STUDY: Leadership Styles of Rockstar Franchise Owners
WRITTEN BY Clay Sullivan October 17, 2018
As the franchise industry continues its growth trends in 2018, Franchisors (companies that license their trademarks and methods) face an increased challenge to successfully identify prospective Franchisees (individuals that invest in a business to use a franchisor’s trademarks and methods). There are many boxes franchisors need to check when vetting prospective owners, and for prospective franchisees, simply showing up with a check does not necessarily get one a ‘thumbs up’.
Over this past summer, in preparation for a speaking engagement at a franchise association’s annual meeting, I was looking over leadership workstyles benchmarking studies I had done on top franchisees across a dozen franchise brands during 2017-2018. I would describe these as expansion-focused brands in the areas of Health & Wellness, Fitness, Quick Service Restaurants, Commercial & Residential Services, Personal Services, and Business Services.
As a Human Capital Advisory firm, we help organizations improve profitability through proven talent management solutions. We prescribe executive coaching and science-driven data analytics to predict franchisee success through understanding inherent behavioral drives across positions and people within the workplace.
For understanding what makes successful franchisees ‘tick’, we look at four primary behavioral drives:
Dominance (Factor A) – the drive to influence, control, take on challenges, be assertive and a self-starter
Extraversion (Factor B) – the drive for social interaction, connecting with others, natural selling abilities
Patience (Factor C) – the drive for consistency and stability around pace of taking action
Formality (Factor D) – the drive for rules, structure, data-driven decision-making
In my curiosity to understand better the traits of top performing franchisees I mentioned above, I ran group analytics on all 91 of these ‘rockstars’ provided to me by the collective franchisors.
Notice any interesting correlations below?
84% of Top Performing Franchisees are Mid-to-High in Dominance
Above, out of the 91 franchisees considered top owners/performers by the contributing franchisors, 84% are in the mid-to-high Dominance (Factor A) drive. Individuals who fall in the higher range of the Dominance drive tend to embody higher self-confidence, independence, determination to achieve results, demanding of themselves and others to meet goals.
While a key benefit to investing in a franchise unit or multiple units is lower cost and guidance from the franchisor, those are no substitute for the skills and natural behaviors to running a business. Higher A’s have an internal (self) competitive, ‘thick-skinned’ ability to problem-solve quickly and deal with challenges of managing the business pressures, the potential employee challenges, and selling/marketing the business.
72% of Top Performing Franchisees are Mid-to-High in Extraversion
Above, out of the 91 franchisees considered top owners/performers by the contributing franchisors, 72% are in the mid-to-high Extraversion drive (Factor B). Individuals who fall in the higher range of the Extraversion are outgoing, socially-oriented, articulate, enthusiastic and persuasive, and able to sell ideas to new people easily.
Many franchises need leaders that (1) can connect effectively with their managers and employees daily and (2) play a major selling/marketing role, certainly during the ramp up period. While we are all social beings, higher extraverts can sustain the ‘people thing’ for much longer time periods, and frankly, are energized by connecting with employees and customers on a daily basis.
86% of Top Performing Franchisees are Low-to-Mid in Patience
Above, out of the 91 franchisees considered top owners/performers by the contributing franchisors, 86% are in the low-to-mid Patience (Factor C) drive. Individuals who fall in the lower range of the Patience drive think and function at a faster-than-average pace, thrive under pressure with a sense of urgency, able to adjust quickly to change, and are energized by variety of activities and fast-paced action.
Running or building any type of business requires innovation, problem-solving, and an ability to handle a variety of pressures. While franchisors typically provide a level of training and guidance to their franchisees, there are still many expected unknowns when managing a business and employees.
76% of Top Performing Franchisees are Low-to-Mid in Formality (D)
Above, out of the 91 franchisees considered top owners/performers by the contributing franchisors, 76% are in the low-to-mid Formality drive (Factor D). Individuals who fall in the lower range of the Formality drive are tolerant of risk, flexible to new ideas and change, persistent and determined in the face of challenge.
There is certainly a level of structure when owning a franchise – signing a formal agreement with your franchisor which may dictate how to market and sell the products/services. However, the ability to be flexible with all the in’s and out’s and the ‘surprises’ of running a business is a great advantage.
A Deeper Dive into the Most Impactful Behaviors of Top Franchisees
Above, in observing the behavioral drives of top franchisees, I took a deeper dive by running analytics of what we call Factor Combinations, unique insights into the day-to-day nuances of leadership traits:
82% are A/D – comfortable with risk, self-confident, firm, decisive, venturesome, competitive
76% are A/C – proactive, takes initiative, achievement-oriented, thrives under pressure
74% are B/C – quick to connect, enthusiastic, persuasive, motivates others, positive selling styles
70% are B/D – informal, poised, communicates the big picture, persuasive talker
Whatever Can Be Measured Can Be Improved
So why is the franchise industry increasingly using data analytics to evaluate franchisee prospects?
When franchisors or franchisor recruiters/developers bring on single/multi-unit franchisees that fail/under-perform as a business owner, you can imagine the myriad impacts on the brand by missing the mark of bringing on misaligned franchisees: lost revenue/fees, brand integrity, opportunity costs, and potentially time-value having to find a replacement franchisee investor for a location or region.
While franchising is seen as a vehicle to go into business for oneself, there is NO guarantee of success. The same basic principles of well-managed entities go beyond investment capital and knowledge: human behavioral workstyles. It takes getting out of bed every day and committing to hard work, confident decision-making, being energized by people interaction, dealing with everyday business challenges and pressures…all inherent natural strengths that lead ownership typically embodies.
The data in this study tells a compelling story. Our behavioral science-driven data platform is 70 years in the making, and technology has allowed us to predict success across organizations like never before. More and more each year, we have observed many franchisors, franchisees, and even franchise consultants gain impressive competitive advantages for their businesses.
If you are a franchise corporation, a franchise consultant, or a franchisee, we will help mitigate the risk and maximize the probability towards making the best people decisions in building successful leadership and teams for your brands and locations.