Brad Sugars: How to build a better franchise

According to recent research by Statistic Brain, nearly 50 per cent of businesses fail before their third year.

Brad Sugars, founder and chairman of business coaching firm ActionCoach. Picture: Contributed
Brad Sugars, founder and chairman of business coaching firm ActionCoach. Picture: Contributed

Of those most likely to fail within the first five years, transportation, utilities, communication, information and retail businesses top the list. According to the research, businesses in these industries fail due to a lack of knowledge about business and financial management.

In other words, it isn’t down to neglect or the owner’s lack of knowledge about the industry, but the owner’s lack of knowledge about business. Most likely, these are also people who are so good at their trade, they misguidedly believe that they should own a business in that field.

It’s important to remember, when embarking on the road to entrepreneurship, the budding entrepreneur is no longer in the “business” they thought they were in. At its very essence, successful entrepreneurship is about the art of good business, not excelling at a particular trade or profession.

If planned properly, franchising is a model that provides the framework for good business across any sector. The key reason why I advise novice entrepreneurs to consider buying a franchise as their first, second, or even third investment opportunity, is that the system for success is already in place. The goal then, is for the business owner, or franchisee, to work as little as possible at their trade, whether it be a coffee shop, a plumbing company or construction business, and instead focus their time running the business. We have all heard the term “working on the business rather than in the business” – this concept is at the heart of franchising.

Here are three useful tips to get you started on the road to setting up a successful franchise:

Build a successful business model

As a business coaching firm, ActionCoach is dedicated to the mission “World Abundance through Business Re-education,” meaning we envision a world of abundance, where business owners worldwide have the knowledge and gain the expertise to run a successful business that is self-sustaining in the long-term. This can only be achieved by creating a model that allows anyone who has the capital to invest and the business acumen to run the business.

This is why I discourage people to get into a business that is near and dear to their hearts. This may sound counter-intuitive, but if cooking or haircutting are what you enjoy doing, and you have the talent, investing in a restaurant or hair salon will likely result in buying a job, not a business. Why? Because the tendency to do everything yourself is great. Nobody can cut hair better than you… no one can bake a better cake. You won’t become successful by doing the haircutting or baking yourself. It is only when you get the right people to execute a good business model that you will achieve the goal of “ever more with ever less.” In other words, your business essentially runs itself, and you spend less and less time—your most valuable asset—doing the work of the business, whilst reaping the rewards of your original time and capital investment.

You are in the franchising business, not the dog-grooming business

Just because you love animals does not mean you will be able to run a successful dog-grooming business. Just because you love to workout does not necessarily mean you should own a gym. If you enjoy cooking, and your friends and family compliment your spot-on recipes, does that necessarily mean you should open a restaurant? No. Once you get your mind wrapped around the fact that you are in the franchising business, regardless of the industry, then, and only then, are you on the right track to building a successful franchise.

80 per cent of franchising is about relationships, not systems

Most prospective franchisors believe that most of their time should be invested in creating the system – the model that works, as described above. Whilst it is essential to have a working business model – hence, the right systematization in place – that is only a part of the job. Cultivating relationships – networking, getting the right team together, customer relations, the right coaching, the right suppliers – will ultimately determine whether you can build a successful franchise.

To learn more about the art of franchising and entrepreneurship, we’re hosting the UK leg of our Billionaire Tour at the Marriott Hotel Glasgow on Wednesday 16 November.

• Brad Sugars is founder and chairman of ActionCoach