Franchising is the best thing that ever happened to me in terms of financial freedom and personal development. However, I made plenty of mistakes along the way and I would like to share three important things that I have learned that have made me a successful franchisee.
Look up: One of the major lessons was during the start up phase. My wife Avril and I were trying to really understand the technical aspects of our business. Like many new franchisees we spent seven days a week working in our business, rather than working on the business.
The problem was that we were stuck in the business and this meant that we could only put out fires rather than be strategic and grow our business. The lesson was to work on the business rather than in it. To do this we invested a great deal of time into empowering our staff and putting in place our management systems, policies and procedures.
The second major lesson we learned was that we were focusing too much on building sales and not enough on costs and our profit and loss (P&L). This meant our labour and cost of goods (COGs) were too high and this reduced our profit.
Initially we were not concerned by this and saw sales building as an investment. But we soon realised that we could not sustain this type of expense long-term. The sales growth did not compensate for the labour expense. This was when we started to learn about productivity and profitability.
Measure and manage: It is critical to measure everything and keeping a close eye on a day-to-day basis is crucial. To get on top of things and make our business profitable we would assess our sales, labour, promos and COGs on a daily and weekly basis, we also would look at monthly and mid-monthly P&Ls, as well as quarterly, half yearly and annual P&Ls.
The old adage ‘what gets measured gets managed’ rings true; without measurement of the business it is not possible to manage it effectively.
The third major lesson we learned was the importance of planning and making sure our business was well capitalised. The most prominent reason for business failure is that the business owners quit before they allow themselves enough time for success.
Longterm results: Anticipating immediate results in any business is a recipe for failure. Expecting immediate return on any investment is unrealistic and makes for an unhappy and unproductive business owner.
Luckily when Avril and I started our franchise coffee store in Oxford Street, Sydney we banked for six months of loss until the business broke even. It was a smart move; that’s what it took.
Finally I believe the key for us has been having a dream, working in partnership and most importantly having the right attitude.
One reason why many businesses fail is simply giving up. The power, and the decision to do so lies with us, so it is important to have a good support network and ensure that you invest money and time into yourself through training, coaching and personal development work.
Tony Melhem is FCA deputy chairman, chairman of National Franchisee Forum, founder of Coco Cubano and a multi national award winning franchisee.