Secrets to finding the best master franchisors: an interview with Harry Stoubos
Harry Stoubos – pivotal in the incredible international expansion of KX Pilates into Asia – has awarded Master Licenses to franchisees from all corners of the globe, from Australia to unique markets such as East Africa, Afghanistan, Paraguay, Kenya, and has achieved one of the best Master performances globally.
Harry Stoubos got his start as a salesperson for Cadbury Schweppes. On his first day, he got to work to find a Holden Commodore ready for him – and in the boot were five milk crates, holding forty folders each.
Those folders were his forty client accounts per day. He drove to each and every of his two hundred clients each week, wrote up their orders (by hand), and returned to the office to process.
After a couple months, Stoubos was getting back to Cadbury Schweppes by 5pm each day, while the rest of the salespeople were getting back at 7pm.
They asked him: “How are you getting back so early?”
In those very first two months, Stoubos had figured out a guiding principle that can scale businesses globally - one of the most instrumental principles of expansion, management and wealth creation.
When Stoubos got to each client, they already had their orders waiting for him, all the numbers written down before he even set foot in the building.
They would hand him the order. And then invite him in, for a coffee and a chat.
Relationships beat “sales” every time.
As Jordan Belfort (the inspiration for the Wolf Of Wall Street movie) has said, “In sales, the first goal of any conversation is rapport - on a conscious and unconscious level.”
And here was Stoubos’s great talent: immediate rapport.
This guiding principle brought him from a young salesperson with his accounts in the boot to becoming one of the most successful expansion strategists today.
We sat down with Stoubos to get his insights on an area of business that is both notoriously opaque and one of the most crucial tenets of success for franchises: finding a great master franchisor.
How do you choose a great master franchisor? What top three things do you look for?
“This is an extremely important appointment when awarding a Master License and it comes down to a number of key requirements when assessing suitability.
Depending on your business model, these requirements determine the ideal Master Franchisee.
- You are looking for an entity/entrepreneur who will represent the Brand and the delivery of the product to the highest standards set by the Franchisor that is represented across its Domestic and Global Markets - especially if you are an emerging brand.
- They need to be able replicate a successful business franchise model and adapt to local conditions.
- There is no rush to grow! As they say, ‘slow and steady’, growth with the right people will pay off in the end. KX Pilates is achieving this with (now) six international markets - and we’re still continuously looking for more growth, but ONLY if we feel satisfied that the Master Franchisee prospect is aligned with KX Pilates ethos and has the capability to execute successfully.
When assessing the Master Franchisee's suitability, I really need to understand the following: experience tells me that you need people with the right attitude, passion, and commitment for the journey (a marriage/agreement, typically 10+10 years) to partner on aligned values, embrace and mirror a successful system, and moreover become proud Brand Ambassadors in their country.
I assess the following.
- Financially solid - must have minimum finance in liquidity to invest
- Must have working capital for the first 6 months
- Vision, passion, and capability to achieve an expansion plan
- Target age: 30–55
- Involved, hands-on, hardworking
- Result seeker – knows how to execute
- Min. 5 years of management and experience
- Strong leadership skills, motivational and a great communicator
- Retail /Customer service experience
- Understands franchise concept
- Identifies with Company values
- Service-minded/passionate
- Well-connected in community
- Calculated risk taker
- Communicator
- Support system
- Trust & respect”
What barriers are there to finding great candidates?
“Leading Franchise Brands will always attract interest because of their successful history and reputation.
So, it is more of what is the expectations of both the Franchisor and the Master Franchisee Prospect.
Expectation of the Master Franchisee’s role.
The ability to recognize the need to achieve two separate and important tasks: running the Business and expanding it, each of which requires different skill sets.
Potential language barriers and the current economic conditions can raise a red flag. No two countries are the same. Cultural differences may prohibit the full use of the business model, and the Franchisor may need to adapt to meet local compliance requirements.
If the Franchisor does not have a robust business model, then appointing a Master franchisee will be problematic. The Franchisor must be confident that they have the best systems and support structure to train all Master Franchisees for success, which will attract the best possible Master Prospect to its organization.”
When is the best time for a company to look for a master franchisor?
“To attract any Potential Master Franchisee, you will need to show a successful Business Model that has developed over 3-5+ years into a leader within its category, has steady growth over 50 units, and has a healthy P/L (i.e., having Proof of Concept).
Once you feel you have a robust system, the resources, both financial and human, and the full support of all stakeholders, you can then look at International Expansion.
Importantly, the Franchisor can tell a ‘Compelling Story’ about the Brand's success and growth achievements over the journey. This will be important when meeting with potential Master Prospects, who will compare you to all other business/franchise systems.”
What advice would you give a fitness studio owner or Franchisee who is looking for a master franchisor for the first time?
“To become a Master Franchisee comes with enormous responsibility and great rewards.
There are so many factors to consider, and we really need to understand the motivation behind the desire to be a Master Franchisee.
They should already be in the system, must have the passion, love the Brand and the industry, and have an intimate understanding of how the Franchisor operates to grow the Franchise system. Therefore, the Franchisee must have the appetite to study and replicate the support system it has enjoyed to be successful and be given the opportunity to grow.
If you are committed to 10 + 10 Years and see this as your lifelong ambition, then this is a good reason to consider becoming a Master Franchisee.
The challenge will be that it's more likely for another country, so this means it starts from zero and much harder because it's new ground. If you have a great relationship with the Franchisor and believe in the system and support the Brand values, then there is no reason you cannot also become the Brand Ambassador in another country and build the footprint successfully with the Franchisor's blessing.
