Controlled Growth Key to Success for New Franchise Concepts!

Posted on June 12, 2015August 3, 2015 by Paul Segreto

Working with entrepreneurs exploring franchising as a business expansion strategy, I’m often asked the question, “How does a new franchise company sell franchises without brand recognition?” Here are my thoughts…

Initially, the founder is the brand. It’s his or her passion for the business. It’s how he or she treats customers and employees alike. It’s how the business is promoted within the local market. Not just through typical advertising efforts, but through solid grassroots, organic efforts.

The initial franchise candidates are actually the “low hanging fruit” of the original business. These are the customers that inquire whether or not the business is a franchise and how they can learn more about owning their own. Most are interested because the business appears to be thriving and they’ve seen the owner (founder) time and again, always smiling and shaking hands. Public Relations efforts should ensure this occurs.

They admire the owner a great deal and will base their decision to open a franchise location, on the potential of establishing a relationship with the owner. They’ll compare the opportunity to other franchises and justify to themselves that they’re in on a ground floor opportunity with a direct line to the founder. As such, they feel their probability of success is greater because their location will be in the home office city and if they need help, they could easily approach the founder and the home office because of the proximity to their franchise location.

Ideally, the next few franchisees will also be in the same market as the original business and the first franchise location. It’s prudent to only expand locally until critical mass is established in the market, ad cooperative is developed and support systems are perfected. Now the concept is ready to expand outside the initial market.

However, it is often financial suicide to entertain requests from candidates all over the country. Instead, development efforts should be concentrated on one or two cities relatively close to home office city. For instance, if original business and home office is in Houston, the natural progression would be to promote the opportunity next in San Antonio/Austin and Dallas/Fort Worth areas.

As these markets start to become established with franchise locations, it’s advisable to promote the concept in another two or three areas. Maybe, explore another “hub” and “spoke” scenario. Let’s say, Atlanta as the next hub.

Expansion efforts should be the same as they were in Houston and expansion out of that market shouldn’t occur until Atlanta has a critical mass. Then, when that occurs, the opportunity could be promoted close by in Nashville and Charlotte. Now, you see the spokes of national expansion beginning to form.

While this is going on, maybe inquiries start coming in from the San Francisco area. So, the next phase of expansion might be in the Bay Area. The Bay Area becomes another hub, and once developed, the franchise opportunity could be promoted up the road in Portland and to the East in Sacramento and the process continues.

It’s all about controlled growth and the founder exhibiting tremendous restraint in expanding too fast and in areas far away from his core group and subsequent hubs to be able to provide ample support, create ad cooperatives and build the brand geographically. Chances of franchise success are far greater at all levels of the franchise organization within the parameters of a controlled plan of development.

So, to answer the often-asked question directly, I suggest everyone in the system having a clear understanding of the founder’s vision and if it includes anything but a controlled development plan with his or her firm commitment to actively participate in the franchise sales process, the chances of selling the first ten to twenty franchises will be a frustrating, monumental task that most likely will fail miserably.

Franchise Candidates: A Changed Mindset

Posted on July 7, 2014July 13, 2014 by Paul Segreto

This article was originally posted on August 13, 2009 as Franchise Candidates: A Changing Mindset. Well, I guess we can revise the title slightly to reflect candidates’ current views – A Changed Mindset. Nevertheless, the article may be even more relevant today as franchising attempts to rebound from the economic downturn and continues to explore more viable lead generation strategies that will attract today’s franchise candidate. Many continue to explore social media and have realized its position as an integral and effective component of these strategies… of course, when utilized according to a plan.

A look at today’s franchise candidates will reveal they are more sophisticated, better educated, and more technologically advanced than ever before. In addition, and even more so because of the economic downturn, they are extremely cautious.

Today’s candidates are spending more time researching opportunities, and doing so at a much slower pace. In order to be diligent in the process, more time is spent online pouring through page after page of information, constantly bookmarking, and moving back and forth from new information to saved information. They’re comparing notes with other franchise candidates on social networking sites. As well, they’re gaining invaluable insight monitoring online discussion groups and forums.

Ultimately, today’s franchise candidate desires and needs to be certain the franchise opportunity is as close to perfect for his or her situation, as humanly possible. In the past, and especially after previous recessions, franchise candidates took their capital gains and invested in a franchise opportunity. Many times leaving the principal investment untouched. There was a sense of throwing caution to the wind because they were investing profits. Many times ungodly profits, at least by today’s standards. Does anyone remember when money markets kicked out 17% profit margins?

