If you’re ‘entrepreneurial,’ forget franchises

But the first mistake is thinking that entrepreneurs and ideal franchisees have much in common…What franchisors are looking for are intrepreneurs, not entrepreneurs. Intrepreneurs are self-managers, but they like to work within guidelines in concert with other people.

The Globe and Mail
May 8, 1995


If you’re ‘entrepreneurial,’ forget franchises
John Southerst

Thinking about buying a franchise? It’s a thought that occurs to many a wage slave: “I’m really the entrepreneurial type. A franchise is a quick way in.”

But the first mistake is thinking that entrepreneurs and ideal franchisees have much in common.

Just ask Mac Voisin, president of M&M Meat Shops Ltd., a chain of 135 retail outlets based in Kitchener, Ont. M&M does psychological testing on prospective franchisees – and weeds out those who show strong entrepreneurial tendencies. “True entrepreneurs will die of frustration in a franchise system because they want to do everything their own way,” Mr. Voisin says.

Instead, he looks for team players. “I need someone who understands the importance of developing a brand name with consistent products and standards, and who truly want to work within a franchise system.”

Mr. Voisin’s view is that business investors have to be aware of this tradeoff. Entrepreneurs generally face long odds: Only about one in five survive after five years, according to most estimates. But whether they soar like eagles or limp along like lame ducks, they do it their way.

By contrast, franchisees are in something of a strait jacket. Much of what they do is dictated by the franchisor, who is selling a formula that supposedly has worked for many others. But the chances of making a go of a franchise are relatively good – approximately four of five survive after five years.

For Mr. Voisin, would-be franchisees fall into the two categories: either true franchisees or entrepreneurs. The first red flags come up in conversation, usually in the form of questions: Do I have to open on Sundays? Can I bring in some of my own products? Do I need to wear your uniforms or can I design my own? “They’re already trying to change the system,” Mr. Voisin says, “and they’re not even a part of it yet.”

These questions may mean that the applicant doesn’t understand the concept of retail franchising. The hours of business, the look of the store, products and services and even the promotions and advertising are usually carefully choreographed by the franchisor to give consistency and broad appeal.

A franchisee often has to commit to buying supplies exclusively from the franchisor, usually at a markup. The franchisor may not be the cheapest supplier available, but that’s too bad. When the franchisor gets rebates from suppliers for bulk purchases, there’s no obligation to share the riches with the franchisees.

There may also be pooled ad funds, where franchisees contribute a percentage of sales to a general fund. According to most such contracts, the franchisor can spend these funds any way it sees fit. And doing your own promotions may be strictly forbidden, much less setting your own prices. Do you still feel like captain of the ship?

If you flinch, and Mr. Voisin suspects you are an entrepreneur, he’ll probably ask you to take a personality test to determine the strength of these tendencies. The test, administered by consultants Dynamic Performance Systems of Toronto, consists of about 400 questions and takes two or three hours to complete.

The test asks applicants to what degree certain words and phrases apply to themselves personally. For instance, does “react quickly” apply to you definitely, moderately or not at all? What about “impulsive” or “easily hurt by criticism?” Certain patterns begin to show up.

What franchisors are looking for are intrepreneurs, not entrepreneurs. In personality profiles, entrepreneurs tend to be highly independent, take a lot of risks and don’t need anyone to manage or get them fired up. Intrepreneurs are self-managers, but they like to work within guidelines in concert with other people.

“Intrepreneurs can be creative within a structure,” says Fred Berni, Dynamic’s president. “The entrepreneur needs to define his own structure.”

Mr. Voisin estimates that about 30 per cent of M&M’s applicants fall into the entrepreneur category and don’t belong in a franchise system. Nonetheless, he’s the first to admit that entrepreneurs and “true franchisees” share certain characteristics. The most obvious is the willingness to bring new ideas to the table. But franchisees have to be patient enough to let their ideas percolate through the system and not run out and do it themselves.

“We believe we’ve always been good listeners, but we want to make changes chain-wide. We don’t want anyone behaving like a lone wolf in his own store.”

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