A couple of months ago, I was approached by a New Zealand company I'd never heard of before. Then I found out they operate across more than 100 different locations globally, have 600 employees and are a world leader in their field. Despite being pretty much unknown outside their specialist field.
The reason my client likes to fly under the radar, the CEO told me, is that they prefer to blow their clients' trumpets, not their own. They are, after all, a service business which helps their clients to provide better service - and consequently make more money.
It sounds like a winning formula. When I spoke to one of my client's clients, he said my client had shown him how to make $150,000 per year more than he'd been making before. At just one location. And by doing nothing more than what he'd been doing before. He called it "money for jam".
This is the key to my client's success.
They don't charge their clients for the services they provide. Instead they pay their clients for the right to charge their clients' customers. And they provide their clients' customers with the most innovative and professional services of their kind in the world. Is there a better business model than that?
Yes, there is. It's called the "underdog" model. It's something New Zealanders do very well because when we expand overseas, our competitors there don't regard us as any kind of threat because of course we're only from New Zealand. Where? Exactly. Our competitors don't regard us as any kind of threat until they recognise that we do what we do better than they do for the clients we do it for which are the same clients they used to have. Then and only then they see us as a threat.
Which is exactly what has happened in my client's case.
It has happened before with other New Zealand businesses, organisations and sports, most recently with lamb and timber exports to China. New Zealand is now the world's biggest exporters in these commodities to the world's largest market. Who knew?
Who had heard of Sir Edmund Hillary before he conquered Everest? Who had heard of Ernest Rutherford before he split the atom?
My client has only one problem.
They're world class in every way except one. They run their own business operations in Australia, Europe and North America. But in several parts of the world they've found it makes better sense to work with local business people - people who have the right connections, who know the right people to get things done. In those parts of the world, they have recently established franchises. And they've tried to manage those relationships as they manage their own company-owned operations - through their existing management team.
Unfortunately, that hasn't been working so well.
In almost every case I've seen where an established company has tried to manage its franchisees by stretching its existing infrastructure to meet their needs, there have been problems. Franchised businesses are different from managed businesses. Franchisees' needs are different from managers. Members of the company's management team don't really understand this, and see franchisees at worst as an intrusion, at best as an added chore. Despite the best intentions, franchisees quickly pick up on this and the relation begins, slowly but surely, to sour.
My brief in this case, as it has been in the past, is to not only turn this relationship around, but to establish an innovative yet practical franchising platform for future partnerships as the company expands around the world.
How have I achieved this in the past?
How will I do it this time, if I can?
There is no single answer. Every situation and relationship is different. But I use a simple three-step approach to finding answers. First present yourself as a neutral third party, an objective consultant who uses best practice and analysis rather than judgements to determine the ideal strategy going forward. Second, don't get caught up in relationship issues between the franchisee and franchisor - simply listen to each party and then work to balance the needs of them both. You're not there to mediate or negotiate, simply to consult. And third, don't think that you can solve all the franchise relationship issues and create a platform for an idyllic relationship that will carry on indefinitely into the future. You can't, and it won't. Because the world is changing so rapidly, and the franchisees' needs will be different in different parts of the world, you need a franchise agreement that doesn't try to set in concrete specific obligations, but attempts to establish the rules of engagement, a kind of memorandum of understanding, for how the parties will work together, even when circumstances change. Tom Peters in his seminal book In Search of Excellence called this approach "simultaneous loose-tight properties". For this you need a new kind of agreement - not a traditional franchise agreement, but what is known as an "umbrella" or partnership agreement.
I'll keep you posted on progress.
Article by Robin La Pere, No Ordinary Business and Franchise Consultants
Contact me at email@example.com.
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