Which franchisees treat their franchisees worst
Franchise rock stars: Steffen Kessler, FranchisePORTAL
Hello and welcome to the Rockstars Podcast franchise. My name is Lars Bobach, I am the presenter and host of today's show. Today I have Steffen Kessler as a guest. Steffen is the managing director and co-owner of the FranchisePORTAL. His father founded the FranchisePORTAL 25 years ago. 300 franchise systems are currently represented there. It is there to provide orientation for those interested in franchising how to find their optimal system.
In the interview, however, we talk about the most important tasks that the franchisor has towards the franchisee. At the very end, I ask him what kind of question he would ask any franchise system headquarters. The answer to that is really great, I was absolutely thrilled, he gave a really great answer, so be sure to listen. Before we start the interview, I would like to briefly point out that Steffen has his own podcast, the Franchise Universe. There he also interviewed me about what franchisors should do to keep franchisees successful over the long term, i.e. over five or ten years, and above all in the system. You can also listen to it. Look in the podcasts under Franchise Universum, there you will find Steffen's podcast. We're going straight to the interview now.
Lars Bobach: This is how franchisors should offer their partners lasting benefits.
Stefan Merath's successful entrepreneur
The Harada Method
The interview for reading
LB = Lars Bobach
SK = Steffen Kessler
Steffen, what tasks do you generally see at a system center in franchising?
The most important task of a franchisor is to share their entrepreneurial happiness and promote satisfaction. This is now a very individual type of answer and has a bit to do with my history. I was traveling in Kenya, met great people there and asked myself why they are all so open and courteous, even though they have lived in mud huts. I came back on the ICE at 300 kilometers per hour from Frankfurt to Cologne, I had a culture shock because I looked into the faces of the people here on site.
I chewed on it for a long time, five or six years, and started to think about what is the purpose of existence in the direction of “why”. I came up with these words, also for me as a mandate to share my happiness with others and to promote satisfaction. Because I am convinced that this will make society, that is, we as a community, more satisfied, both those who share their happiness and those who receive.
Then I thought about what that means in franchising? This is exactly my answer now, if you look at it very globally, so franchisors have a wonderful opportunity and task, namely to share their entrepreneurial happiness. In this way, they naturally become more successful themselves because their franchise partners are more successful. You will become successful, happy and satisfied. And that is the global answer with very individual words that are so seldom found in the franchise industry.
Total, I think it's a really great picture what you have there. Even the ICE with 300 kilometers per hour, I can really imagine the culture shock you experienced there. But now it's more practical, now we've painted the big picture, I think that's really nice too. Where do you see the main task of a system center in practical doing now? What should she do?
You should support your franchise partner in what he does on a daily basis. It starts with the concept that there is a concept that can be copied, that the franchisee can copy, that he can apply it and thus serve his customers with a real benefit. We want to support him as the system center. It starts with many guard rail systems, not with the focus on limitation, but on leadership.
The focus maybe even?
Absolutely, yes. For example, support in marketing, if we now break it down to the individual, with bookkeeping, evaluation, combined with benchmarking, with other franchise partners. To bring this together and to play the results back to the franchise partner so that he can reflect and optimize the whole thing for himself, so that he can then get back to the next level, i.e. sales, marketing, accounting. You can still list a few similar topics if you look very closely at the individual subject areas.
I have a lot to do with franchisors and franchisees, also because of my history. The system headquarters are often accused of being franchisees on the one hand, and that there are usually no companies there. According to the motto, they don't understand me anyway, they're not entrepreneurs. What are you telling them?
When it comes to attracting franchisees, there is actually the additional task of taking a very close look at who it is suitable for. Who fits And these are different levels that are played on there. The chemistry has to fit first, of course, but then also the entrepreneurial personality.
We just talked in another podcast episode about what it means to be an entrepreneur. It is easy to see that this entrepreneur, in my opinion it is an entrepreneur and can only be an entrepreneur, who becomes a franchisee, what he brings with him and how he can then shape himself in this guard rail system. Ultimately, he is responsible for his customers and for what he offers his customers, of course for his employees, if he has any.
It's a completely normal company what I build up as a franchisee, but I can simply make use of a brand and a know-how, sometimes patents and similar things. But I am 100 percent entrepreneur.
