With the big wave
of new franchises comes the idea that 'buying a franchise means
people have already put a lot of money into marketplace testing and
research.' Yes, that may be true, but there's a 'but' here.
But just because
the prospectus says it will work anywhere and has all these wonderful
testimonials by happy, satisfied franchise owners, does that mean it
will work where YOU want to put it?
No, you don't get
to test franchises out at your location. There is just too much money
involved—by both sides of the desk. You have the right to visit
other franchisees at their locations, ask questions and query
customers at those locations. Yet is your area the same apples to
apples comparasion?
The Case of the Major Market 'Can't
Lose' Hotel Sucking Up Cash—In Spite of 'Wise' Counsel
This case should
send shivers up any entrepreneurial spine.
The owner already
owned a fast-food franchise that was throwing off a lot of cash. The
fact that the franchise was located just off one of the major
Interstates in our region AND on the way to a popular ski area
enhanced an already-popular brand.
Having popular
businesses on the way to major tourist or recreational attractions
allows for an easy strategy to site another franchise nearby. Doesn't
it? After all wasn't that how Wendy's and other fast-food franchises
got their start by buying or leasing real estate near McDonald's?
Our Quad State
entrepreneur thought about his situation for a few years. Here he
even purchased land that was not only nearby his popular fast-food
franchise, it was just off of one of the interchanges of one of two
of our major Quad State interstates.
What other
business could he place there?
It was really a
no-brainer as far as what business. All his internal and external
counsel suggested a hotel would be perfect. He could not only give
travelers a respite away from major cities in our region, he could
tap the ski resort traffic in the winter. A win-win for sure!
He was counseled
not to get one of the low-budget hotels, but really sink some coins
into a solid upper tier property. He settled on a very good 4-Star
property. He figured that his location of being in a small town off
the Interstate could give him the 'large duck in a small pond'
ambiance that his customers were looking for.
But would a hotel
really work at that particular Exit ramp? He gathered what he said
were good real estate pros, franchise pros (not the ones with the
franchise hotel he invested in), paid for traffic studies (at least
in his mind he paid for traffic studies). Every professional gave the
same enthusiastic thumbs-up for his commitment to the 4-Star hotel.
He took the
plunge.
A couple, three
million dollars (in building costs alone) later an extremely handsome
4-Star hotel now stands just off one of the exit ramps of a very
well-traveled Interstate. No turning back now.
His counsel was
correct—at least for some of the winter months when the ski resort
had snow. The place was hopping with folks from the Washington, DC
and Baltimore areas. As of this writing we do not know if our
fast-food entrepreneur turned hotelier ever had a sell-out of rooms,
however...even in the busiest of months.
The first
summer—April to November even--was virtually dead as far as
rooms-sold was concerned. The second summer a little better. He
thought he could see riding out the dry times and then the property
would also be throwing off cash.
The third year the
ski resort even had a hard time manufacturing snow...ergo, not too
many people were eager to travel to the resort. Result? Both a summer
and a winter where he was happy to have the cash from his fast-food
store support his hotel. Did I tell you that it is a very nice hotel?
Oh, I did.
He has now hired a
full time marketing person with a great local background to market
the hotel. Time will tell. The hotel manager told me that it would
sure be great if he could wean the hotel off the fast-food cash
infusions, but he doesn't see a time, as of this writing, when he
could do that.
How Do You View Testing In Your Own
Business Launches?
While I do not
wish to go into what our entrepreneur could have done to think
through building the hotel (that would probably identify him too
closely), I do think we should treat testing our new products and
services with a little more reverence.
I refer to 'little
more reverence' being the condition of not pulling the trigger so
quickly. You have marketing consultants like me telling you that you
need a stream of new products and/or services coming out regularly.
And that is true. But you need to be wise about it.
Those
entrepreneurs among us who truly enjoy shooting from the hip because
of the thrill of hitting a marketplace bulls-eye will save ourselves
a lot of trouble by developing low-cost, no-cost tests.
These tests could
take the form of reports in dry runs (product promised) or wet runs
(product delivered). I've even seen entrepreneurs take to flea
markets and booths at events in order to test products and services.
How to Tell If You Are the 'Shoot
From the Hip' Type or the Wise Entrepreneur
This got to me
when I first read it. I wished I had not taken years for me to learn
to adapt, but the Henry Ford hiring test will give you an indicator
as to which side your tendency lies.
It is fairly well
known that whenever old Henry Ford would hire anyone for an important
position, he would have lunch with them.
If the potential
employee would salt their food—without tasting it first—Mr. Ford
would not hire the person. Period. Why?
Salting the food
before tasting it indicated that the person would implement a plan
before testing it. And if that was you having Mr. Ford buy you lunch,
you didn't get the job.
Everything counts.
Test everything. Invest the time. Enjoy the results.
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First appeared in www.QuadStateBusinessJournal.com
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