Franchise Store Closings

Why Do Franchise Stores Close?

It’s the elephant in the Discovery Day Boardroom; Franchise Unit Closures. The Franchisor may not even bring up the fact that there have been store closures under their watch, but it’s important for you as a potential buyer to find out how many and why. In today’s post, I’m going to cover:
1) the reasons why a franchise store may close, 2) how closures reflect on the brand, and 3) at the end of this post, I’ll discuss a metric tied to store closings that can help you reduce your risk when choosing a franchise.

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10 Steps to Opening a Franchise

In this Blog Post, I’m going to share with you the 10 Steps to Opening a Franchise.

Opening up a franchise or any small business can be daunting. There are hundreds of tasks that need to be completed most, within a certain time-frame. Risk increases with ignorance and to that end, its important to understand the big picture, the context of the entire sales and development processes. In this article I’ve outlined a high level overview of the how to open a franchise unit. Its important to note that this post is intended to be a road-map. The specific how-to’s for each task will be covered in a separate posts.

With just a few exceptions, this process can be used to open any small business.

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Are You Outsourcing What You Should Have In-house?

By Steve Slowey

Recently, I spoke with a Franchisee made reference to the fact that they were not making any money and were considering closing their store. When asked why, and what the problem was, they said they ‘could not keep a GM’ and that they were ‘having to put money into the business’. They were trying to hire someone to bring functionality and organization into their disorganized dysfunctional operation.

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Profit alone is no way to judge your business

By Steve Slowey

So I took over one of my restaurants from a manager who, in many circumstances, could not do the job. Today makes a full month since I took over. In that month, I have dealt with entitled employees, poorly executed systems, lack of training, and poor execution at every level. It is amazing how much damage is done when there is no leadership and no accountability.

Ultimately this is my fault as l should have never allowed it to get to this point but, I did. This scenario is not uncommon. It is likely we all have all allowed parts of our professional or business lives go, then found ourselves having to clean up the mess we created. Businesses are either in a progressive state or a regressive state; there is not a third direction.

This store has been in a regressive state for a while, and though it was and is still making money, business would be crushed if another concept were to open in the area. Profit alone is no way to judge your business. Ironically, at this location, the manager even said that he ‘didn’t see an issue’, that ‘the store was making money’.

The consumer has the ability to choose where they spend their money, and it is every employee’s job to ensure that the customer made the right choice when they walk in the restaurant. Open your eyes and try to see what your customer sees. Do a thorough evaluation of yourself and your business and make the changes needed to stay relevant.

Well-ran businesses do not worry about competition, they embrace it because their standards are high, and their execution is consistent. I have a lot of work still to do to get this store where I know it should be, but is there really any other choice? By being an absentee owner, I allowed this to happen so I have nobody to blame but myself. 

I hope you do some soul searching and take an honest look at your business. If you don’t like what you see, address it. I am doing just that. I am already seeing progress and getting good customer feedback but it has taken hard work to get here.

I am a believer in clear and concise systems that maintain standards and evaluate performance. Getting those systems in place has been difficult but they are the reason I am getting results. The systems are exposing the employees who are productive and the ones who are not.

If you find yourself wondering how to address some of the issues you are facing let us know.  I am confident we have the tools to help you get back on track.

Success is a byproduct of commitment to goals

By Steve Slowey

So I have finished my first week at a restaurant that I have owned but recently took over all the GM duties and it was not easy.

I live a relatively relaxed life and enjoy my routine. Taking on this project has certainly changed all that. I started by making an honest assessment of what was needed and created realistic goals for myself and my management. I narrowed the focus of my managers so I would not overwhelm them and I took on the brunt of the load. This particular store had several systems in place and really it had too many. The systems were burdensome and created so much of a workload that the primary function of the employee was replaced by all the additional tasks they were made to do. An example would be the servers, their primary function is to take care of the guest and insure that the guest experience is of a standard that the guest would become a repeat customer. The systems that were in place had the servers doing so much additional work that they were unable to properly attend to the guests needs and it showed in declining revenues. First, I redistributed the workload and made the guest the priority and did away with excessive tasks. I also worked hard to win the respect of my employees so they would be more willing to accept me and my philosophies.

Success is a byproduct of hard work and commitment and it begins at the top of every business and trickles down to all involved. I have to be willing to put in the work and make the time investment to ensure that the goals I have set are accomplished. I also have to be the one who accomplishes my goals and cannot expect them to be met by handing them off to someone else. Every successful business has a strong leader and this particular store was in desperate need of that. What keeps me going is that if I do this correctly, the time I am investing will pay dividends in the future not only by increasing the value of this store, but also by allowing me the ability to enjoy my life.

