"Be humble enough to admit that you're imperfect, and also willing to take help and advice from people."
Honesty. It’s a key component of lasting success. In franchising, it’s how a franchisee gains the trust of a franchisor. From the day they first approach a franchise, describing their previous business experience and what their goals are, to the day they sell their profitable franchise unit, franchisees must be completely open with their franchisor in order to build a successful business.
Honesty is not an attribute for which now-franchisee John Rusnak is famous. In fact, most would view Rusnak as an infamous fraud.
His downfall began in 1997 as a currency trader for Allfirst, then the U.S. branch of AIB. Rusnak used the bank's money to bet on the future value of the Japanese yen. The bet didn’t pan out, and Rusnak found himself responsible for a big loss. However, instead of taking his lumps from the loss and moving forward, his ego kicked in and he tried to cover the loss.
“Once faced with that [loss], my attitude, ego, mentality at the time said, ‘I can make it back and I am smart enough, I have the resources and I have got people around me so I will just grow the business and trade more and try to make it back.”
Problems spiraled out of control, but Rusnak refused to be honest about it. He was living a double-life: an upstanding citizen outside of work, but at work he was arrogant and abusive, secretly taking more and more risks and bullying those who questioned him.
In 2002, the house of cards folded. He was exposed for having lost a total of $691 million. In the aftermath, many senior managers at Allfirst lost their jobs, and Rusnak took a plea deal in January 2003 sentencing him to seven and a half years in prison. He served his sentence in seven prisons, eventually being let out early for good behavior in July 2008.
Full of regret over his actions and their consequences, Rusnak has now become a campaigner for truth, promoting responsibility in the workplace. He is now president of Pilgrimage Development, which oversees the expansion of the ZIPS dry-cleaning franchise chain. And as he has been given a chance for redemption, he seeks to give one to others. He hires almost exclusively felons, recovering drug addicts, or those thrown out of school or by their family.
"We just want total transparency…put your hand up if there's a mistake, because the sooner we know there's a mistake, the sooner we can assist in order to fix it."
The franchise relationship is based on trust, with the franchisee giving regular reports on how their section of the business is performing. They also need an ability to admit when they are struggling and require help from the more experienced. They cannot keep issues to themselves, as Rusnak did. During the five years of his fraud he didn't even tell his wife that there were any problems. He barely spoke to her, his children or any other person as he fll deeper into the hole.
A franchisee must also be able to stick to the rules, operating a system according to the instructions provided. Much time and money will have been invested to perfect the business model, and a franchisee has to stay on course...and of course, be honest.
Quotes are from John Rusnak via The Irish Times.