I agree. Sure, when you say that there are no entrepreneurs in the system headquarters, what should they tell me? Yes, there are people who have actually accumulated knowledge in their specialist area, via the other franchise partners, etc., which they can then pass on.
Or as you call them “guard rails”. Saying, pay attention, set that focus, then you can be successful. It worked for this and that too. It doesn't just have to be entrepreneurial personalities. As an entrepreneur, you can use the service to maximize your own success.
From my point of view, it is actually something that has to be lived in the system headquarters in such a way that it is a partnership on equal terms. It is a franchise community, both sides are dependent on each other and can support each other. The franchisor is just as helpless and lies on its back like a beetle when it comes to expansion, if it didn't have its entrepreneurial partners.
In this respect, sometimes I have the feeling that you can perceive the tendency in system centers that don't get it, they are too stupid for that, the franchisee, like a kind of subordinate being. If there is one setting that is wrong in my opinion, it is this one. It is at eye level and without these franchisees, who are totally embedded in their region, have a network, who really do something there and represent the brand, without them the franchisor cannot really get out of his region. Unless he is now doing a branch system with branch managers, then other problems will arise. The branch manager must also be viewed at eye level, otherwise he will not perform either.
You have already given a good bullet point, good system centers run at eye level. Can you pin it somewhere You just said that you sometimes hear that some of the franchisees are treated like employees. I know that too, I can well imagine. That is not very appreciative and also not at eye level. How do you determine that communication or mutual appreciation takes place on an equal footing?
On the one hand, the conversation with the franchisor himself. You can hear that at some point, at least if it's not your first conversation with a franchisor. On the other hand, I think it is even more important if I take up the position of a potential franchisee now, it is talking to franchise partners. They'll tell me how the world works in this franchise system, what values are conveyed there, how we talk to each other. Also the conversation with the franchise managers, if you ask questions there, how do the other franchise partners do it, etc. I believe that if there is a “look down from above” in the system centralized culture, that will also be quickly reflected in the answers reflect.
Absolutely. Now we have already said that this is what distinguishes a good system, a good system center, at eye level, I hear again and again in the podcast. I hope that many will then also live it. What are the characteristics of bad system centers? What other criteria are there?
I would distinguish between two categories. One is the dubious, which unfortunately also exists in franchising. Not as many as you sometimes think when you look at the media reports, but yes, they are there too, with a very strong focus on how to get money from other potential partners while delivering as little as possible or nothing at all. Then we are in the fraudulent area. Let's ignore that a bit, that's one corner.
The other corner, which is significantly larger and which can also jeopardize the existence of freshly minted franchisees, are those of the unprofessional who are simply not mature enough, not as a person but as a company, to offer support as franchisors.
It quickly becomes noticeable that the processes are not running smoothly, that the system center is overloaded, that the selection of franchise partners is not good, that everyone is taken who is not on the tree at Drei. Just the will to expand, the main thing is to grow. This is a strategy to first build up space so that no competitors can sit on it.
You can argue about whether it is the best strategy now. Nonetheless, I find it very important to pay attention to the franchise partners themselves, otherwise you have to go through a very strong cleansing process afterwards and you find yourself permanently in court. The number of court hearings could also be a measure if you want something that is really measurable.
I can well imagine.
That is also more or less a part of franchising. From a certain number of people who meet and you have contracts, so you can no longer get along. It certainly distinguishes great franchisors when they get through without court hearings, but I appreciate some franchise systems, viewed from the outside, as portal operators, good franchise systems that still conduct court hearings with ex-partners. Ultimately, however, having the conversation with franchisees and the number of ongoing proceedings, insofar as you can find out, would be two points.
You have now said something important. Even the selection of franchisees, they take everything, exactly. If the system is not fully developed, it falls back on your feet very quickly. You may have partly destroyed livelihoods at that moment. By making large monetary investments, it quickly becomes life-threatening. That must be clear to everyone.
Absolutely, the first phase is usually one where you have to finance your living costs yourself or with outside capital. If the scheduled time is exceeded, it quickly becomes dangerous. As a rule, the reserves are then used up.
What distinguishes a good system center from a bad one in terms of daily support?
The willingness to engage in dialogue, the word support is a bit colored from my point of view. Let's say in the "accompaniment" for example. To offer assistance in dialogue with the problems that the franchise partner is currently facing. And in case of doubt also the willingness to take in know-how from external parties, for example, in order to help this franchise partner to the next level.
