By Ray Penner
It was the end of another typical week at the head office of The Body Shop in Toronto. Except for this guy from Saskatchewan.
He had observed a Body Shop store in a Vancouver mall and was convinced it was the perfect opportunity for him back in Saskatoon. When he phoned head office to say he was flying directly from Vancouver to acquire a franchise, they told him not to bother; they would send him a package in the mail. Unsatisfied with that answer, he showed up the next day at head office anyway. They ignored him, as best they could. For the entire week, he would arrive early to greet the staff with, “Hi, I’m Gord Haddock, your new Saskatchewan franchise owner.” He would be the last to leave, wishing them all a pleasant evening. He and the receptionist became friends; she let him watch training videos in the boardroom.
Finally, Margot Franssen, founder of The Body Shop Canada, marched into the reception area and confronted Gord. “You’re never going to leave, are you?” “Oh yes, I am certainly going to leave, Ms. Franssen,” Gord replied, “as soon as you let me buy the Saskatchewan franchise.” She ushered him into her office. After a stern grilling, she said he could take the training, and they would make a decision based on his performance. He would be the first male franchisee if he passed.
The trainers soon realized he had business experience, and after just one month of product training and shop floor experience, Gord found himself back in Margot’s office for another hour of intense questioning. At the end of that meeting, she told him he knew his stuff, he had the Saskatoon franchise, and suggested they go for wine and lunch. Less than a year later, Gord and his wife, Maureen, were operating one of the most successful and innovative Body Shop franchises in the world.
We absolutely loved the product, and that is the key to deciding whether or not to invest in a franchise. You have to fully believe in what you’re offering to your customer.
Gord and Maureen grew up together in Rosetown and married in 1970. By the time they became interested in franchises, Maureen had already embarked on a teaching career, and Gord had been an owner or partner in several businesses, including the very successful HEL Music in Saskatoon and a pharmacy – in partnership with Gord’s brother – in Rosetown. Maureen smiles, “In the last 50 years, we’ve owned 18 different businesses, including four franchises.”
Why franchises? “I’m fascinated by anything that’s new and promising,” responds Gord. “Two of our franchises, The Body Shop and Lululemon, were a huge success. The other two – a fish and chip shop in Winnipeg and a popular clothing brand outlet in Saskatoon – were not.”
Those franchise experiences, good and bad, taught the Haddocks important lessons about franchising, which they are happy to share.
THE MORE EAGER SOMEONE IS TO SELL YOU A FRANCHISE, THE MORE CAUTIOUS YOU NEED TO BE.
Gord believes franchise trade shows and websites are generally a waste of time and money. He has been approached many times by entrepreneurs eager to franchise their business. “Most of them, I just shake my head,” says Gord. “They don’t have a successful, proven business model at all, so the only way they can hope to make money is to sell their fantasy to others.”
In contrast, at the time Gord acquired the Lululemon franchise, the owner had not decided whether he even wanted to sell franchises. Gord had to convince him it was the right thing to do for Saskatchewan. The Haddocks were motivated by the right reason: “We absolutely loved the product,” says Maureen, “and that is the key to deciding whether or not to invest in a franchise. You have to fully believe in what you’re offering to your customer.”
YOU HAVE TO DO THE RESEARCH AND TRUST WHAT YOU LEARN.
The Body Shop and Lululemon franchises came about after the Haddocks got the answers to the tough questions. Before Gord went after the Body Shop franchise, he went on a scouting mission to major malls across Western Canada. When he discovered The Body Shop in Vancouver, he spent so much time on a mall bench observing the store’s activity that mall security came by to question him. Eventually, he struck up a conversation with the store owner, who was, to Gord’s surprise, happy to divulge the store’s annual gross margin and gross sales.
It’s not just the numbers you need to investigate. Talk to existing franchise owners. How thorough is the training program and other support? What’s the general consensus among franchisees, the sense of camaraderie, the enthusiasm for the product or service they’re providing? The Haddocks recall Body Shop conferences that were “beyond anything you could imagine; they left you literally breathless with excitement.”
