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Franchises and Basic Concepts of Business
By Ken Marlborough
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. Schooley Mitchell Telecom Consultants is
in the business of telecom consulting. 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. A more in
depth discussion of the Franchising concept will follow,
but first we need to delve into the basic concepts of business.
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 awry. Customers don’t need a Franchise. They need
hamburgers, telecom consulting, 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.
At Schooley Mitchell, we have a credo that says that ‘Good
is the Enemy of Great’. It’s not absolutely
original, but we hope our approach is just that. First
of all, if greatness is to be achieved, focus must be completely
on the customer. We have to continue to strive to have
our customers clamor for our services. If we’re satisfied
with being good at it, we’ll never be great. I want
to be great. We want to be great. Our focus must be entirely
on the customer to achieve that goal.
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. These
are the purposes of business. They form the first set of
four in a concept we have developed at Schooley Mitchell
called our 4 By 4 Concept. The other four will be discussed
at a later point. 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.
General Motors should have been trying to figure out how
to ‘get’ Japanese customers in the 1970’s.
That would have led them to understand how to ‘keep’ North
American customers. Enough said.
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.
Michael Vickers, one of our Sales & Marketing instructors
at Schooley Mitchell, says that ‘Whatever company,
in whatever industry, sets the standard in customer service,
moves the bar up for all of us.’ It’s a great
message. 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 have 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, and every good Franchise system. Evaluating 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.
To receive a free copy of an E-Book titled ‘Franchise
Opportunity – Making The Right Decision’ by
Dennis Schooley, email that request to corp@schooleymitchell.com.
Dennis Schooley is the Founder of Schooley Mitchell Telecom
Consultants, a Professional Services Franchise Company.
He writes for publication, as well as for schooleymitchell.blogging.com
and franchises.blogging.com, in the subject areas of Franchising,
and Technology for the Layman. http://www.schooleymitchell.com,
888-311-6477, dschooley@schooleymitchell.com
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