced—in either direction—there’s likely something wrong. A franchisor that just incorporated last year and is already boasting over one thousand successful franchisees is likely either lying or is providing absolutely no support to those business owners. Likewise, a franchisor that’s been in business for 50 years, but only has 34 franchisees, may not offer the kind of support you need.
6. High franchisee turnover. Item 20 of the FDD reports how many franchisees have left a franchise system within the last three years. As a rule of thumb, the less expensive a franchise is to join, the higher the turnover rate will be. That’s just logical based on the business owner’s level of commitment. However, a high turnover rate in relation to the total number of franchisees—especially if startup costs are relatively high—is a sign the opportunity may not be viable or the systems being duplicated aren’t working anymore.
7. An inadequate training program. A solid franchise training program should allow someone who’s never worked in an industry and never owned a business to get up to speed and succeed quickly enough to ensure profitability within a reasonable period of time. If anything about the proposed training program appears to be inadequate, too short and hurried, or too long and drawn out, you’ll definitely want to talk to existing successful franchisees who have already been through the program. If you’re still not comfortable, don’t move forward.
8. Tinkering and experimentation in the business model. One of the key benefits of buying into an established franchise (as opposed to starting your own business from scratch) is the fact that the business model, processes, and other aspects of business operations are (supposed to be) tried-and-true, time-tested methods that have been proven successful. If a franchisor prides itself on constantly changing methodology, or if current franchisees are having a difficult time keeping up with how many “strategic pivots” the parent company makes each year, that key benefit is gone. Apparently, the “proven, duplicatable system” doesn’t work.
If you’re investigating a franchise opportunity and don’t encounter any of these warning signs, there’s a good chance you’re looking at a legitimate opportunity. Even then, however, it’s best to have a team of experts (business broker, lawyer, CPA) assist you in reviewing documentation and comparing various franchise options before you settle on the right one for you.
Post by: Bruce Hakutizwi
Bruce Hakutizwi is the U.S. and international manager of BusinessesForSale.com, a global online marketplace for buying and selling small- and medium-sized businesses. With more than 60,000 business listings, it attracts 1.4 million buyers every month. Bruce manages business development, content building, client acquisition, and customer retention in the United States, Canada, South Africa, and Europe. Bruce frequently writes on topics that promote entrepreneurship and small business ownership.
Did you know that you must go through an interview in order to invest in a franchise? If you want to become a franchisee, your first order of business will be to speak with the franchisor (or a representative on their behalf).
The franchisor will ask you questions about your background and goals, if you have any existing experience in the industry, your plans for building a customer base and financing the franchise, and your exit strategy. While it may seem like a lot of questions, this is all about getting to know you in order to establish a relationship together.
However, you shouldn’t expect to interview with the franchisor alone; you should also speak with current franchisees. These franchisees will be able to provide further insight about what it’s really like to run a franchise—including the ups and downs of being in business.
If you’ve scheduled an appointment to interview and meet with the franchisor or current franchisees and have no idea what to ask, we’ve got you covered. First read the franchise company’s Franchise Disclosure Document (FDD), and then come prepared to your interview by asking these questions:
After the franchisor has thoroughly interviewed you and has a solid understanding of who you are, it’s time to do the same in return.
1. Will the franchisor help me find a good location? Depending on where you want to open your franchise’s doors, the franchisor should have an understanding of the best sites available in a particular area. They also may be able to help you pick the best site for your franchise and, if need be, assist with lease negotiations.
2. Can you tell me more about your training program? Beyond the procedures for training new hires, you should find out what’s involved in the company’s operational training program, and the types of additional support offered. Support can range from assistance during your grand opening to various types of ongoing support once your doors have opened.
3. Can you provide extra financial assistance? The franchisor may be able to assist you with your financing needs—or at the very least provide lender recommendations or support through the U.S. Small Business Administration (SBA). Beyond the initial franchise fee, Item 7 in the FDD outlines your additional expenses, which may include grand opening promotions, business and operating licenses, equipment, business insurance, and employee salaries. Other ongoing costs may also include advertising fees, accounting, and legal help.
4. How are disagreements resolved? While no franchisee wants to experience conflict with a franchisor, it could potentially occur. If there’s a disagreement between the franchisor and a franchisee, you’ll need to understand the best method for resolving it. Furthermore, it’s important to find out if the franchisor has had a history of disagreements—or pending lawsuits—with other franchisees in the past. You can learn about current or pending lawsuits of the franchisor by reading Item 3 of the FDD.