It’s far better to invest $20,000 five times to find the right venture than to lose $100,000 in a venture destined to fail.
A clear sign of a good franchise is a franchisor who is adamant about protecting their brand and maintaining high product and service standards. That said, the Haddocks will also tell you the best relationship is one in which the franchisor is also willing to listen to innovative ideas from franchisees. A case in point was the Haddocks’ concept of home parties to sell The Body Shop products, particularly during the slower seasons. The Haddocks pioneered this innovation, establishing more than 100 home party representatives across Saskatchewan. The Haddocks were also allowed to sell unique products in their store that smelled like a saskatoon berry pie.
Doing the right research costs money, and it’s money well spent. To people who wonder why they should spend money investigating something they might not pursue, Gord replies, “It’s far better to invest $20,000 five times to find the right venture than to lose $100,000 in a venture destined to fail.”
BE DETAILED AND FIRM ABOUT YOUR AGREEMENT, BECAUSE THINGS CAN GO WRONG.
The Haddocks’ fish and chip franchise was very successful at first. It offered a product that Maureen and Gord still praise. However, they had not defined their geographic territory. Eventually, too many other franchises of the same business – sold by an over-zealous corporate owner – cannibalized each other, and the Haddocks had to close down.
In the other disappointing franchise experience, the clothing chain had corporate stores (i.e., owned and run by the corporation) as well as franchises. The company made a bigger margin selling through its corporate stores. With increasing frequency, Gord and Maureen began to receive incomplete shipments of
clothing, where the most popular items of the season, as well as the most common sizes, were often missing. Apparently, that was never a problem with any of the corporate stores. The relationship with the corporate office quickly deteriorated, to the point where the Haddocks became so frustrated and disillusioned, they sold back their franchise for a dollar.
By the time the Lululemon franchise began, the Haddocks had learned one other lesson about franchising: have your own lease, rather than sub-leasing from the franchisor. “I negotiated three successive five-year leases for our store on 2nd Avenue,” says Gord, “so I knew what the rent would be down the line. If the franchisor owns the lease, then you’re trapped. But if you’ve got the lease in a great location, you can switch to another brand or another type of store if you have to.”
BE PREPARED TO FULLY COMMIT.
Starting any business takes extraordinary effort, and the same is true with a franchise. During the Christmas season, Gord would be in the store by 6:00 AM, and keep going until well after the doors closed 15 hours later. Maureen recalls the time when he completely “blanked out” at the till near the end of the day. “For a moment, he didn’t know where he was or what was going on. It was quite scary,” she recalls.
You need to know how to perform every function in your store, from running the till to cleaning the restroom. That’s even more important if you’re thinking of expanding. “Before you open a second location, you have to run your first location for at least a year or two, so that you know every facet inside and out,” advises Gord. “Otherwise, you don’t know, for example, how long it takes to do a particular task, so you have no idea whether or not someone in a second store is being as efficient as they should be.”
You also have to be prepared to make a major financial commitment.
The Haddocks suggest having enough savings to get you through the first year, regardless of how the franchise performs. They also warn you to fully understand the sales cycle, and budget accordingly. Roughly 40% of The Body Shop’s sales occurred in the Christmas season.
It’s obvious from talking to the Haddocks that another commitment is also essential to run a successful franchise. It’s a commitment to preserve your personal relationship with your spouse or partner. “You both have to feel you’re in this together,” says Maureen, “regardless of the role each of you is playing in the
business or at home.” That has sometimes meant moving the family to pursue new opportunities. “Being uprooted has been the story of my life,” she laughs, “but it has been pivotal in so many ways.”
ABOVE ALL, HAVE FUN.
“’Have fun’ has always been our number one business rule,” Maureen says in conclusion. “That’s followed by work hard, make money, and do good things, in that order.”
First published in the December 2019 edition of The Business Advisor.