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Growing up

FFDC addresses how to grow with money


Robert Andersen, president of Mooyah Burgers & Fries.

Cameron Cummins, vice president of franchise marketing and recruiting for Marco's Franchise Services, and Mark Smith, research analyst with Feltl & Company.

Liz Olson of Franchise Times
with a Dilly Bar, a gift
from Dairy Queen's CEO

The luncheon speaker was intended as comic relief in a long day of information overload, and yet, it was humorist Dr. Will Miller who told us all why we were at the Franchise Finance & Development Conference: “Conferences scratch an itch with us because we need connections.” We need the education, the socialization and the connection with like-minded people so we can do out jobs better—live our lives better, the therapist/minister/stand-up comedian said.

There were plenty of opportunities to connect at Franchise Time’s conference in mid-May in Minneapolis.

This year’s event hit the development theme hard and attendees weren’t shy about raising their hands to get more information from their counterparts in the trenches and the pros.

International Dairy Queen President/CEO Chuck Mooty kicked off the conference with a candid talk about Dairy Queen’s past and future. The venerable brand has gone through numerous challenges, such as redefining the chain as a food-centric brand, not just a treat-centric one; and unveiling ways to inspire operators to reinvest back into the system—“not just in dollars but in heart and soul,” Mooty said.

When Mooty joined the chain all the agreements were in perpetuity. “I came in and said that’s not right,” he told the group. But, change doesn’t happen overnight. “You have to be patient and you have to have a team that’s patient,” he said.

Patience, yes, and you also need the ability for your sales team to sometimes say no, said Lynette McKee, vice president of franchising for Dunkin’ Brands. A good franchise salesperson has a healthy dose of common sense and is in it for more than the money. “You want them to do the deal because it’s the right deal,” she said, not because it’s money in their pockets.

“Fair, but firm”—that’s our motto,” McKee said. When a salesperson tells a prospect something senior management has dictated, “you better back them up when the prospect calls you,” she said.

Finding qualified salespeople—as well as qualified franchisees—is all about networking. “The only places I don’t prospect are weddings and funerals,” McKee said.

A panel of three CEOs and a consultant brought “franchise sales to the next level.” “One thing we bring to the table is that we’ve all survived our mistakes,” said Michael Seid of Michael Seid & Associates, the moderator.

Steve Greenbaum, president and CEO of Global Franchise Ventures, franchisor of PostNet, said that while it’s easy to pontificate about what franchisors should do, “the reality is that people need the sale.” While there are a variety of tools available to help franchisors select the best franchisees, such as profiling, “it’s a good start, but it’s not the end-all.” Sometimes it’s a gut feeling, and sometimes, such as in PostNet’s case, it’s having “focused people on the ground” as area reps “that create opportunity we wouldn’t normally have.”

The Internet has also changed the way companies sell franchises, and the expectation is that a company representative will get back immediately to anyone filling out a query online. “A lot of Internet searches are taking place at one, two, three in the morning and while I want to be first to the door, I’m not going to be calling them then,” said Paul Wolbert, vice president of U.S. Lawns.

According to more than one expert, a relationship has be formed before a sale is made. “You need to create an emotional connection to start the sales process, then build trust. You can’t be in it just for you,” said Tariq Farid, CEO of Edible Arrangements.

That same trust needs to extend to the franchisor’s staff, too. Kenneth Larson of Slumberland said his company ranks its mission and values before its profits, so when they had the top salesperson in the company acting unethically, they had to let him go, or the rest of the company would lose their trust in what they stood for. The audience applauded this action.

Three franchisors who made Franchise Times’ Fast 55 list compiled by FRANdata—Jeff Thames, COO of Anytime Fitness; Joanna Meiseles, president of Snip-Its Corporation; and Tina Kuna, cofounder of Dream Dinners—talked about how they grew their young companies so quickly.

Kuna began to franchise because of demand. “The franchise process took us twice as long as we thought and cost twice as much,” she said.

The other problem with young franchisors, said Meiseles, is that “when you start out, you’re selling a dream because you have no data to base it on.” When prospects call new franchisees, they’re still struggling to get up and running so their testimonies aren’t that encouraging to others, she added. “We have mature stores, now, so we can show what they can expect to make,” she said. “Now we’re not selling a dream, we’re selling a reality.”

Bill Killion, a litigator with Faegre & Benson, wants franchise sales people to stick to the Uniform Franchise Offering Circular. “It’s your bible,” he said. And, enough of all that touchy-feely stuff: “It’s not a partnership, it’s not a marriage, it’s not family. (Franchising) is a business relationship.”

And, less is more. When a salesperson is explaining territories and the prospect looks at them with big eyes and says, “so you mean you can put a unit right outside my territory?”, say “yes,” Killion advised. Not, “yes, but we’ve never done that,” just say “yes,” because “you don’t know what they’re planning upstairs.” It’s the “yes-buts” that can come back to haunt you on the witness stand, he said.

“Deal with the issues now, rather than in two years (when you get sued),” co-presenter Brian Schnell of Faegre & Benson said.

Schnell wanted to find a way to tie their development talk into the second theme of the program—finance. “Our finance component is about saving you $200,000 in legal fees by avoiding lawsuits,” he said.

A stronger link to the finance program could be found in the panel titled Financing Programs: Your Secret Selling Tool to Closing the Franchise Sale. It reinforced the importance of the 7(a) and 504 Small Business Administration lending programs in providing franchisees—particularly those just starting out—access to capital. Moderator Mark Siebert began with an account of a franchisor that saw its closing rates jump more than 30 percent after it instituted a comprehensive franchise finance program and put itself on the SBA Franchise Registry maintained by FRANdata.

One conference attendee asked how franchisors could better assuage a common franchisee fear that financing might be out of reach. The panel responded that with lending markets as competitive as they are, most franchisees shouldn’t have a problem. More systems with a good track record, SBA loan applicants generally require little more than a 20 percent cash infusion (at most), a FICO score above 650 and a pulse. Panelists also recommended advising would-be franchisees to begin conversations with lenders very early in the process.

Accounting and Internet-driven, franchise-buyer behavior rounded out the day of education. But, as always, it was the networking in the halls and at the cocktail receptions and dinners that cemented the connections. After all, as Dr. Will, the luncheon speaker pointed out, we all need connections.

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