Unfortunately, many individuals looking at franchise opportunities today are looking at things differently. They have to. Many are transitioning corporate executives staring at the back end of illustrious careers trying to squeak out just ten more years before retirement. Facing the challenge of younger talent, new technology, and a rapidly changing business environment, many opt to “buy” a job and explore franchising and small business ownership.

What Changed?

Here’s the difference between today’s recession, and of those in the past. As huge fortunes have been lost, and large gains have not been realized in current financial markets, today’s candidates are forced to invest all or part of their remaining nest egg in order to enter the world of business ownership. Of course, everyone knows and fully understand the risks involved in owning a business. But in yesterday’s business environment, many franchisees and business owners were “gambling” with profits.

Certainly, no one wanted to lose money in a business venture. But, many had fallback positions with funds still in retirement accounts and of course, if they had to, employment. For many of today’s candidates, failure is not an option because fallback opportunities are fast becoming non-existent. Actually, I believe many of today’s candidates might not have even considered franchise or small business ownership in the past.

So, as many individuals explore their options, they will focus more and more of their efforts online. Franchisors must embrace this fact, and dedicate more resources to the internet and look to social media to complement, not replace, their traditional franchise marketing strategies. By doing so, they’ll realize multiple benefits for their entire system including:

– Creating or further developing brand awareness with franchise candidates and consumers alike
– Generating franchise leads that are genuinely interested in exploring what franchising and small business ownership has to offer, and how a particular concept may be the vehicle to achieve their goals and objectives
– Establishing an interactive environment of communications and information sharing that will become the backbone of future franchise relationships throughout franchise systems

Last, many franchise candidates previously viewed franchising and small business ownership as a way of achieving their wishes, hopes and dreams, regardless of what those may have been. Today, it’s more about goals and objectives, and necessities. We, as an industry need to fully realize this, and understand the mindset of today’s franchise candidate.

True Social Media ROI – Relationship & Community Building

Posted on December 10, 2013December 11, 2013 by Paul Segreto

Certainly, return-on-investment (ROI) is important but too many miss the boat by trying to make social media a line-item on their financials. First, social media is not advertising. So to think there will be a definitive ROI based entirely upon revenue generated against dollars invested is absolutely off-base.

One needs to look at social media as the glue that can hold several key functions of the business together such as bringing the customer experience to marketing complete with sharing operations role in making the experience positively memorable, and letting the end-user know about its objectives. Complicated? No, but not without proper planning and a long-term vision. Further, social media is vehicle that transports information from one function to another – it’s a conduit.

Social media is the communications tool that should lend itself to truth, trust and transparency in establishing or strengthening the business relationship. Last, social media is the tool that enables a brand or business to earn the right to “ask” for business from customers, clients and investors alike as it provides the platform for them to virtually see how your business operates, how it communicates and how it is perceived. The key here is in establishing community. The necessary steps are relatively simple to follow… Share, Interact, Engage and then, only then have you earned the right for a Call-to-Action. Yes, that’s when the right has been earned.

It does take training for social media to be utilized effectively at any level. But even more so at the local level as franchisees typically cannot afford the luxury of adding human resources to handle their social media. So, training and guidance is paramount. As is open communication and interaction between franchisor and franchisee in managing and monitoring social media. Yes, working together with common goals and objectives, as should always be the case in the franchise relationship. This is just another component of what I believe should be the everyday goal of working towards a truly interdependent relationship. The same should be said about all relationships in a business [and franchise] environment – franchisor/franchisee, employer/employee, business/customer, etc… Yes, it should be the norm, and not the exception.

Personal Branding and the Power of “YOU”

Posted on February 1, 2013February 2, 2013 by Paul Segreto

This is the final post in a week-long recap of my 2012 interview with Renee Bailey of Franchise Direct. The title of the post in Franchise Direct was “Marketing, Media and Franchising – An Interview with Paul Segreto”. The full interview may be read HERE. But if you’ve been reading along this week, the following represents my final answer along with some parting advice for prospective franchisees.

In August of 2011, HubSpot explored why every franchisee needs their own website (story link: http://blog.hubspot.com/blog/bid/22027/). Does this relate to your philosophy that individual brands enhance the overall franchise system?

