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This is the first of what I hope will be a series of helpful commentaries on current franchising issues. The format, owing to the vagaries of my own personality, is that of someone who, at the end of the day, has stopped off at Muldoon's Saloon for a cold one before going home, and is getting some sage counseling from the bartender. If you don't frequent saloons or taverns, please put a bag over your head when reading these articles so that none of your friends recognizes you and tells your husband or wife where you were.
Sticking to what we know best to do is usually a wise admonition. However, it may help occasionally to ask what it is that you really do. This is especially cogent when speaking of the dynamics of life cycles.
Every industry and company experiences a life cycle in which there is birth, growth, maturity and where I am at the present age, getting on. If introduction / birth is survived, the growth stage is rich (if the concept is sound), prolific, recognized, in the form of imitation / competition entering the market, maturity and decay.
Today many companies are in the decay stage and having difficulty adjusting. "Decay Stage" sounds pejorative. No one wants to be thought of as "over the hill". But it is a hill and we do go over it. What we do when we get just beyond the crest of that hill is the issue here.
There are clinical signs that tell you when you are just going over the crest. They are easy to spot and can be measured, so it isn't really guesswork. Here are the most significant of those symptoms. Competition has so proliferated that there are signs of saturation. The signs include heavy price cutting and aggressive value promotion. This causes erosion of retail margins and net financial operating results. It reduces the willingness of franchisees to make substantial investments in upgrades. It affects the resale value of franchises. Sales of franchises to new franchisees decrease. An exception is when you are in saturation in one geographic area, but sales (e.g., internationally) are still growing. If you aren't selling lots of franchises in the USA, but are selling lots of them abroad, you are in the decay stage only in the USA. Existing franchises are being bought up in wholesale lots by experienced operators at bargain prices. New locations are acquired by merging with competitors rather than through internal growth.
If you are a franchisor with 15 - 25 years operating experience, substantially all in one business, as in hamburgers, print shops, photo shops, pizza parlors, et cetera, you think of 'sticking to your last' as staying in that product or service. Try another approach. Your Last is probably Franchising, not food or services or any other narrow definition tied to what you have always done. You know how to sell, support, advertise and promote. You have a substantial investment in franchising infrastructure and staff. They can be used to franchise any business with the addition of a small number of effective people with experience in the intricacies of the 'new' business.
There is a vast market of new concepts out there that are simply dying for a connection to the kind of resources that you already have and are worried about underutilizing. Strategic alliances and venturing with these fledglings represent rebirth opportunities. If you have a corps of successful franchisees, these may be your first and best franchisees in the new business. This builds lasting future value in those relationships.
It takes a bit of courage, but anyone who has been successful in franchising over the last 20 years certainly has that.
Copyright 1997 - 2008 || Richard A. Solomon
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