Run a franchise, only if you're a good follower
Greg Lange of Sunbelt Asia (Thailand)
explains what it takes
By Jon Fernquest |
Today's Bangkok Post business section has an interview with Greg Lange, managing director of Sunbelt Asia, a company that buys and sells businesses around the world
The topic of the interview is what it takes to run a successful franchise, with the most important point being:
Franchising is not entrepreneurial
Characteristics of successful franchise business owners:
1. A good follower.
2. A "yes" person.
3. Accepting that the final say lies with the franchiser.
4. Not so independent.
5. Willing and able to learn from others.
6. Have a thick skin.
7. Able to accept and act on criticism.
Characteristics of a successful entrepreneur:
1. Independent.
2. You are your own boss.
3. Think out of the box.
4. Tell others what to do.
Here is the article in full:
ENTREPRENEURSHIP
Mismatch between expectations and reality affects franchising, says broker
NINA SUEBSUKCHAROENTuesday June 24, 2008
Franchising is struggling in Thailand because most Asian businesspeople have difficulty transforming themselves into good followers, said Sunbelt Asia Company managing director Greg Lange.
The company, part of the international Sunbelt business brokerage group, saw its gross sales grow by as much as 80% last year. Business transfers and brokerage are still its main income earners.
The accepted view that owning a franchise means you are your own boss is not completely correct, said Mr Lange. Ultimately, the final say lies with the franchiser.
"They are going to be coming out and checking up on you month to month and giving you a report and there is always something that's going to be wrong," he says. "You have to have a thick skin. You have to be a yes person; you can't really think out of the box because you have to follow the system."
Naravadee Waravanitcha, Mr Lange's wife and business partner, agreed that a good franchisee has to be a good follower. "You cannot be a good entrepreneur, maybe if you are too good an entrepreneur then you are not a good franchisee because you always have your own ideas that you want to implement but in order to preserve the brand, preserve the identity, you have to follow the system."
The Siam Paragon branch of Sunrise Tacos is one of the businesses launched by Bangkok-based American entrepreneur Greg Lange.
Mr Lange added that Ms Naravadee, who owns a few franchises including Squeeze, Spicchio Pizza, Chester's Grill and Coffee World, had some difficulties initially.
But franchisees have to adjust because franchisers do not like to be told what should be done because they have already conducted research and development and made those very mistakes.
Franchisers are very selective; for example Atlanta Bread went through 6,000 names before selecting a candidate. "You know that is a lot of people to interview, a lot of due diligence. So there are a lot of people who say, 'Hey, I want to buy this franchise' but the franchiser is very picky."
Sunbelt Asia has met several people who have franchises in other countries but after failing to find the right candidate, the master franchisee decided to launch the business here on his or her own.
"The reason why is that if you get the wrong master franchisee in an area, it's kind of scorched earth; you can never go back to that area," said Mr Lange.
Sunbelt Asia was launched in Indonesia by a young couple with his company having the master franchise rights for all of Southeast Asia.
"They went after huge transactions such as hospitals and didn't really follow the main street business that drives small businesses. Now when a potential franchisee looks at Indonesia five years later, they say, 'There was a Sunbelt Asia at one time in Indonesia'."
Mr Lange also ran into problems when helping the Subway sandwich company relaunch in Thailand with almost all of the 350 applicants backing out when they realised that there was a Subway here five years earlier that had failed.
A handful of people were interested in going to the next step but the franchisers felt they were not suitable.
His wife suggested that Subway was a good product and was worth the risk of opening an outlet. The launched the business and today are major shareholders in six locations.
Another obstacle dragging down franchising in Thailand is the high cost of internationally famous franchises.
"We heard a lot of rumours that this group or that group is going to bring in this product," said Mr Lange. "Because of the huge investment and the selection criteria the franchisers implement, you don't see that many international franchises have come to Thailand lately but you are seeing franchisers themselves are investing in this country."
Examples of this include Starbucks, which is expanding on its own after having worked with a franchisee, and Mos Burger which has outlets at Central World and Siam Paragon.