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Outside of disagreements, you may also want to inquire with the franchisor what the contractual obligations, namely terminations and renewals, look like in your contact. Item 17 in the FDD touches on what franchisees must do to qualify for a renewal. A renewal is not an automatic guarantee from the franchisor, nor is possible that the renewal will keep to the same terms and conditions, so franchisees must ask if there will be any financial changes with their renewal of the franchise. If the franchise is terminated by the franchisor, you must ask about your remaining obligations to the franchisor. As an example, if you wanted to open up another franchise your contract may restrict the location and industry for the franchise.
Your conversation with a current (or former) franchisee may be a bit more laid back than it is with a franchisor since this is a franchisee-to-franchisee relationship. Ultimately, you want to get a better understanding of what a typical day in their world is like: the highs and the lows that come with owning a franchise.
1. What’s a typical day like for your franchise? The franchisee will be able to offer insight into the day-to-day operations that come with running that franchise, including success stories, challenging moments, and how much hard work, time, and energy will be spent on the business.
2. Are there any hidden fees? While you grill the franchisee on all things money—including the amount of time it took them to earn a steady profit—you’ll also want to inquire if there were any hidden fees or expenses. This will allow you to better financially prepare yourself to avoid any unwanted financial surprises.
3. What’s your relationship with your franchisor like? Keep in mind that the FDD will note in Item 20 whether franchisees have signed confidentiality agreements that keep them from speaking to you. If that’s the case, you may not be able to ask them about their relationship with the franchisor (or even chat with them, period). However, if the franchisee did not sign an agreement, they may be able to tell you if the franchisor has been supportive to their needs and has continued to reach out to them on a regular basis, which is a sign of a great franchisee-franchisor relationship.
4. Are you happy that you decided to become a franchisee? If you had to do it all over again, would you change anything? Pick another industry? Work with another franchisor? Or, are you content with the investment you made and wouldn’t change a thing? The franchisee will likely be honest with you about the decision they made—and hopefully, their answer is a positive one.
By Eric Bell
Investing in a franchise requires extensive due diligence. Not only do investors need to understand the initial costs and what financing options are available, but they also need to carefully research the franchise model, the franchisor’s experience, the franchisor’s approach to running the business, and the culture of the franchise.
Just as important as researching the franchisor, future franchise owners need to assess their personal strengths, weaknesses, and work/life balance aspirations to make sure the franchise system they choose matches their personality and long-term goals. The extra time put in during the due diligence phase will pay off in the end.
Here are five questions to consider that can help you make the right franchise investment decision:
The costs associated with buying a franchise vary widely, depending on the industry you choose and the brand within that industry. There are many low-cost franchises that start around $10,000, but the majority of franchises require investments of $50,000 to $200,000 to get started. There are also many with startup costs that are far beyond this range, especially those of well-known brands including fast-food chains and retail stores.
Understanding how much your initial investment will be and the associated fees will help you to narrow down the industries and brands you are considering. For example, the cost of entry for a brick-and-mortar retail store or fast-food chain is going to be significantly higher than the cost of entry for a home-based business.
Almost all franchisors require their franchisees to pay a one-time upfront fee know as the franchise fee. Ultimately, you are buying the right to use the franchisor’s brand and business model, while also receiving ongoing support in management, training, marketing, and more. In addition, with most franchises, there will be ongoing royalty fees, which usually are a percentage of revenue, to pay after the franchise is open.
Some franchisors offer incentives for women, veterans, and minorities. When you research the initial investment requirements, ask if there are franchise fee discounts. These types of incentives could make the difference in whether or not you can afford that franchise.
The franchise fee and startup investment cover the costs to open the doors of your business. Also remember to budget at least six months of operating capital while your business ramps up.
Most franchise investors bankroll their franchise through some form of self-financing. This could be a home equity loan, a second mortgage, using money from savings, or even withdrawing funds from a retirement account. Here’s a quick overview of some of the options:
It’s important that you evaluate the many financing options available before you make a financing decision. The good news is obtaining financing as a franchisee is often easier than as a new, independent business owner.
During the exploration phase, it is critically important to meet with and interview existing franchise owners. Current franchisees will help you understand exactly what the day-to-day looks like, what their major challenges have been, and whether their relationship with the franchisor has been up to par. They can also help you understand what costs, if any, have unexpectedly arisen.
Speak with as many franchisees as possible. They may be busy, but they will want to give you their time as they understand the importance of growing the brand they have personally invested in. The information gleaned from these interviews can be invaluable. Some questions you should consider asking are:
Franchise ownership requires you to not only invest your money but also your time. The initial phases of getting a franchise business up and running can be challenging, and over time you will require guidance and support. You want to make sure you are joining a company managed by experienced professionals, who have created a proven model that will grow with your business.
Franchisors should provide training programs that cover all aspects of owning and operating a successful business, from initial and ongoing training and assistance to marketing and advertising support. Most franchise systems also provide local support through franchise field representatives.