Yes. I don’t think that it can be argued that a franchise organization with franchisees with strong personal branding wouldn’t be significantly stronger than a system with franchisees that just stand behind the counter.

Now, I’m not degrading the efforts of franchisees that strive for 100% customer satisfaction and are willing to put in long hours to ensure the same. But with a strong personal brand that reaches into the local community, franchisees would be more successful driving the business. I refer to this as “GOYA marketing” – Get Off Your Ass marketing. Here’s the great part of GOYA marketing… in today’s digital world, much of the personal branding can be done online!

Are there any additional insights you would like to share with prospective franchisees?

It doesn’t matter what your level of investment, or visibility and strength of the brand, the key to your success is YOU! Yes, I am a firm believer in location, location, location, and I always stress not to fall so in love with a brand that you accept a secondary location because that is a recipe for failure. But as important is for me to stress: You, you, you.

Until next time, this is Paul Segreto, wishing you the best, the very best, in this great thing we call franchising!

The New Media Effect on Franchise Sales & the Franchise Relationship

Posted on January 31, 2013February 1, 2013 by Paul Segreto

This is third post of this week based upon my recent interview with Renee Bailey at Franchise Direct. In this part of the interview our focus turned to what many within franchising look for day in and day out… the silver bullet to increase franchise sales. When social media became more and more popular, many franchisors wanted to use social media to attract franchise candidates. Many thought, incorrectly that social media was a form of advertising. My response to the first question below sheds a different light on social media in the franchise sales process.

In the second question the focus was media’s affect on the franchise relationship. My answer was short, but to the point.

Finally, in the last question below we discussed a new trend in media – Social Mobile Local or SoMoLo.

How are franchisors utilizing social media to connect with prospective franchisees throughout the prospecting process?

Great question because many are not connecting with prospective franchisees. Social media is not the silver bullet many want and expect to make the sales process easier, or even to generate leads on its own.

Instead, social media for franchise development should be looked at as a vital complementing component in the traditional lead generation process. That means it should provide a support mechanism that candidates can be directed to and that candidates can find on their own in their own due diligence. Today’s candidates are also more diligent and cautious than ever before. Social media allows them to virtually stand next to a brand and experience how that brand interacts with its customers, franchisees, etc.

All that being said, social media can be utilized in the franchise development process as a way to drive candidates to a specific event like a webinar, where the concept can be explained in detail. The key here is that one-size-fits-all strategies with social media do not work effectively.

One more thing: it’s critical to ask questions at the onset of utilizing social media related to expectations and desired results. This is crucial in evaluating whether or not the program worked. As important as click-thru’s, insights, impressions, etc. are in analyzing the process and program itself, looking at desired results against actual results is really the true Social Media P&L.

Have new media options available altered the franchisor-franchisee relationship?

Of course, but they don’t need to. New media is all about truth, trust and transparency. Really, isn’t that what the franchise relationship should be built upon?

New media is a wonderful way of keeping in communications at all times. Embrace and adapt is what I typically advise. It’s important to receive proper training to fully understand new media and all its capabilities and features.

How does a personal brand enhance the overall brand of a franchise system?

The new trend in digital marketing, or better stated, in attracting today’s consumer is referred to as SoMoLo, or Social Mobile Local.

Social, we’ve touched upon above.
Mobile is just the way consumers are choosing to access and search information, and communicate.
Local, well, that’s all about the “personal side” of the business transaction.

People want to do business with people. They buy from people. Sure, the brand may get them in the door, but it’s the person representing the brand that they want to business with. So, as consumers technologically advance, it’s not uncommon for them to check out the local franchisee’s Facebook page or LinkedIn profile, perform a Google search of the franchisee, etc. What they hope to find is a person of experience and integrity. [Even] the banking industry is leaning towards utilizing a social reputation score for business loan applicants that will rival the credit score.

Tomorrow, in the last post in this series we’ll wrap up the discussion with a questions about local websites and a word of advice for prospective franchisees.

Franchise Social Media Basics – What a Great E-IDEA!

Posted on January 30, 2013January 30, 2013 by Paul Segreto

This is the second post based upon my recent interview with Renee Bailey at Franchise Direct. As the interview progressed, Renee and I discussed challenges franchisors face integrating new types of media and how franchisors and franchisees alike could better utilize mediums at their disposal.