A spontaneous example would be a personal coach, a coach who works with the franchise partner on beliefs because they limit his further growth. For me, this is what distinguishes a good system center that doesn't necessarily say that I can do everything myself.
At ISOTEC, where you come from, I am well aware that there are a few people in the head office who even have coaching training and who can help out there. Without knowing it, I would say that it is rather rare in franchising. And then to bring in someone from outside and say, the main thing is that you get to the next level, I can support you, here you have a recommendation, maybe the costs will be shared. This is how you can build it up.
If we look at the career of a franchisee, the system gets better and better over time, but the franchisee also has a development and especially at the beginning you are very dependent on the system headquarters. If you are reasonably good at the system center, you can always get started. Helping someone get up when the system is mature and working. But over time, if it's an older franchise system and people are in their 8th to 20th year, then you need them less and less.
That is the permanent benefit. Many years ago I spoke to a franchisor and I remember the conversation fondly. He complained that his franchise partners, that was in the cosmetics sector, that franchisors often terminate the contract after 5 to 10 years, unscrew the sign, screw on their own sign and continue with the same thing. If in doubt, even with the same devices. And then he said, the franchise partners are stupid, not with these words, but that's what it was meant.
From my point of view, the problem is not with the franchise partners, but with the system headquarters, which has not managed to offer lasting benefits. What could that be? We were just talking about the guard rail system. For example, a franchisee does not want to mill their way into Google AdWords in your online marketing world. It's like Chinese to him.
If there is a guard rail system there that has ready-made campaigns, where the franchisee only has to select the appropriate campaigns for his region, define the region himself and his budget, then he has a benefit. And he will still appreciate it 15 years from now, when it is no longer Google AdWords, then it may be a parallel system. This is something, for example, where a permanent benefit can be given.
The transfer of know-how from the head office to the partner is another point, or from partner to partner, offering opportunities to exchange experiences, etc. Benchmarking with an internal intranet, a Facebook system so to speak, where you can see what the other franchise partners are currently doing, which campaign has drawn from whom and how. That would be a different point or, what I have come across several times in the last few months, that is the subject of employee recruitment.
This is a huge bottleneck for many companies and of course also for franchisees. They often do not necessarily know how to go about it, the regularities, such as a letter of rejection z. B. must look. The system center can help a lot here. It can use its market strength so that more people notice when skilled workers are being sought.
At the same time, they can also create a system, for example through an online tool, that supports the franchisee in the entire process. That the franchisee can talk to his assistant about the candidate there, that text templates are already there, that the rejections are legally correct and that the applicant leaves this conversation with a good feeling despite a rejection. It all plays back on the brand and also on the system center.
That is a huge point that the head office can help with. I noticed again with the systems that the communication between the head office and the partners plays a major role. That distinguishes good from bad system centers. Can you give us some examples? Or are there any tools that have proven themselves? I'm also a franchisee, you can tell that the headquarters want to inform, there are a lot of e-mails, but at some point you can't anymore. We all live in a communication and information overload. That is why it is very important to have targeted communication that does not get lost in the mushy things that come in every day.
It is certainly a very big task, which I am not so deeply involved in either. I hardly notice these streams of communication, what is being transported and how. I move in the field of franchisee recruitment up to the signing of the contract.From stories with franchisors, with system headquarters or with individual franchise partners, I know that they really appreciate it when there is a technical system that works in a structured manner and is sufficiently transparent.
I was shown a system from Goalcampus, I don't know whether they are still active, which reminded me very much of a kind of Facebook. There is also a kind of wall, but at the same time with a key figure system, where you can see the best three franchise partners in different categories and yourself and where you stand. The worst are not shown. You only know that if there are 100 franchise partners, for example, the top 3 will be shown.
You can go there and ask questions about what they did to get there. One is z. B. in place 26. I haven't heard from Goalcampus for a long time, I don't know whether it would be a recommendation at the moment. But something like that could be built with the online tools that are available, Pipedrive and a combination with Gmail and Trello or Meister Task. There we are in your world.
Yes exactly. I have a self-management academy, so we use twist. It's like Slack, but a little different. There are a few hundred people in there, it's very agile and structured. Above all, it is very popular because it is nice and easy communication. I could well imagine using something like this between the franchisee and the head office, where the franchisees can act as a moderator among themselves, but also at the head office.