Most Franchisors who have a successful business model and an excellent relationship with their Franchisee like to promote within. This adds further strength and recognition to the organization's values and its importance in developing its people, which also attracts highly valued Master Franchisee prospects.
The Brand can potentially offer a lifetime career within a successful Franchise system that attracts the best people for both domestic and Global opportunities.”
What strategies have you found most effective in finding great master franchisors?
“Generally, ‘Face-to-Face’ is always best to get to know someone over a period of time. Whether it is a prospect or an interest, the trusted process is consistent and can take up to 9 months to finalize an agreement.
Do your research - in my experience, this is one of the most reliable processes to follow:
a) Attend events where there are opportunities to speak/present your company to attract interest.
b) Participate in global industry events to Network and meet leading industry figures to promote your company.
c) Attend Franchise Expos to identify industry trends and meet potential Master Prospects who are also attending to look for a brand to invest in.
d) Formal Introductions from fellow associates and network acquaintances.
e) Proactive Company website and social media to generate leads online
f) If required, meet in the new country to appreciate the culture and business environment which further cements the relationship. It is a two-way process. The Prospect and you are getting to know each other and determining if both can work together. Vice versa, the master prospect will need to meet with the Franchisor at their Corporate Office which means, more often, International Travel to show their commitment, be introduced to management, take a tour of the Network and have a personal experience with the brand to determine and discuss if both parties visons are aligned."
Can you share some personal philosophies or principles that guide your processes?
“Yes, you need to be in a role that you enjoy and be very enthusiastic about the organization that you represent. This comes through when you engage with people for the first time. You are acting as the Ambassador, so every touch point is especially important for me in how the Brand is perceived and represented.
The Master Franchise application starts with building, hopefully, instant rapport with each other. The process may take 3-9 months, so you are the key figure throughout the journey. By now, the Prospect is placing trust and faith in you, in that all that I have shared and discussed about my Company is true. Importantly, I introduce a Master Prospect to the Company who is aligned with the Company’s values. So, I do the screening and due diligence to analyze the master prospect's suitability.
Franchising is a people business, and my experience over the past 20 years awarding Master Franchise Rights around the globe in all continents has come down to this: establishing meaningful relationships and respecting diverse cultures.
You are bringing people together who are looking for long-term agreement, and you want to know that you have everyone’s best interest at heart and is the right partnership. You assess the person/entity first before you think about the Master Franchise Fee.”
Are there any gaps in how fitness studio owners are thinking about master franchisors?
“In general, the Franchisee is always looking to the Franchisor/Master Franchisee for support and guidance to grow its studio performance. A successful network has like-minded franchisees who have a good rapport with the franchisor/Master Franchisee team, so transparency and trust are a key factor for a great Brand to shine and stand out from the rest.
There is a perception that the master franchise makes plenty of money off the Franchisee through its royalty and other fees that are applied and do not invest back into the Network.
The Franchisor/Master Franchisee who is constantly investing back into the Business and is recognized by the Network will have the best relationship.
This can be demonstrated consistently by placing the Franchisee first and continuously evolving the Brand through innovation, providing better tools/systems, being initiative-taking, supporting the franchise at the studio level, and growing the Network in numbers and profitability is respected and admired the most from within and external. The industry will recognize you as a Responsible Franchisor/Master Franchisee!
Responsible Franchising:
A commitment to integrity, fairness, and unwavering support for franchisees, guiding them transparently and consistently on their journey as a franchisee so they can have predictable, repeatable, and scalable results.”
Where do you see the future of fitness boutiques going?
“As more people are placing health and wellness as the #1 priority, I see the future of Boutique Fitness becoming the #1 growth fitness category as more people are looking for personalized and unique workouts, have a connection with the studio trainers and owners and want to feel part of the class community which leads to social interaction.
With so much competition, the key is to stay true to what you are great at… and not try to be something else, which could risk losing your identity and point of difference.
Be the best in your specialty field, and people will recognize this achievement. Clients will be loyal and happy, and, importantly, they will come back for that unique experience, which is provided in the studio every time you attend a class.
Keeping up with technology and younger generation trends, such as using their smartphones to find a fitness studio and book their classes, indicates the importance of digital and mobile-friendly services in this industry.”
What are the best statistics to tell the story of a brand's success?
“You need to provide all prospects with a Franchise Disclosure Document, which allows you to tell the full picture of your Network—the story!
The best brands have nothing to hide and tell their story well. They will provide the background to the business, include all the franchise network details, and highlight the key executive team and their credentials. they will show growth over the years.
Potentially Franchisors looking to providing some key KPIs could usually share numbers/statistics of interest;
- # of years you have been in the position/role/ownership
- # of stores/studios/revenue opened
- #of clients have attended your Network to date
- Average studio revenue performance
- # staff /trainers employed
- The average lifetime of your Franchisee
You can also showcase your ‘’Point of difference’’ such as a world-class training academy.
The Master Franchisee Prospect needs to end the read understanding the Brand and be excited.”
What top qualities do you need to go international?
“A Franchisor who is looking to go International should consider the following:
1. You must be committed and lead from the front
2. You must stay true to your Brand
3. You must clearly communicate your Vision
4. You must be patient and prepared to invest
5. You must select your partners wisely; do the due diligence
6. You must prioritize resources
7. You must seek International experience
8. You must have a strategy”
Thanks Harry!
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