What are some challenges franchises are facing concerning integrating new types of media?

The biggest challenge franchises face with new media is a lack of understanding that like anything else, requires planning. Many are not taking the time to:

develop and explore the various media available
identify their targets along with identifying where they congregate and communicate online
develop a strategy based upon the targets (which may actually require sub-strategies for each target and their online communities)
execute the plan and all that goes into it, including dedication of financial AND human resources in managing and monitoring activity, and of course
analyze and quantify results in order to continue moving forward or adjusting as necessary

Yes, that’s a lot to grasp but it is essential to developing an effective program utilizing new media. Basically, what I’ve described is e-IDEA, which is something we utilize religiously when working with franchise clients – Explore, Identify, Develop, Execute, and Analyze. It really is a great, simple guide to follow.

How do you feel franchisors and franchisees can better utilize the mediums at their disposal?

By working together, as many franchisees essentially “got there first,” meaning they were posting within social media in its early stages. It’s important to utilize their efforts as a foundation on which to build a uniform social media or new media program.

Franchisors should not take a rigid approach with respect to messaging and social involvement. New media is all about interaction and engagement, and as such, requires a “personal” touch at the local level. Of course, there needs to be guidelines and certain policies to protect the brand. But that is more common sense than anything.

Also, I believe franchises shouldn’t get all caught up in just driving LIKES. It’s more important to create a community of sharing and engagement. I much prefer seeing a Facebook with lower number of LIKES but a high number of post views. That tells me that people are coming back day after day after day to see what is on the page. Whereas just LIKING a page, they may never return. What good does that do?

Tomorrow we’ll turn our attention to how franchisors are utilizing social media to attract prospective franchisees and also, Social Mobile Local – more affectionately known as, SoMoLo!

Note: Photo credit to 1851 Magazine

Marketing, Media & Franchising

Posted on January 29, 2013January 29, 2013 by Paul Segreto

This is the first of several posts based upon my 2012 interview with Renee Bailey at Franchise Direct. The theme of the interview was Marketing, Media and Franchising.

What are some trends in franchising today in regards to marketing?

As today’s consumer and franchise candidates are more sophisticated, educated and technologically advanced than ever before, many franchise organizations are focusing on digital marketing as a way to attract these targets.

Unlike traditional marketing, the digital space allows for many different approaches to attract and engage their targets. Specifically, using a combination of social media marketing and content marketing in conjunction with traditional marketing has proven quite effective. Add to the mix the old stalwart – email marketing – and it creates a cross-platform, multi-tiered effect that touches the target audience multiple times within a short period of time… and at times, almost simultaneously.

The key here is to understand that the sales process with today’s consumer and franchise candidate is no longer an A to Z proposition. Often, by the time [they] make personal contact with a company representative, they’re already at letter K, M or even W in the equation. As such, it’s imperative that the transition from the digital space to the personal interaction is seamless, and in line with the message conveyed throughout the digital marketing efforts.

In the next post of this series we’ll address challenges franchisors face integrating new types of media and how franchisors and franchisees alike could better utilize mediums at their disposal.

Consumer Trends Focus on Customer Experience & Information Sharing

Posted on October 11, 2012 by Paul Segreto

Working this morning through my daily routine of reviewing some 300+ blogs, articles and newsletters continue to see a trend that refers to what today’s customer wants, needs and commands. The trend touches on customers in all age groups, what brands need to do, and, of course, technology and its ever increasing role in business. But the common ground that everything centers around is customer experience and information access.

I believe the days of worrying about being too intrusive with consumers is behind us. The thing we must learn, and fast is that today’s consumer wants information and wants it now, in real-time. They are more sophisticated and technologically advanced than ever before. Small business owners must follow suit and adapt accordingly. In the franchise space, franchisors must lead the charge and do so, in part by leading by example – embrace and adapt to change!

Below are three interesting articles that lend towards the common ground defined above and indicate major changes already taking place across many industry segments. Would love to hear your thoughts on the same.

Social Customer Expectations as published on Social Media Club

In a study from this year, Gartner predicts not responding to customers via social channels will be as harmful in 2014 as not answering the phone is today. The reason? Customers simply expect it.

Customers have long complained about the lack of attention via certain channels when dealing with companies. Ever stand in line at a store while they answer the phone and have a lengthy conversation? That’s the feeling customers get when they try to reach a brand via social media and are ignored.

