People and the free flow of capital count for much more."  The same principle holds true in franchising, and my research (highlighted in my book, Franchising Dreams) suggests that operational and social factors play a more significant role than location in explaining franchise success.

Why is location less significant in explaining franchisee success?  Well, part of the reason is that as our economy has shifted from manufacturing to services, the uniqueness of location has waned.

In 1950 if you wanted sourdough bread with your lobster, you had to travel to both San Francisco and Boston; now you can enjoy that combination nearly anywhere in the country.  In the new economy, services, ideas and knowledge can be easily transported and replicated and many regional and local differences no longer exist.

Franchisees and franchisors have certainly benefited from the shift to a service economy, but the proliferation of services also means that location plays a smaller role in franchisee success.

If I were buying a franchise unit I would be wary of the franchisor whose major selling point is the location of one particular unit.  If he or she focuses on location, you might ask, "If this is such a great location, why don't you buy it?

Instead, I would be more interested in the operations of the unit, the integrity of the franchisor, the uniqueness of the product or service offering and the value of the trademark.  Sure, location has some impact on franchisee success, but fortunately, the impact is a lot less than what most people believe.

Knowing that location has limited impact on franchisee success will allow you to focus on those things that really drive success:

·        Your ability to learn and apply management principles

·        The relationships you develop with others

·        Your involvement in the wider community in which you operate.

Surprisingly, very few people figure out that franchising success is driven not by the location of the franchise unit, but by the behavior of the franchisee.  I asked one of the franchisees in my study, a franchisee at a muffler chain, about his business, and he lamented, "They sold me a loser store.  It was a loser store when I bought it, and it's still a loser store.  Now I know why they gave me a ‘good deal' to buy the unit."

But the franchisee who followed in his footsteps - in the same location - is one of the most successful franchisees in the system, with strong sales growth, low employee turnover and above-average profits.  If it were really a "loser store," then nobody would be able to turn it around.

Unfortunate franchisees who believe that their location is the major driver of success can easily avoid responsibility for the growth and development of their units and instead blame things they cannot control.  I would advise you to follow three steps to be successful.

STEP 1: ACT LIKE A CEO

Regardless of whether or not you put the title "CEO" on your business card, if you're a franchisee, then the people who work with you, work for you and purchase goods and services from you believe that you're the CEO.  To be successful as a franchisee you have to develop an executive mindset, one that has learning as the cornerstone.  I have personally interviewed executives at some of the best-managed companies in America, and I consistently find that successful senior executives share at least three characteristics in common:

A strong sense of curiosity that drives them to interact with many people and to read very broadly.

Interpersonal skills that allow them to develop high levels of personal trust.

Significant business acumen that includes strategic, operational, and human aspects of their company.

STEP 2: DEVELOP YOUR SOCIAL CAPITAL

"Social capital" may sound like an academic term, but it really refers to the relationships you have with others.  In my research, I found that franchisees with the highest sales.

Success is driven not by the location but by the behavior of the franchisee.

So why doesn't everyone develop high levels of social capital?  Well, it's tough to find the time to interact with others when you're running your own business.  Also, once you become an expert in something, it's easy to believe that you won't learn anything from anyone else.  But the most successful franchisees find the time to interact with others, and they develop relationships with the four critical constituencies in every franchise system: Franchisors, other franchisees, customers and employees.

I have heard numerous unsuccessful franchisees complain, "The franchisor doesn't understand my local market or know who my customers are."  OK, so teach them about your local market, and while you're at it, learn something about your franchisor's business and challenges.  You'll learn more about your system, and your interactions with the franchisor will add value and build goodwill - a true win-win situation.

Similarly, if you have only limited interactions with the other franchises in the system, you won't be able to get support, help and advice from the people who might be able to help you most.  By devloping strong ties with other franchisees, by sharing your ideas and strategies, you'll help build a stronger system.

Finally, many unsuccessful franchisees elevate customers to royalty status with common slogans like, "The customer is king!"  Or "Without our customers we wouldn't exist!"   Customers are important, and you would do well to have strong enough relationships with some of them so that you can learn how you services and products can be improved.

However, employees are equally important to your success, and the high-performing franchisees I studied invested significantly in their employees.  How do they do that? They treat their employees well, provide them with growth opportunities and hold them accountable to high standards. 

Researchers have found that an increase in employee morale has a direct (and positive) influence on customer satisfaction. High customer satisfaction levels can impact your future business, can lead to referrals to other potential customers and may increase opportunities for additional goods and services.  It is equally important to have fruitful relationships with employees, since employee development is not a cost of business but an investment in the future growth.

By developing strong ties with other franchisees, you'll help build a stronger system. 

Investing in your social capital and developing relationships with franchisors, franchisees, customers and employees will help elevate your business to one of the very best in any system and, in the long run, boost your bottom line.

STEP 3: INVEST IN YOUR COMMUNITY

It's counter-intuitive to believe that investing in ones' community has an impact on franchisee success, but it's true nonetheless.  The most successful franchisees in my study invested in their communities as well as their business.   

What do I mean by invest?  I merely mean involvement in activities and associations that are not solely self-serving.  Perhaps it means being involved with the Chamber of Commerce, the Library boards the local YMCA, a sports activity, or your local church.  It doesn't really matter what you do as long as you make an investment in your community.        

It is a mistake to believe that the franchise trademark alone will lead to high performance or to believe that location is the most significant factor in franchisee success.  The range of franchisee performance in every system varies, and I have yet to hear a franchisor say, "So-and-So is our highest revenue franchisee because of their location."  No, your ability to perform as a franchisee is nearly completely independent of location.  Instead, invest in yourself, your relationships and your community, and then you will be a high performer.

Source: Peter Birkeland, Ph.D. is a professional speaker, author of Franchising Dreams, adjunct professor of strategic management and organization at the Carlson School of Management at the University of Minnesota and president of the Birkeland Institute.