As an entrepreneur, we often times don’t need an alarm clock. Our adrenaline is running higher than a typical person’s might and we generally are under pressure….most of all directed from ourselves, but none-the-less, we are driven by things like paying the bills, upcoming payroll, rent and other obligations that associate with business ownership. It is this line of thinking that often takes precedence when discussing franchise development and whether the franchise expansion model makes sense for a business. Often, the discussion starts with something around the topic of “I’ve hired so many people who haven’t worked out, they just don’t seem to be motivated to go sell or do their job the way I want them to.” We’ve all heard of the 80/20 rule when reviewing performance where a large percentage of the productivity comes from a small percentage of your staff. Hiring is difficult regardless of industry or business, even more so in a time where generations are defined by laziness and entitlement characteristics, it’s understandable why you would consider giving up sometimes and just doing everything yourself. Of course, that’s not the answer, we need to continually focus on scale and leveraged growth. When opening the discussion around whether to franchise a business, the question certainly is directed to what’s the difference going to be from an employee vs. a franchisee? Skin in the Game is an odd saying in some ways, but it also is incredibly simple and has a great deal of logic behind it.
Someone who invests in something is going to care more for it than a person who is handed an opportunity. The “Dutch Disease” is one example of the downside of human-nature’s inability to carry respect for wealth or items which are not earned, Franchising is an example for the positive side of this equation. A franchisee makes the entire initial investment into the business they are starting, which many times could be in the millions, certainly in the hundreds of thousands of dollars. This is Skin in the Game from a financial meaning, when someone puts enough money into a business, they immediately develop a sense of ownership, pride and willingness to do more to make the franchise model succeed. Franchisees tend to be more successful than employees or managers by a large margin due to the investment they have made in the business and the financial commitment it takes to get a franchise open.
The second definition of Skin in the Game relates to the franchisee’s commitment to focus. Many times, both entrepreneurial franchise buyers and new franchise owners tend to bite off more than they can chew. When you franchise your business, during the franchise sales and recruitment process, you certainly have the opportunity to choose who you grant the franchise opportunity to. Some franchise investors will make poor business owners while others will be exceptional, it is your responsibility during the sales process to qualify and sell your franchise to the right person. A franchisee who has skin in the game is committed to focusing on the franchise model. They don’t invest in several businesses at one time, keep their current job while they are operating the franchise business and they certainly don’t hire someone to run the business before they work in the operation themselves. They jump in with both feet and dedicate themselves to the success of the franchise model.
Franchising can be a powerful expansion tool when managed well. Good franchisees work with the commitment, passion and energy that a business owner has. No employee can have the same dedication to their trade as a franchisee who has Skin in the Game.
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