How would your franchisees answer this question, “Does your franchisor have integrity?”

Posted on September 22, 2012September 25, 2012 by Paul Segreto

Integrity is what you do when nobody is watching!

Some franchisors appear to believe that when a person asks for the franchisor’s FDD they need not give it.

Why? Here is, slightly edited a franchisor’s broker’s answer, which appeared on a major business social network.

“Because they [franchisor] are not required to provide an FDD upon request.

Here is the excerpt from the FTC 2008 updated ruling:

“Upon reasonable request, franchisors also must furnish a disclosure document to a prospective franchisee earlier in the sales process than 14 calendar days before the franchisee signs or pays.

The failure to comply with a reasonable request for an earlier delivery is an independent violation of the Rule. This does not mean that a franchisor must tender a disclosure document to any person who asks for a copy.

Rather, it applies where the parties have taken steps to begin the sales process.”

The problem is that many franchisors begin a validation process with the prospective franchisee, but believe that they haven’t “taken steps to begin the sales process”.

But, the way I see it, is if a candidate is on a validation call then I think it’s hard to dispute that you’re not knee deep in the sales process!

Some brokers will argue otherwise.

“If I took a lead to many franchisors and after the first call said to the franchisor, “the candidate would like to reasonably request an FDD at this time” most of them WOULD indeed laugh or explain their “sales process” to me where the FDD is provided after the application which comes after the webinars and other phone calls.

I can only think of a handful of times where an FDD was provided after the first call with a franchisor.”

Irrespective of FTC Franchise Rule enforcement, it’s not the candidate’s duty to know that they are entitled to an FDD upon reasonable request, it is the duty of the franchisor to comply with the FTC Rule.

If you as a broker or the franchisor has a bona fide prospect considering a particular franchise you as the broker must communicate an FDD request to the franchisor. The franchisor must fulfill the request and track and record all FDD requests.

Even if the FTC is not watching, it is not okay for franchisors and brokers to break the rule. I recommend taking a look at The Franchise Sellers Handbook. It’s a great resource and most likely will answer a lot of questions that you may have.

Remember, integrity is what you do when nobody is watching!

*Reprinted from International of Association Franchisees and Dealers Feb 2012

Franchisees Using Social Media… Of Course!

Posted on June 7, 2012June 7, 2012 by Paul Segreto

This morning I had the distinct pleasure of being interviewed on Tweet Chat by Jennifer MacDonald, Director of Community and Client Engagement at Engage121. The topic of discussion was Franchising and Social Media, a topic very close and dear to my heart.

Starting off the discussion, Jennifer asked me, “Why should I let my franchisees use Social Media?” to which I responded, “Today’s consumer is more sophisticated and technologically advanced than ever before, and expect brands to be online!” and followed up with, “Franchisees need to be on social media to provide the “local” experience for consumers.” The discussion may be viewed on Twitter by searching the hashtag #IFA2012.

But if you really want (need) a more comprehensive answer to the question, I suggest reading Jennifer’s post, Why should I let my franchisees use Social Media, posted today on Engage121 blog. Here’s an excerpt of the post…

Why wouldn’t you? I’m going to guess that your first thought is brand management. That is understandable. But, you let your franchisees market their business now and you have brand guidelines for them to follow. You provide training when they first join your franchise network, and maybe you show them how to use your email marketing system. Why not add a little training about using Facebook for business as well?

If you don’t have the manpower for training, then make sure to add some guidelines to your brand policy. Point your franchisees in the right direction for support, such as Facebook’s Help Center or Twitter’s support center. List a few good blogs for them to follow in order to learn Best Practices, such as Spin Sucks, SmartBrief on Social Media, and Mashable.

Read the complete post here.

About Engage121

For more than 10 years, Engage121, Inc has provided communications software and services to hundreds of national franchisors, dealerships and direct sellers. We sell software applications on a subscription basis to marketing and customer service leaders who need to manage their communities. Simply put, Engage121 is an established social CRM software company. Engage121 drives demand and incremental revenues for customers by providing access to millions of engaged consumers. We have a client-driven development approach to adapt our platform to your business and customer relationships today and tomorrow. Customer satisfaction is our top priority.

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Controlled Growth Key to Success for New Franchise Concepts!

How would your franchisees answer this question, “Does your franchisor have integrity?”