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Franchises- Four Concepts in Business

Written by: David R Waldman

Article Overview: This article covers the four basic objectives of any business. In order to be successful at Franchising a business needs strategies, procedures and formulas to capture customers. How well a Franchisor executes these strategies determines their success.

Franchises- Four Concepts in Business

In order to truly understand the concept of Franchising, an exploration of the basic concepts of business is required. There is no magic in that. It just makes sense in order to provide clarity about the Franchising strategy.

Franchising is not a business in itself. It is a business strategy. It’s a business system. That’s a significant distinction that isn’t always clear. McDonalds is in the fast food business – although many people feel they are really in the real estate business, while others think they’re in the entertainment business. Regardless of that discussion, they are not in the business of Franchising. Subway is in the business of selling sandwiches. Ramada is in the business of operating properties. Snap-On Tools is in the business of selling tools.

Each company uses Franchising as its strategy to penetrate and dominate the marketplace. However, their core business relates to the products and services provided to their customers, using the Franchising strategy to deliver those products and services in a consistent manner.

If someone says to you that they’re in the business of Franchising, they don’t really get what they’re doing. It’s all about the customer and if the focus is not on the customer and their needs, then something is wrong. Customers don’t need a Franchise. They need hamburgers, sandwiches, hotel rooms and tools. So therefore Franchisors are not in the business of Franchising.

It has to be about the customer doesn’t it? After all, the customer pays for everything. They pay for salaries, they pay the rent, they pay the utilities, they pay for the costs of delivering the product or service and they pay the profit. In businesses using the Franchising strategy, the customer pays the royalties, the customer pays for the development of the system, including support and operations and they pay for everything the business does in its day-to-day activities, both Franchisor and Franchisee.

Some of the most successful franchise systems have a credo that says that ‘Good is the Enemy of Great’. It’s not absolutely original, but they hope their approach is just that. First of all, if greatness is to be achieved, focus must be completely on the customer. Then they have to continue to strive to have customers clamor for their services. If they’re satisfied with being good at it, they’ll never be great. Focus must be entirely on the customer to achieve the goal of greatness.


Purpose of Business

O.K, so let’s look at the purposes and objectives of business, regardless of whether the goal is to be good, or great. I don’t think anyone has a goal to be bad, so we’ll leave that one out. First of all, the basic purpose of business is to make money. It is not about your way to give back to humanity. That’s a charity. People that wish to be in business for themselves are doing so in order to make money. That shouldn’t be a surprise to anyone.

So how do all businesses make money? As stated above, they focus on the customer. Therefore, the purpose of daily activities, the objectives of business, are to get new customers, satisfy those customers, keep the customers, and grow business, either with, or through those customers.

Get, satisfy, keep, and grow. There you have it. Simply put these are the purposes of any business. You can’t think of a transaction that happens in business that isn’t aimed at one of these four things. The key is to understand that they are four distinct things and they each require distinct strategies designed to achieve excellence in all four areas if greatness is to be achieved.

Get

Most people ‘get’ this one. This is sales and marketing. Peter Drucker said there are only two things that create value in business - sales and innovation. The rest are costs.

I would suggest that many companies tend to become happy with their existing suite of customers. Or they land the ‘big one’ and all is good. I would also suggest that if there are not constant strategies put in place to continue to get new customers, to get new blood, then stagnation will follow. Landing the ‘big one’ can actually put the business in a very precarious position. It’s called over-trading. If the business relies too heavily on one source for its revenues it can be in big trouble if something goes wrong with that customer.

The solution to over-trading, and to keep generating a steady stream of new customers in order to keep any business vibrant and moving forward, is to implement great ‘get’ strategies. And never quit. That’s certainly not rocket science, but it is a basic tenet of long-term survival.


Satisfy

A lot of people really miss the boat on this one. I actually saw a truck drive by me recently that had a slogan on the side in proud, bold letters that said ‘We Deliver Satisfied Customers’. They seemed to be quite proud of the fact that they actually provided what they sell. All customers for all businesses expect to be satisfied or they wouldn’t complete the business transaction in the first place. Boasting that customers are satisfied is like saying, ‘we don’t rip you off’. Well, big deal and thank you.

Satisfaction must be a given. It is required for survival. It is certainly one of the four main purposes or objectives of business, but it is so often misunderstood. Satisfaction is what people buy, so they expect it to be delivered. We must constantly be wary of what customers expect in order to be satisfied, and it’s an ever-increasing standard. However, it’s nothing to brag about. It’s just what you sell.

In a book called ‘If It Ain’t broke – Break It!, Robert Kreigel wrote, “Embrace the unexpected. The only thing that won’t change is that everything will keep changing. Today’s skills, knowledge, and products live fast, get old before their time, and die young. The overnight letter, which was the innovation of the 1980s, is now used only when you’re not in a hurry.” He wrote that message 15 years ago! It’s a clear, and still valid, indication that we need to continually re-tool to meet customer satisfaction goals.

Keep

If satisfaction is a constantly moving target, and satisfaction requires ever-increasing effort and commitment, then to keep customers requires more than just satisfaction. Customers expect satisfaction. They buy satisfaction. People will copy satisfaction. If that’s all that is provided, then it comes down to price, and that’s a losing game no matter what business is at hand. Therefore, strategies are required to provide more than what the customer buys, in order to maintain long-term trusting relationships. Michael Vickers says to “take a standard service offering and up-level it.” That defines the ‘keep’ strategies that a business must employ. Ignoring this one will again create stagnation or denigration.

Grow

Most of us have heard that it is less expensive to do more business with existing customers than to obtain new ones. It is my belief that you must do both.

In order to do more business with existing customers, there has to be consistent strategies in place to educate them about new products and services. In addition, you must understand their business, particularly as it changes, so that it becomes apparent when your products and services can be provided. You must also put practices in play to ask for more business. Complacency is too often the norm when opportunities are in front of us. Companies that implement processes to ensure these things are managed will continue to grow business via the grow strategies.

The grow strategies also include asking existing customers to support you in your business growth through others. It’s surprising how many people would be willing to help if they are requested to do so. Things like referrals, testimonial letters, agreeing to act as a reference, and introductions to their association are all offshoots of this strategy.

So there you have it. These are the four basic objectives of any business. Business needs strategies and formulas to continually get new customers, satisfy them (which is an allusive and demanding standard), keep them (which requires more than delivering what you get paid for) and grow business with them or with their help. These are the basic concepts of business and they must be at the heart of every good business -every good Franchise system. The success of a Franchise system should include an assessment of how well the Franchisor understands these concepts and how well they execute strategies to make them happen.


David R. Waldman is the founder of PIR & Associates Inc. providing no-cost assistance to entrepreneurs nationwide, helping them identify franchise opportunities that match their interests, backgrounds and goals. PIR & Associates Inc. also provides services to businesses that wish to duplicate their operations and create franchise wealth.

Contact us at 1-877-615-5177 or visit our web site at: www.PIRandAssociates.com .

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