So many times in my professional life I have come across businesses that are in decline because the owners are unwilling to give up their personal time to properly correct the issues. People do things for only two reasons, either they want to or have to and if you wait till you have to the risk of failure will be much greater.

These next couple of weeks I will work to have the systems in place that will allow me to fiscally manage my cost of goods and labor to insure profitability. The retraining of my staff will be ongoing during this process and will continue until I see it executed consistently and achieving the desired goals. Once this is complete and my foundation is solid I can rebuild my revenues and feel confident that they are stable.

Do you have what it takes?

By Steve Slowey  

Recently, I took over an existing restaurant operation and though I consider myself pretty smart, I was overwhelmed by the challenge and the magnitude of problems.

In 2012 the store was a powerhouse. It performed very well, but due to a number of issues, it has continued to regress to the point it is now; down 2% from 2015 which was down 2% from 2014 etc. Needless to say, the store is down and I have to fix it. I will share with you my assessment of issues and my plan to repair.

My first day at the restaurant, all the employees of course, were worried. They acknowledged things were bad but they were reluctant to change. They all wanted to let me know how long they have worked there as if that is some “get out jail free card”. (Personally, I would have stayed quiet, since the reviews on the store are really bad.) So I have a bunch of “entitled” employees (refer to previous blog posts) rather than productive employees. The other issues I saw are poor operational procedures and lots of discounted pricing. My guess is that the discounted pricing was used to increase traffic and/or to offset slumping sales {it did not work}. Labor costs were way too high and my cost of goods was 6% high due to discounting and poor procedures.

My biggest challenge is ME. I have to be willing to asses the situation, put a plan together, and execute. My plan takes me to my goal and to get there I have to be focused and committed without time and energy restraints.

If you’re faced with a similar situation, you had better be willing to do it the right way or you will add to the issues, and further devalue the business. This business is worth it. The first step I had to take; determine if the ROI was worth the time and energy and cost to repair what is broken.

This week I will put the focus back on the customer and not the employee. I will evaluate my staff to build the team I will need to accomplish my goals. My blogs going forward will be a journal, documenting my plans, struggles, and accomplishments. These are the realities of being in business and when you’re the leader of your business, you had better know what direction you are heading.

Who is the Prevailing Common Sense in your Business?

By Steve Slowey

Common sense is only common to the individual; there is no such thing as we are all different and, in business, there needs to be one perspective.

In the absence of leadership, everyone goes in their own direction and does so to protect what they think is theirs, even to the point of hurting their place of employment. Clear and concise systems, that read like a detailed map, that direct your employees to exactly the result you want, is what is needed. Invest time in putting your common sense in detail, doing away with any interpretation, in every position that your company has.

Every department should have it’s own KPI {key performance indicator} that is detailed to that departments’ expectations. If the detail is there, then training should align to the detail. If that is done, then you will be the ‘prevailing common sense’.

The two biggest cost factors in business are labor and cost of someone who does not fully grasp their impact or clearly understand what you believe to be common sense. Infinite detail is the answer again. Make the time investment and put your common sense in detailed form, leaving zero doubt what the outcome is to be. 

Is your business progressing or regressing?

By: Steve Slowey

Your business is moving in a very specific direction and it is either in a progressive productive direction or a regressive destructive direction. The way to tell is simple, what is your current focus? is it fixing employee issues and dealing with their problems or are you focusing on building revenues and stream lining your business. Every business has a foundation and within the foundation are all the systems and standards that need to be in place to protect the revenues coming in. How solid is your foundation? If your foundation is unstable then your revenues are likely unstable and you are not progressing and you certainly are not in a position to grow. To be in a progressive state you must be solid in your foundation you must have systems that assist you in managing your personnel and evaluates what value you are getting out of them. So many times we try to hire what we lack rather than develop it with good systems. I hear it all the time, I hired her or him because they came from an organization that was efficient and organized and we need that here. Well when you take someone who flourished in a solid systems oriented environment and put them in a dysfunctional system odds are you will ruin them.

 Evaluate your foundation and start fixing the systems that are needed to get you pointed in the correct direction. You may have to get your hands dirty and do a little work but that work if done correctly will be an investment that will pay dividends and allow you to grow. Businesses that are progressive are not building their foundation they are managing it and building revenues.

