The Instincts of an Entrepreneur
As a franchise consultant, I am often called upon to serve as an expert witness in franchise lawsuits. It is of course the job of opposing counsel to cast doubt upon my testimony. Frequently they ask, "How is it that a man who graduated with a degree in music presumes to speak with authority on franchising?"
So I tell them.
After graduating from DePaul University, I wanted nothing more than to be a band instructor. I landed a job as a fourth grade teacher with a school in the Chicago area that had plans to create a band program the following year. But the money for the band never came through. The problem--then as now--was that schools had tight budgets. Unfortunately, music was often the first item in the curriculum to be cut.
By that time, however, the school principal had seen enough of my work to want to keep me. She offered me a job in school administration. I declined. I had to follow my heart. I wanted to teach music.
But I've always had the instincts of an entrepreneur. I suggested to the principal an alternative. I would teach band to interested students and collect money directly from the parents for lessons and for instruments. In return, the school would provide me with practice time and space. The school would end up with a band program without the cost. I would be allowed to teach and whatever economic success I would have would depend upon how many students I could recruit and how many instruments I could provide.
Within two years, our program won the statewide band competition and I was soon asked to replicate my program at other area schools. At first, I eagerly agreed. But quickly I found myself overwhelmed by the demand. I simply couldn't be in every school at the same time.
Meanwhile, it began to dawn on me that I had developed a system that could be duplicated. My first instinct was to train others to do the work. But once the trainees had my system why would they need me? I had a people problem.
I also had a money problem. Even if I could find enough people to put in each school, I could not afford to buy the more than fifty instruments a band program required.
Finally, there was a time concern. I knew that if I could not find a way to help schools clamoring for my band program, then someone else would step in and try to create a program similar to mine. That's when I began to think about McDonald's.
I had watched McDonald's throughout the late'50s and early '60s and had come to realize that McDonald's was less a business with superb products than a business with a superb system of operations.
My business was also a system of operations. Not only had schools come to me for band programs, I also knew that other music major graduates were looking to be band instructors. It was a perfect match for a franchise.
I packaged my system of operations, developed the connections with schools, and sold franchises to other teachers. Then I trained those teachers to use my system and assigned each to a specific school.
Before I knew it, I had a number of franchisees teaching band in schools, collecting fees from parents, renting instruments, and paying me a royalty on their sales.
So, what sold me on franchising was its potential for solving three problems that I couldn't solve in any other way: the problems of people, time, and money. And these are the same three problems that confront both small and large entrepreneurs today. Many find that they have an excellent business concept or system that can work in markets other than their own. But they need people to operate those businesses. They need the capital to expand. And they need the time to grow before the competition arrives.
In my work as a franchise consultant I meet such business owners almost daily. Some are small businessmen who know that their ideas can be readily appropriated by large competitors if they move too slowly. Others are large public companies that want to establish units in new locations without having to fund them entirely or supervise them on a day-to-day basis. Still others want to capitalize quickly in a fresh market. But most are entrepreneurs like Ray Kroc who lack the capital for the land, buildings and equipment that new locations require.
And then there are the horror stories. Trained employees have become their most aggressive competitors.
Franchising, of course, has come a long way since the days when I worked as a band director/franchisor. In fact, the very complexity of franchising led me to franchise consulting. In the process, I simply transferred my teaching skills from one subject to another. But the basic reason why companies franchise hasn't changed. The problems of people, money and time are constant. And franchising remains the one method of expansion that solves all three. No wonder franchising accounts for $1.5 Trillion in sales annually and is involved in the creation of one of every seven jobs in the United States.