Words of wisdom from David Barr on building a successful franchise operation
One of my favorite parts of the franchise industry is being surrounded by so many amazing entrepreneurs and innovative leaders. Whenever I have the opportunity to meet with them or hear them speak, I seize it. I have been inspired by the industry’s best. I have learned from franchising’s pioneers and taken their advice. One of the most influential franchise leaders I have had the privilege of knowing is the great David Barr.
When I heard Barr’s talk at Springboard 2021, a Philadelphia event for emerging franchisors, I thought to myself, “every franchisor should hear this.” Not only should every franchisor listen to his speech, but they should also bookmark it to use in the future as they grow. Barr’s hour-long presentation was loaded with information that all franchisors should consider a gold standard for building a successful franchise operation.
David Barr is a friend and a major force in franchising. His franchise industry credentials are impeccable: He’s a multi-unit franchisee with KFC, Domino’s, Capriotti’s, and Spice & Tea Exchange. He is board chairman of Your Pie (fast-casual pizza franchisor) and on the board of the franchisors Capriotti’s Sandwich Shop Inc., Chicken Salad Chick, Dogtopia (dog day care), Domino’s Pizza – China, and Outwest Restaurant Group (a franchisee of 89 Outback Steakhouse locations).
Here is the video of Barr’s 2021 speech. This information is timeless so it will be relevant for years to come. I have also included a summary of the key points from the speech below.
Building for the average franchisee
I have been working with franchisors for almost 15 years. This one piece of advice seems so obvious but is not always followed. Barr says to “build your franchise system for the average franchisee.” I can’t stress enough how important this is. I see many times franchisors are focused heavily on their top-producing franchisees and wondering why all their other franchisees aren’t succeeding in the same way.
As a franchisor, you created a system for someone to follow and every operator and every location is different. You can’t have the same expectations for your top franchisee as you do for all your other franchisees. Your top franchisee may be in the most prime area for your brand, he may be a better manager or may have the best staff. Too often franchisors build a system that is designed for the perfect franchisee. When average performance occurs, the franchisor blames the average franchisee for disappointing results.
I recently had a franchisor tell me, “I want my franchisees to live in mansions, not townhouses.” So, if you want the majority of your franchisees to live in mansions, build a system that enables the average person, in the average location with the average staff to succeed greatly and “live in a mansion.” That’s how you will strengthen your entire franchise system.
Creating the right franchise system
In growing a franchise brand, Barr said many emerging franchisors concentrate on pursuing multi-unit investors, which Barr considers a mistake if the franchise has fewer than 50 units. The correct course is to create the right system, which in turn will attract the right people.
Barr explained once again that the “right system” is right for the average franchisee on an average day with an average work ethic.
A good system will ensure predictable cash flows for an average franchisee, he said, and your company’s valuation will be based on that predictability. To get there, franchisors must forward-invest, Barr advised. To grow brick-and-mortar franchises, you’ll need to hire experts in real estate and construction. If it’s a service business, the franchisor must forward-invest in training and have ample field personnel. Forward-investing is a long game, an “endurance test,” Barr said, one that requires capital upfront to achieve the desired income levels later.
Intellectual capital
Barr said franchisors often set a goal of 100 units to reach their profitability goals, but he pointed out that 3,200 franchises file franchise disclosure documents each year and only 16% meet or beat that threshold. A good half of the lagging 84% have the capability to reach 100 units, he said, if they possess adequate financial and intellectual capital.
“I would contend that intellectual capital is more important than financial,” Barr told Springboard LIVE 2021. People with the right skills in the right place will attract the necessary capital. “There’s a lot of financial capital chasing deals in today’s world,” he said.
Corporate as a franchisee support center
The corporate headquarters of a franchise is the support center for franchisees — they’re the customers, Barr said. The leader of the franchise must not allow HQ workers to complain about franchisees, saying things such as, “I wish we had better franchisees.” He calls that type of mindset “a cancer.” Everyone involved in support should adopt a service mentality and have a positive attitude.