That sounds very exciting.
What I have heard often here in the podcast and never even knew it is a capital participation of the franchisee in the head office, but also, conversely, a share of the head office in the success, whatever the franchisee looks like. Both in monetary terms. What's your opinion?
That's exciting, I can't say anything about the involvement of franchisees in the direction of headquarters, because I have no experience.
There was a system whereby the entry fee was used to purchase shares in the headquarters. I thought the concept was great, because if the head office is doing well, there is also a certain kick-back. A great way to let the franchisees participate in the success of the whole system. On the other hand, I find it very interesting that Frank Roebers from “PC Spezialist”, who once had an interview here, said that the biggest mistake he made was that he was not involved in the success or failure of the franchisees as head office.
He noticed what was happening in the market far too late because the sales were still good, but the people were no longer making any money on site. For example, if you do a pure share of sales, most systems have that. Entrepreneurs can tweak a little on the EBIT themselves.
I can understand. I do not have any concrete examples with this intention that Frank Roebers described there. When you just teased the topic, you spontaneously thought of franchise systems that are basically looking for a new target group as franchise partners, because the interest in founding a company has clearly declined in recent years.
The job market is very attractive for many and we are not the most start-up-friendly country in terms of our society's willingness to take risks. In this respect, franchise systems are challenged to address other target groups. It can be the existing entrepreneur who changes the flag or it can be young people, because they often do not yet have the capital.
There are more and more, I have the impression that the system headquarters are helping them to a certain extent through a kind of shares, that's why I come up with it and he can work the whole thing out for himself. So, as his success increases, he owns more and more of his company. That sounds paradoxical now, but it is. At first he is the managing director, maybe has a few percent shares depending on the capital contribution. Then the company grows and the system headquarters surrenders more and more and he can buy the shares afterwards.
I find the model very exciting. I bet z. For example, among students you will certainly find great people who would be willing to build something like this, but who cannot raise the necessary capital for the entrance fee etc. at the beginning.
Then there is the conversion franchise model, in which the system headquarters first set up the locations completely until the business is up and running. Then, after 6 or 12 months, it is given to a franchise partner. That would be another variant to give people security. As a first step, you can also think about managing director models if they are young and have little capital, but otherwise have a lot of entrepreneurial personality and skills. The constellation as you have now described it is not yet known to me.
I found that very exciting. I think that can also strengthen cohesion.
It fits the franchise community, yes, absolutely.
You are an expert in the recruiting process, i.e. new franchisees.
The job is to make contact between two groups, exactly.
What does this recruiting process or the selection look like in a good system center? You said the bad guys take everyone before they're up because they want money or want to build up. What does a good process look like from your point of view?
Above all, it is transparent for those interested in franchising. It starts at the very beginning with a clear speech in order to be noticed. Good systems then understood that it worked like a kind of ping-pong game. The website alone is not enough, and a portal is not enough to draw attention to one's own offer, but several touchpoints are required and at some point an interested party will contact you.
How does that work with the ping pong game?
During the conversation I often notice that the system headquarters thinks that you could evaluate the franchise portal solely on the basis of the leads that come across, i.e. on the basis of the contacts of a franchise prospect or the website. They think the website is so strong that they don't need any other tools. Or just social media marketing, etc.
I believe it is a ping pong game. The franchise prospect, if only the website exists and he comes across it, but he can't find anything else around it, he may not get in touch. Ultimately, he stumbled upon it somewhere via ping-pong and continued researching.
We just talked about your franchisee story. You too said you surely moved to different pages to find out more before you made up your mind. A good process begins with the realization that where the contact is made, the form that is filled out is not necessarily the only place where the prospect would like information.
Exactly, because what a good recruiting process takes into account is that the franchisee wants a picture of their future. This is what he is looking for, what could his future look like? He doesn't necessarily want to know when the company was founded. I have to reflect this very clearly in the further course of the recruiting process. That is, the first conversation, a phone call in which he can ask questions, in which the most typical questions are answered for him.
Information material in advance, be it through a kind of newsletter sequence, that's how I would build it up. Where I can provide him with information about the franchise system. Because this also increases the willingness on his part to disclose information about himself up to the amount of his equity. This is a key figure that franchisors want very quickly, but which franchisees don't want to give so quickly.
That can also be variable, depending on whether you still ask grandma.
