Franchising: the secrets of a winning franchise operation

by Dawn Gibbins MBE

First Published in Real Business, Wednesday, 25th June 2008

Dawn Gibbins MBE will shortly unveil a revolutionary concept in consumer seamless flooring – Barefoot – to be sold through a national network of franchisees across the UK. We asked her to share her perspective on franchising – and the essential ingredients for success...

Franchising: philosopher's stone or millstone?

The philosopher's stone, so the early mystics and alchemists believed, was a magical substance capable of creating gold. Looking at the published statistics on the UK franchising sector, you could be forgiven for thinking that the stone really exists – it's called franchising.

Just look at what the 2007 NatWest survey revealed:

• The franchise sector grew twice as fast as the UK economy (UK growth of 2.7 per cent compared to 4.9 per cent for the franchising sector)
• The sector was worth a record £10.8bn (up to £12.4bn this year, according to the British Franchise Association)
• The sector has grown 44 per cent in ten years.

What's more, the sector created 7,000 new jobs in 12 months, and 93 per cent of franchises are profitable operations (compared with two-thirds of all new businesses going bust within two years).

And, although the sector is maturing, there is still plenty of room for growth. The Australian franchising marketplace, by comparison, turns over more than $80bn (£38.8bn), representing 12 per cent of the nation's GDP.

Good news all round. But what differentiates the real winners? What's to stop a philosopher's stone from turning into a millstone round the necks of both franchisor and franchisee?

How to make franchising work

Simply having a successful business model isn't enough. What is also necessary is transferability. After all, that's what the franchisee is seeking – a share in the brand values, the marketing clout, the entrepreneurial drive of the franchisor.

In my last article for Real Business, I shared my views on branding (the three most important ingredients for success: branding, branding and branding). The need for the franchisor to be able to demonstrate a proven track record in branding and in marketing is a given. What is not always so apparent is the need for the franchisor to have a transferable culture of success. Which brings us back to my other hot button: leadership.

Leadership has been described simplistically as “getting others to do what you want them to do” (the Alan Sugar school of leadership?). Perhaps an autocratic style of leadership might work within a self-contained business operation, but I don't believe it is easily transferable. My own approach to leadership is “getting others to want to do what you want them to do”. That way, the leader's culture becomes the company-wide culture.

My previous business, the Flowcrete group, grew rapidly to a global network of eight factories and 26 sales offices worldwide. But we could always be confident that everyone wherever they were – from Brazil and the Czech Republic to South Africa and Malaysia – had exactly the same motivations, energy, and commitment to customer service. The company culture had become truly transferable (and self-sustaining).

Now that's the essential ingredient for a real winning franchise operation.

As an interesting footnote, a franchise operation built on a highly transferable business culture is a valuable barrier to entry for competitors – simply because very few people have the necessary leadership qualities!