 You are the answer or you are the problem but if it is your business you are the leader and the direction your business is going is your responsibility. I have been in a regressive state and it’s not a good place to be but what got me progressive was working on my foundation and making it solid.

The Entitled Employee

by Steve Slowey

Let’s talk about the evolution of Employee X. When Employee X starts a new job in, say the restaurant industry on the staff level, he/she is eager and ambitious, no task is too large, they stay late and arrive early. As time passes Employee X establishes tenure; and so develops a behavioral fork in the road. Which path Employee X chooses is largely based on the operational systems in place within the restaurant.

A typical restaurant operates with rewarding tenure. We’ve all heard it: “Mary’s been here for 10 years, so we promoted her to General Manager”. Now it may be that Mary is an exceptional employee that out-performs all of her counterparts, runs circles around the other servers, and truly deserves the promotion to General Manager. But in most cases at a typical restaurant, this type of promotion is not based on productivity, it’s solely based on tenure. If you value an employee for their tenure rather than their productivity, you will likely have several mediocre employees with an inflated sense of self-worth. You will spend ten times more time coaching, training, motivating, and counseling this type of employee than any other.

The better way to manage employees is a system based on rewarding productivity. This type of system should be rooted in accountability. When I developed systems that revealed who my most productive employees were, tenure based entitlement was gone! Employee X, regardless of his/her tenure, could be the most productive one week, and perhaps the least productive the next. That iteration in itself, didn’t solve the entire problem; I needed a more consistent productivity outcome. So I then developed systems that scaled my employee’s productivity, meaning I created an acceptable range within which they were rewarded for staying. Furthermore, when they fell below that range, there was a consequence. When I implemented this system and followed through with it, I found a profound Increase in productivity across my entire staff regardless of their tenure.

This idea of rewarding based on productivity instead of on tenure does not just apply to the restaurant world, it transcends business. There is no place for unearned entitlement in business. It can do an incredible amount of damage to your business.  The days of employees starting at the bottom and working their way to the top are gone. You will be lucky to get three years in the restaurant industry, specifically. If you want your restaurant or business to be a great place to work, then there has to be a consequence to failure. That concept, coupled with a reward for productivity, will make your employees value their job.

When you meet with your (prospective) Franchisor, ask them what type of operational systems they have in place that reward employees based on productivity. It may be that the Franchisor does not mandate one type of system over another. In this case, the onus may be on you to implement your own system. 

Your General Manager Should Read Your Lease

I heard a funny story recently about a General Manager (GM) that obviously had NOT read their proprietors’ lease. Told from the perspective of an absentee owner of a gourmet burger fast casual restaurant, the story went like this:

                “The plane landed at 6:30pm and I drove straight to my restaurant. My GM, James* wasn’t there. The Assistant Manager informed me that he would be right back, that James had been invited to the friends and family event of a new burger joint in the shopping center. I was dumbfounded. How did I not know that there was another burger restaurant opening in the center? I have a water tight exclusive for burgers in this center! I walked down the sidewalk to the endcap of the shopping center and sure enough, the friends and family event for the new burger joint was in full swing. The parking lot was jammed with people and I was just close enough to have the conga line pass right in front of me. James, my GM was number four in the conga line.”

*Name changed to protect the derp

This story made me laugh. Although unfortunate for the business owner, it embodies an important message. Have your GM read your lease. If James had read his proprietors lease, he would have been versed in the exclusive use protecting the owner’s use from a competing burger business. 

There are many other reasons to have your GM or your Director of Operations read your lease(s). Below are just a few:

1)      Maintenance and Utility Repairs – Knowing who is responsible for these items can save you time and money. Think HVAC, roofing, sewer line blockages. If your GM knows who to call immediately, you as an owner will not have the stress of dealing with this yourself.

2)      CAM Services – an example of this is paying for trash removal out of pocket when your lease clearly states this is included in CAM. Your GM should be able to put two and two together.

3)      Renewals timing – your GM can help keep up with your deadlines to renew your lease.

4)      Opportunities – a good example of this is signage. If your lease states that you’re allowed multiple signs and your GM notices a position available on the multitenant sign, pursue it. You don’t get it if you don’t ask.

Have a copy of the lease (redact the rents and other sensitive material if it makes you more comfortable) on site an accessible to your GM and AM.

Empower your GM with information that can positively impact and protect your business. He’ll gain proverbial skin-in-the-game, and you’ll gain an asset.