Exactly, or you can borrow money, but for that I have to be convinced of the concept. That’s exactly it, there’s a give and take to the recruiting process, not just at the very beginning but all the way through. When it comes to visiting a franchise partner, visiting the system headquarters, talking to the founder, the entrepreneur who got the whole thing rolling, right from the start, showing a picture, and support, for example going to worry about a location. Without, however, this is a tip for the franchisor to take on a kind of location advisor role themselves. That would have very serious legal implications. Since a neutral authority brings in and only accompanies the interested party with the question of the location, but does not advise or evaluate, otherwise one gets into liability issues.
That on the edge.
But it is the case that a good recruiting process is multi-stage, that you make an effort, get to know each other and sniff out whether you are a good match?
Yes, it is a classic funnel in New German, where you are channeled through the different levels as a prospective customer, but also trust and want to win. Testimonials, live through conversations or recorded, can certainly be very important. From my point of view, showing competence is very important, to say that we are here as franchisors for a reason and that we will give you a concept that works.
We don't have to talk about the financial figures. It is clear that they should be clean and realistic and that the franchisee should also check them critically and, if in doubt, with external help. It's a funnel, a convergence and, from the franchisor's point of view, you have to see how you can keep the effort manageable.
The potential for frustration is of course high if you talk to a large number of people and they jump off or are not suitable. So how can you set up this funnel in such a way that the candidates who do not fit or do not want to fall out with as little effort as possible and you can invest a lot of time in those who look promising.
As the portal operator, we are now trying to do our part by, for example, transporting a contact request with few fields, because the dropout rate is lower if you ask fewer things. But afterwards the interested party is motivated to answer further questions. This creates a kind of response portfolio that enables the franchisor to take a closer look at where he wants to set which priorities in the acquisition process.
We have now also noticed the funnel, opening a large funnel at the beginning. I also looked for employees and asked very few questions. Not even requesting a résumé, filling out a form online, answering two questions, and then there was a flood of applications. Then we went and asked for a résumé.
Last question before we get to the final questions. If you could ask a question from a system center, someone in charge, to find out whether they are doing the job well, which one would you ask?
Please describe your franchisees to me.
Based on this answer, I would try to hear how the system center works, what the values are there, whether people look down from above or at eye level. From the point of view of those responsible, is the franchisee just an extended arm, a sales representative in the field? Or is it an entrepreneur who is also taken seriously as such? Hoping to get an honest answer. If a mask is put on it will be difficult, but I would try to empathize with this question. The more you ask this question, the sooner you get a feel for what is to be read between the lines.
Great question, also a great idea. Steffen, thank you so far. We come to the final questions. Which book has shaped you the most as a person and entrepreneur?
“The path to becoming a successful entrepreneur” by Stefan Merath has shaped me. It brought us to rethink, we redefined our roles in our management team. We are a family business with several family members.
Right now I am enthusiastic about a book recommendation “The Harada Method”. This is currently not available on Amazon, but only on the website of the German counterpart. It's about lean management among people. I am now roughly on page 100 and find it fascinating how he takes it as a management methodology for employees, but also for oneself.
If I have athletic goals, how do I make sure I achieve those goals? How do I define these goals? And then these goals are charged with what is linked to social and personal contribution? What personal gain do you have if you achieve this goal? It looks very holistic and I find it fascinating.
Exciting, comes on my reading list. What would you advise your 25 year old self with all of your experience today? We could also say, to your 22 year old self, it wasn't that long ago for you ...
I was 25 about 10 years ago. Above all, I would advise myself to be open, watch what is happening around you and watch yourself do it. From this there will be some kind of path. I indicated it at the beginning, very memorable experiences for me were my two trips to Kenya about 12 years ago, where we were partly on foot.
After that I had to deal with myself a lot because I felt a kind of imbalance. The journey that I made with authors, with John Strelecky, with Simon Sinek and others, is something that helps a lot in further life. I don't know whether you can simply force it from your head or whether it has to happen with Kenya through some trigger moments like with me now. I can not judge over this.
But that would be it, be attentive to these soft things too and don't become a lawyer because your father is a lawyer or something like that, but what is YOUR purpose of existence. That's what John Strelecky says.
Super, very nice. Steffen, thank you very much for your time, it was really exciting. I wish you and you of course more time for the really important things in life.
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