By Bud Holladay
This article is the cover story for the May,2007 issue of RTO Magazine, published by RTO Online (www.rtoonline.com). RTO Magazine is the rent to own industry's leading print publication.

Today’s digitized, MTV’d and X-boxed rental store customers have been trained to make buying decisions largely on the basis of presentation and promotion. And there the franchisee can excel.

Look up the origins of the word "franchise" and you will see that it stems from the early Germanic word "Frank." That term was used to describe certain free people, craftsmen and landholders who were awarded privileges and liberties not given to others. Those Franks became today’s French (the term survives in their national currency, the franc). In today’s business universe those privileges and liberties can include copying the means and methods of someone else’s business as a way of creating wealth for you. And that’s all a franchise is, a means to building wealth. It enables the franchisee to generate a handsome return on his investment of both sweat and money with a fair degree of assurance that he won’t flame out on the same learning curve someone else already experienced - and from which valuable lessons were learned. And generally he can because of the blizzard of documentation, proof and disclosures required from anyone desiring to franchise his business model to others on large scale.

RTO Magazine and RTOonline.com contain the cream of the rent to own and leasing franchise crop and contain profiles of successful owners. This discussion will focus on some of the "invisible differences" that you should look for when researching various franchises.

Many successful franchisees have far less experience than you or I and yet continually do well even in the face of adversity. This is not luck. At the core of the best franchises are more than just eye-catching signs, fancy trucks and slick commercials. The appeal of those elements is obvious and not hard to replicate on your own. But how about the ability to nearly always hire the right people, find the best locations and somehow manage sales and collections without letting either go off the rails for a quarter or two? It’s hard to see evidence of any of that by walking showrooms or looking at fliers. Consider:

How many times have you walked through a franchise store in your market and left thinking that all they’ve done is put frosting on the biscuit and call it a cupcake? Same prices, same products, same agreements. What’s the deal?

All signs and storefronts hold, for the customer, a promise of what’s inside. Beyond the sparkling plate glass of a good operator customers see smiling folks in spiffy shirts and pressed pants bustling about creating a retail experience for a rent to own customer. It is unlikely that the people who work there are more intelligent or savvy than the rest of us. They don’t have to be - they have a system, a process they live by. The franchise manual is a step-by-step guide to accomplishing the things that get and keep customers while limiting or eliminating those that don’t. Because employee compensation and advancement are tied to specific performance measurements - and the franchisee’s right to keep the sign depends on his level of compliance and execution – most of them get it right most of the time. And in our business "Most" works. Always is better but "Always" can be an unreliable partner.

The best franchise organizations don’t just teach franchisees how to close deals or keep the books or buy product. They also swing a stick big enough to ensure that those critical functions related to revenue growth and cash management are constantly monitored and measured; variances are short lived. All this has less to do with ingenuity and expertise than with discipline, process and commitment to a financial objective instead of just a Saturday close.

The rent to own customer comes in with a purpose: acquire or upgrade. We all know it is therefore imperative that our goods "outshine" what he has at home, in every sense of the word. Now if your store doesn’t use a tire jack for a doorstop at the entrance and your windows are clean, the signage is fresh, and your merchandise is immaculate and ready to be demonstrated, you have a pretty good shot at competing with anybody for an order, franchise or not. But there the competition usually ends. Think about the way your business flows from the time a customer walks in or calls to that later moment when his family sits down to relax with their proud new acquisition. Does each step have a purpose that reinforces your advertising promise? Does each step lead to a timely and complete delivery of the right goods? Do employee attitudes reinforce and support the customer’s decision to do business with you or only confirm his original doubts? Poor attitudes and lack of customer skills are the two chief reasons some rental stores fail to meet growth targets while others in the same market flourish even when they charge higher prices.

Today’s digitized, MTV’d and X-boxed rental store customers have been trained to make buying decisions largely on the basis of presentation and promotion. And there the franchisee can excel.

Price is generally market-driven; only rarely does it become a deciding factor. It is usually our own employees who grab hold of the price tag like sinking swimmers reaching for a lifeline. The franchise operator, on the other hand, provides a stronger lifeline to employees: written guidelines with rules that lead to success instead of punishment, and an attractive workplace that fosters enthusiasm. His managers can’t make prices change when business is slow or stock gets short. In a word, he is Consistent. And customers like consistent. If you don’t like consistency, don’t buy a franchise.

Then there is the after-delivery contact with the customer:

Are payment due dates consistent with his income stream?

In the event a payment is not made as agreed, how is the initial contact managed?

Is there a written procedure for handling first-time late payments no matter who is in charge or what day the call is made or how many deliveries are going?

How are results measured and is that meaningful to overall goal accomplishment?

Does management consistently monitor and improve the process?

Good franchises provide answers to these questions. They should – these are the issues too important to be settled by trial and error. That is really what buying a franchise is all about: learning from the other guy’s trials and errors from a safe distance.

There are two types of franchisees - Joe and Wanda looking to own a store and retire early in a town they recognize, and The Millionaire Next Door. The Millionaire Next Door is often looking to add another high margin proposition to his stable of performers, something with an established brand, proven processes and an expanding market. It could be flat bread sandwiches or flat screens; in the end it is just numbers. For Joe and Wanda the franchise is life itself, it defines them. Because of some trailblazers who preceded Joe and Wanda and the Millionaire Next Door - and a few finance companies bold enough to back them - there is room for both in today’s rent to own market. Whether you go the franchise route or invent your own version, you will soon learn there is no exclusive on opportunity.