Published in "THE GLOBE AND MAIL - Canada's National Newspaper" July 9, 1999

Recruits wanted: entrepreneurs need not apply

Trust in employees tops the list of what makes a successful franchisee, according to a study that challenges conventional ideas.

JOHN SOUTHERST
Special to The Globe and Mail

Imagine you could meet hundreds of franchisees. Now name the personal characteristics you believe would separate the dynamos from the duds.

Most franchise recruiters would probably agree with you if you listed words such as entrepreneurial, hard-driving, outgoing and customer-centred. But for the most part, you would be wrong.

A study initially conducted in 1996 for franchise consultants Dynamic Performance Systems Inc. of Toronto -- and since replicated in about 20 franchise systems -- has challenged conventional ideas about recruiting ideal franchisees.

John Michela, a psychology professor at the University of Waterloo in Ontario, and consultant Liane Davey, who was then a doctoral student, discovered that the greatest differentiators among successful franchisees were:

A belief that employees deserve trust, enjoy responsibility and offer meaningful contributions to the business.

An optimistic outlook coupled with a feeling they are responsible for -- and in control of -- their ultimate success or failure.

"The managers who involve their employees were much more successful in the performance of their franchise than those who distrust employees and exclude them from decisions," says Ms. Davey, now a consultant with Watson Wyatt in Toronto.

"It's a question of positive attitude," adds Fred Berni, president of Dynamic Performance. With Mr. Michela, he has refined the original study's questionnaire and uses it to assess prospective franchisees for his franchisor clients. "Do they trust employees to make a contribution or not -- and do they believe they control their own fate?"

Notably missing from the study's list of success drivers was entrepreneurship. "It came out strongly that entrepreneurship wasn't a desirable characteristic among franchisees," Ms. Davey says.

"The component [of entrepreneurship] that seems to be the problem is the independence streak," she says. "Successful franchisees have a strong drive for success without this need for independence."

What's needed is not a streak of independence, the study suggests, but perhaps a dash. A medium level of independence turned out to be the third best predictor of franchising success. Both low and high independence ratings corresponded with lower sales and poorer franchisee performance.

But independent-minded franchisees may simply need greater challenges, says Mr. Berni, who has since duplicated the original results in surveys of about 20 franchise systems in Canada, the United States and Britain. "With [successful] multiunit operators, the scores for independence start creeping up."

A sales orientation, especially with respect to community involvement to raise the store's profile, and a sociable nature that makes the franchisee comfortable when meeting large numbers of people were the fourth and sixth most important characteristics, respectively.

Oddly, the survey found that responsiveness to customers was only the fifth most important characteristic. "Everyone thought this [trait] would be higher rated," Mr. Berni says.

He speculates that if successful franchisees by definition trust their employees, they probably train them to be responsive to customers. This leaves the franchisee free to pursue other business concerns such as administration and local marketing.

The final characteristic on the survey's list was also surprising. The study found that although a strong work ethic belonged on the list, it was not as strongly related to franchisee performance as the other traits.

Ms. Davey says this result may indicate that all franchisees are driven to succeed, so that higher levels of drive are not significant. But in evaluating potential franchisees, she says, "measuring the drive factor is not where you get the bang for your buck in a personality assessment."

To do the study, Mr. Michela and Ms. Davey initially interviewed executives at M&M Meat Shops Ltd. and Country Style Donuts -- clients of Dynamic Performance Systems -- to draw up a list of desirable franchisee characteristics. The researchers then devised a questionnaire to test for these characteristics and administered it to about 100 Country Style franchisees.

Ms. Davey than interviewed Country Style executives again, obtaining three measures of each franchisee's performance: store revenue, a subjective evaluation of revenue based on the store's location and an overall rating. Survey responses were then compared with each measure of franchisee performance.

Franchisors can use the resulting test to select franchisees more likely to succeed, Ms. Davey says, but they could also decide to accept a franchisee and offer training in areas such as customer relations or sales and marketing where the candidate is weak.

While some of the survey's results at first appear counterintuitive, Mr. Berni says, they actually come down to common sense.

"The reason they make sense is that no matter what product you have, you've got to be good with employees, believe in yourself, follow the system, enjoy working with people and pay attention to local marketing. It fits very nicely with what franchise people already know."

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THE RIGHT PROFILE

The following are questions from Dynamic Performance Systems' FranchiZe Profile to determine a prospective franchisee's level of employee orientation, as well as sample responses:

You are developing a new policy regarding customer service practices.

• What steps would you go through before you implement the policy?
• How do you think that your employees would react to a new policy?
• What would you do if there was an employee who did not like it?

Good answers

• Consulting employees is thought of right away.
• Getting employees' ideas about the policy rather than just telling them that there is a new one.
• Belief that the employees would have valuable suggestions.
• Consideration of why the employee doesn't like the policy.

Poor answers

• Doesn't mention consulting employees until you mention it.
• Doesn't think that employees would have any valuable suggestions.
• Feels negatively toward the employee who doesn't like the policy.
• Doesn't ask the employee why he or she doesn't like the policy.

John Southerst, a Toronto-area writer who covers franchising, can be reached at jsouth@istar.ca

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