Another emerging trend is that some Thai businessmen have started launching their own franchises. Mr Lange and his wife are examples of this with Sunrise Tacos. The eatery now has four locations after opening six months ago.
Sunbelt Asia is working on 20 such business transfers.
"At the end of the day the person who has the advantage is one who is looking to purchase an existing business that has a system, just like a franchise," said Mr Lange. "Good businesses are being transferred because in a bad economy they are looking for a proven system; they are not going to take a gamble on something starting up."
Franchising is big business in the US with Mr Lange saying that one out of every three transactions is done by someone who is involved in franchising.
While food is mainly thought of in franchising, real estate firms and service-oriented businesses such as plumbing and hairdressing exist in the US.
(Source: Bangkok Post, business, NINA SUEBSUKCHAROEN, page B10, 24-06-08, temp-link)
Vocabulary:
franchising - buying the rights to a proven system of doing business (See Wikipedia)
a franchise - the rights to set up a proven kind of business in an area
a franchisee - a buyer of a franchise business
a franchiser - a seller of a franchise business
master franchisee in an area - the person with the rights to run the franchise business in the area
master franchise rights for all of Southeast Asia - has the rights to run the franchise business in all of Southeast Asia
the final say lies with the franchiser - the final decision is made by the franchiser
an entrepreneur - a business person who starts new businesses (startups), that may be risky because untried and unproven, passion for success drives them to organize available resources in new and more valuable ways (See Wikipedia)
entrepreneurship - the practice of starting new businesses or revitalizing mature businesses, in response to identified opportunities, a difficult undertaking, as a vast majority of new businesses fail (See Wikipedia)
entrepreneurial (adjective) - the activity requires the skills of an entrepreneur
what it takes - to succeed, what you need to do, or the abilities and personality that you need
independent - separate from others, not connected, influenced, or affected by others
not so independent - not very independent
a mismatch between X and Y - X and Y do not go well or work well together
a mismatch between expectations and reality - when what people expect is not possible to achieve
a broker - a person who sells things for other people
transforming - changing
a good follower - a person who does a good job of following the intructions of others (opposite of a "good leader")
Sunbelt Asia, Sunbelt business brokerage group - the largest business brokerage firm in the world, founded in 1978, a business brokerage network with 300 offices in the US and 30 foreign countries, broker the sale of approximately 4,000 businesses each year (Source)
gross sales - sales before expenses are subtracted out, sales revenue
business transfers - when a business is sold to another owner
business brokerage - a firm that sells businesses for clients
you are your own boss - have independence in decisionmaking
have a thick skin - can take criticism, without getting angry and upset
a yes person - a person who is more likely to agree and say "yes," than find problems with an idea and say "no"
think out of the box - think creatively (differently from the way that people normally think or solve a problem)
implement - executing a plan, making sure that something that is planned actually gets done (See glossary)
identity - who you are, the characteristics that make you different from other people (for example, "khwam ben Thai" means the identity of being "Thai")
preserve the identity - making sure the identity does not disappear
Research and Development (R&D) - researh in a company to improve products and design new products (See Wikipedia)
conducted research and development - do R&D
very selective - only choose a few (that meet their strict standards)
due diligence - a careful check for true value and risk before purchasing or selling (See Wikipedia)
very picky - will only choose exactly what they want, not easily pleased
scorched earth - a military strategy of destroying everything that might be useful to an enemy in an area, including the food supply, making an area so that people can't live there anymore (See Wikipedia)
huge transactions such as hospitals - big businesses, expensive to purchase
the main street business that drives small businesses -
backing out of a deal - deciding not to buy (something you were going to buy)
realised - come to know that a fact is true, and understand it
a handful of people - a small number of people
suitable - acceptable for some purpose (for example, a spoon is not suitable for eating noodles)
obstacle dragging down franchising in Thailand - a problem that prevents franchising succeeding in Thailand
a rumour - an uncertain story or piece of information that many people are talking about (See glossary)
a proven system - people have successfully used the system, proving that it works
take a gamble - take a risk, do something that might not succeed