Proper training and support is not only essential in helping franchisees achieve the success they signed up for, but it is also crucial to building a franchise system that is consistent from one location to another. Without that consistency, the brand is not likely to grow to the levels everyone is working towards.
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Do your core values, abilities, and goals align with those of the franchise system? As a franchisee, you will be signing a long-term contract and be required to run your business as dictated by a prescribed set of guidelines. Franchisors can be very diligent about enforcing policies and procedures to maintain uniformity and ensure future success within a franchise system.
Here is what to consider when evaluating if a particular franchise is a good fit for you:
Buying a franchise is a big commitment that requires hard work and dedication. The most successful franchise owners are those who truly enjoy their business and putting in the time necessary to make it a success.
If you like the idea of being self-employed, and operating an established business, then a franchise may be the right opportunity for you.
Post by: Eric Bell
Eric Bell has 15 years of franchise industry experience and currently serves as General Manager of www.franchisegator.com. He began his career in 2002 as a Hollywood Tans franchisee in Atlanta, where he also served as area manager and helped develop the company’s Atlanta territory. In October 2005, Eric joined Franchise Gator as a sales representative, and went on to hold several positions, including sales representative, sales manager, and director of sales and service. Eric is a member of the Southeast Franchise Forum and is a Certified Franchise Executive.
Don’t Put Too Much Faith in Learning from Failure
We have heard and most of us believe that we learn from failure. But what’s the evidence that corroborates that? Perhaps our belief on failure followed by success doesn’t rest on a solid foundation, writes Professor Scott Shane, professor of entrepreneurial studies and economics at Case Western University.
There’s only one problem with the “failure helps” perspective. There’s no serious scholarly evidence that prior business failure enhances later entrepreneurial performance. Quite the contrary, the existing evidence indicates that entrepreneurs who failed before perform no better than novice entrepreneurs and significantly worse than previously successful entrepreneurs.
…More difficult to explain is the truism that “entrepreneurs learn from failure.” Our collective belief in its veracity stems less from a reasoned look at data and more from what we want to believe. The idea that prior business failure helps fits perfectly with the motto “if at first you don’t succeed, try and try again.”
You might say it’s fine to think that entrepreneurs learn from failure even if there is no evidence that it’s true. But this inaccurate belief has a cost. —Scott Shane, Small Business Trends
Mon, 12/31/2018 – 05:40
Why Blockchain Is Important for Hotel Owners
Blockchain has been around for ten years now, probably most famously as the technology behind Bitcoin. Specialists say that its qualities make it a natural to generate significant improvements for hotels and their travel industry networks.
In 2017, blockchain projects flourished, where ICOs [Initial Coin Offering] managed to raise billions. 2018 was a crash year for cryptos, even though the sums raised this year were twice as high as the previous one. Blockchain projects promised a lot, however 71% of them still have no working products. The argument was that blockchain is still in its infancy, and many are supposed to deliver their products in 2019. And one of the best places to watch where blockchain will rise again is in the travel industry. —David Petersson, Forbes
How can blockchain help hotel owners and does it look like it will be cost effective?
Blockchain technology has several advantages to offer the hospitality industry, with one of the most obvious being the security and stability benefits. For instance, all data is decentralised and traceable, and the database can never go offline, or be removed through a cyber-attack, which can be important when dealing with financial transactions.
In addition, the technology could have a vital role to play in simplifying actual payments. At present, this can be somewhat complicated, especially when dealing with overseas settlements. With the use of blockchain technology, the entire process can potentially be streamlined and made more transparent, increasing trust. —RevFine
Wed, 01/09/2019 – 21:35
When Listening to Business Gurus Is a Waste of Time
Business advice is available from various online or hard copy sources. Much of it turns out to be mostly fluff, sparse on the hard facts that one really needs to know in business. On the other hand, there is valuable information out there. The avalanche of information has to be handled well, with the chaff being rapidly and efficiently discarded.
With the explosion of social media over the last five years has come an explosion of gurus. Everyone and anyone can become a guru with internet access and good lighting for their photos. The thing about being a guru is that there are no rules or criteria for it. Went through a bad breakup and decided to write about it? You can become a relationship guru. Gave up sugar for a year and took photos of all your sugar-less meals? Congrats, you can now be a health guru.
…What I am saying is, there comes a time that you need to stop consuming other people’s content. There comes a time when what you’re reading is the same old advice, just in a different color scheme, on each website you visit. And there comes a time when you need to call a little bs on some of these business gurus advice. —Kara Perez, Due
Photo by Matt Cornock, Flickr
Thu, 01/10/2019 – 07:18