Once several franchises are up and running, Barr identified a tendency for the CEO to stay in the weeds. Huge error! The CEO must get out in the field and be a leader by listening to understand, leading by example, leading via weekly and biweekly phone calls, and by demanding that others at corporate do the same, he said.
Franchisees will speak the truth, Barr said; at corporate, employees are more likely to say what the boss wants to hear. Even if franchisees tell you something that’s perception and not fact, their views must be validated. You must respect and honor them as members of your franchise family, treating them just as you would a sibling, spouse or other beloved family member, Barr said.
Aim for franchisee engagement
Franchisees must be engaged. Barr readily conceded that setting up an engaging culture within a franchise is more difficult than with other types of businesses because franchisees are not employees. You can’t tell them to “suck it up and do it,” he quipped.
It’s easy to evaluate engagement. If franchisees aren’t attending company webinars and conventions, they’re not engaged and they’re not going to comply with the system. And system compliance — following the proof-of-concept successes developed before franchising began — is essential. You get them engaged by creating a nurturing, respectful, welcoming environment, one with people who are understanding and eager to help.
When an emerging franchise has company stores and franchises in operation, the CEO walks a fine line when deploying talent. Barr said if there’s the best person running the company stores, you may need to hire an equally talented individual to oversee the franchises. Having one person do both, three days here and three days there, doesn’t work — that “best person” in your organization will get fed up and quit. So you can’t scrimp on talent for either operation, Barr said, even if it means diverting corporate revenue to further franchising goals. So again, this feeds his assertion that people take precedence in achieving success.
Franchisors must find and exploit their sweet spots
For growth, franchisors must find and exploit their sweet spots, Barr stressed. This is the area or areas in which they are different from others, exceed expectations and create value. So “get crazy-focused on it,” he said, and know what to say no to. Don’t chase every shiny new object that’s dangled; stick with sweet spots and realize that you face a long, steady march to achieving 100 units.
Be open-minded about improvement, too, of course. Barr suggested that franchise leaders step back for maybe three days each quarter to examine ways to upgrade. The process isn’t that complicated, he said: Assess what’s working (do more of that) and what isn’t (do less).
Hire the right franchise development team
To those ends, a growing franchise may need specialized talent. Start-up companies usually launch with a team of hardworking generalists, people whose knowledge is spread far and wide but maybe not so deep in areas where an aggressively expanding franchisor needs a specialist, whether that’s marketing or supply-chain managers or something else, Barr said. This usually means adding to the payroll by finding a person with the skills to drill down and meet challenges.
He also said that if there are any incompetent jerks on staff, get rid of them. Always hire for competence AND likability to ensure you your goal of a welcoming, servant-focused culture.
Score more points for people — generalists and specialists and likable employees — being crucial to success.
Franchise leadership checklist
Barr went on to say that getting the right people in the right places is one of five crucial tasks for every leader:
1. Create vision (with quarterly or annual tweaks to the vision).
2. Provide resources (people, money).
3. Break down barriers.
4. Hold people accountable.
5. Be cheerleaders (with these last two objectives kept in balance). If your franchise is large enough, Barr said, middle managers can hold people accountable and the CEO can concentrate on cheerleading.
Barr further stated that when leading a small franchise system, something like 20 units or less, you must wear two important hats. The first is being a beacon who illuminates your vision, setting direction and infusing a sense of purpose. The second is being an architect or integrator who formulates the systems, structure and culture to establish conditions that facilitate disciplined execution of the vision while creating value.
He issued the following caveat: Many franchise leaders slipped into a reactive mode because of the Covid-19 pandemic. But he warned that they can’t stay stuck there – they must wear their visionary hats or stagnation will set in. Instead, Barr said to teach your people to solve their own problems so you can keep wearing that visionary hat and look out for the future of your franchise.