Franchisors & Private Equity Firms, Part 3: The Profitability Of Cleanliness
When you know you’re having a dinner party, you almost always clean your house first.
Partly because you don’t want your friends to see your crusty dishes and dirty underwear. But more importantly, because when everyone comes over, if your house is clean, it simply works better. The dinner party is more enjoyable for hosts and guests alike.
Cleanliness becomes the force multiplier that sets the stage for positive outcomes, like relaxation, organization, comfort, cleanliness and so on.
In this series on the relationship between franchisors and private equity firms, we've already given you a primer on the latest trends, along with our tips on smart documentation. In this piece, we'll talk about how cleaning house can set your franchise up for success.
Cleanliness is more than shiny floors
A business works in the same way as a house. We know this because we’ve raised money multiple times for various businesses, and in the process have learned to become incredibly organized in our documentation, processes and systems. It’s like a snowball effect. Each time you take on new investors, and you’ve done a good job running a clean business, all you have to do is look back at the dots. Doing so is remarkably helpful down the line for next time you’re raising money.
- What’s our process for onboarding? Glad the private equity investor asked. Here’s our working spreadsheet.
- Wondering how we forecast sales growth? No problem for the person who wants to write us a million dollar check. Simply take a look at our spiffy financial statements.
- Need to understand how to diversify marketing spend during low sales times? We have a framework for such a decision making process that anybody outside of our company with no experience could use.
This is how cleanliness becomes a force multiplier. Due diligence takes ten seconds, rather than ten days. And as a result, when investors are looking at your franchise, and they see just how quick and organized you are, they get the impression you’re serious.
Tech startups know this process well. Robert Martin, a legend in the software development space in the seventies, is famous for his philosophy about writing clean, slow code.
In his book Clean Code: A Handbook of Agile Software Craftsmanship, he writes:
If code isn’t clean, it can bring an organization to its knees. Every year, countless hours and significant resources are lost because of poorly written code. And no matter how slow you are writing clean code, you will always be slower if you make a mess.
Would a stranger look at your franchise and label it clean? Have you documented processes and operations for maximum readability and applicability?
We hope so. Because if you have any intention of pursuing an investment opportunity with private equity relationships, cleanliness is next to godliness. We mean that in relation to your literal code running your website and infrastructure, but also your company code.
What franchise cleanliness looks like
To say a franchise is clean means there is a whitespace they’ve identified in the industry, along with micro factors like unit economics, highly buttoned up agreements, the sophistication of the franchisees, validation, and so on. And here’s the benefit of this level of cleanliness:
- Franchises built around slow, clean code (either literally or figuratively) allow future collaborators to build on the work you’ve already done. Companies that have their houses in order make it easy and fast for people to add to it.
- Franchises that implement cleanliness from day one give themselves greater leverage down the road, thus reducing labor and time. Not that it’s inherently bad in hiring savants who chug energy drinks nonstop to get the job done, but it’s not sustainable long term.
- Franchises who hire team members that are twenty percent less effective at their job, but work very well as a team and execute slow and clean work, ultimately attract buyers down the road. Whereas unreplicatable processes one person takes to the grave make you vulnerable to losing your secret sauce.
Ultimately, a clean house is an easy house to take over, more efficient to operate and easier to scale. The challenge is figuring out what cleanliness means for your franchise, and how you’re going to leverage it as a force multiplier to make your brand massively valuable, and therefore, more attractive to investors.
Scott Ginsberg is Head of Content at FranchiseHelp. His favorite cleaning product is the Swiffer Dry and Wet 2-in-1 Multi Surface Floor Cleaner.
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