Google the phrase “tips for franchisors” and you’ll find about 45,700 pages. What will be difficult to find is meaningful information describing the most important factor in franchisor growth: long-term commitment to franchisee success.
In order to develop a better understanding of franchisor operations, SBI sat down with John Hewitt, founder and CEO of Liberty Tax Service. John’s accomplishments in the world of franchising are well known and tough to match.
The Liberty operation is consistently ranked at the very top of high performing franchising companies in the country. The awards that have been won by John and Liberty are too numerous to list.
Two characteristics contribute to this success: 41 years of experience in the tax preparation industry; and a commitment to franchisee success that goes to the finest level of detail on storefront operations.
Supporting these two characteristics was Hewitt’s clear vision of where he wanted his company to go. He wanted to run the Number One tax preparation business in the country.
After launching Jackson-Hewitt in mid-1986, and growing from six to twenty-one stores in four years, he said, “I quickly realized that, at this pace, I wasn’t going to live long enough to surpass H&R Block’s store count of thousands.”
He replaced the organic growth plan with a franchising strategy, turning Jackson-Hewitt into the fastest growing tax service in the country.
Jackson-Hewitt went public in 1994 and John departed in 1997. While waiting for his non-compete agreement to expire, Hewitt launched Liberty Tax in Canada, creating a platform from which he could expand into the U.S.
Liberty’s growth has been sensational, in both good times and bad. The store count is now over 3,500. Liberty even grew during the past two years, adding over 800 franchisees during the worst economic downturn in our lives.
Liberty’s commitment to franchisee (“Z” in Liberty jargon) success begins before an individual buys a Liberty franchise. Each potential Z is required to participate in a one-week training program. This orients them to the Liberty operation and begins exposure to the Liberty business model. Potential Zs are assessed and John Hewitt meets with each potential Z on an individual basis. John stated that one of the most important factors from the Z’s perspective is their willingness to execute the business model. “Not listening is human nature. Our model is based on 41 years of success. The number of people who would make an investment and not listen used to amaze me. Now I accept it for what it is. I even tell them during training that they probably won’t listen right away.”
Another aspect of the selection process is understanding why the potential Z wants to invest. As you would expect, John’s advice is much more specific than what you find on the Internet.
While most of the checklists advise franchisees to pick something they like to do (tuning cars, baking, lawn work), John says, “Enjoying being a leader is much more important. Being able to work through others and get things done is much more important than liking to prepare tax returns. If the franchisee wants to succeed, he or she will do the things needed to grow the business.”
The operational detail contained in the business model is astounding. It is so detailed that it is used to help the Z identify potential store locations and potential revenue.
Each location is evaluated and Liberty is able to tell the Z how many returns that location will prepare on each day of a typical tax season. From that basis, Liberty provides a pro-forma budget detailing the financial model for that specific location. If the model is followed, profits result.
When asked about support and guidance in specific operational areas such as staffing, technology, etc., Hewitt replied, “Think everything! The model is extremely complete.”
Yes. It even defines the different waving techniques to be used by Miss (or Mister) Liberty when folks drive by.
Hewitt also cited the dozens of conference calls he holds every day during the 105-day tax season. Each Z’s daily performance metrics are reviewed, with John and the more established Zs providing mentoring to the newer ones. “It consumes a lot of time, but it’s crucial to success,” says Hewitt. “The tax season is short and it’s important to review results each day and help the franchisee make adjustments.”
“I believed from the beginning that our success would result from our management systems being better than anyone’s,” says Hewitt. Naturally, the model is constantly evolving over time.
Changing technologies and other factors have required Liberty to continually increase the investment in support systems that enable the Zs to compete effectively.
The lesson for the potential franchisor is the importance of the commitment to franchisee success.
John Hewitt exemplifies the success of this approach, enabling him to bring over 4,000 individuals into his enterprise.