Franchising World June 2008
It all begins with establishing a corporate culture of respect and commitment.
By Catherine Monson
Positive, trusting relationships between franchisors and franchisees are the foundation of healthy franchise systems. The basis of the franchise relationship is the license that allows the franchisee to use the franchisor’s trademark and systems in exchange for initial and ongoing fees. It is an opportunity to grow the franchise network and brand utilizing the franchisee’s capital and hard work; in exchange, the franchisee retains the profits from the enterprise. However, those franchise companies with the best franchise relationships view the relationship differently: they view franchising as a strategic and interdependent relationship founded on trust where the key objective is to fulfill the goals of both the franchisor and franchisees.
For the franchisor to be successful, its franchisees need to be successful; the bottom line is that the franchisees need to make a reasonable income. For franchisees to be successful, the franchisor needs to be successful. It’s impossible to have one without the other.
It is essential that the franchisor develop and refine the business model and systems that result in successful unit economics, as well as provide marketing support, operations support, and protect and enhance the brand. However, even in a franchise system with proven systems and a successful business model, poor franchise relationships can lead to the decline, even the demise, of the business.
A primary role of the franchisor CEO and senior management team is to provide the direction that establishes, maintains and refines the business model and systems that enable the growth and unit economics that are the foundation for franchisee success. Equally important is providing the leadership that builds trust between the franchisee and franchisor. This begins with establishing the corporate culture as one that respects the franchisee and maintains commitment to providing meaningful support to assist franchisees in maximizing their success. The foundation of this culture is based on the principles of treating franchisees fairly and with integrity, believing in franchisee participation and input, communicating clearly and openly with franchisees, keeping commitments, and truly caring about franchisees as business partners and individuals. The organization needs to be committed to two-way communication. The CEO and management team should lead by example, in what they do and what they say, demonstrating to those who work for them—and for the franchisees—the company’s values.
Highly-successful franchisors empower franchisees. The franchisees are given the tools, training and resources that will make them more successful and more effective in growing their businesses and maximizing profits. They also create a culture of working together with franchisees without giving up authority to make decisions as the franchisor and owner of the brand. Empowerment includes developing the communication system that creates and facilitates input from franchisees.
Franchisees expect the franchisor to continue to develop and refine the system. They want the franchisor to listen to their input, thoughts and concerns in regards to system modification. Successful franchisors involve franchisees in evaluating and developing any changes to the system, products or design. It is important that the franchisor understands and is empathetic to the financial implications of any system modifications and ensures that there is a reasonable return on investment for the franchisee.
Employing Advisory Councils
One of the best practices in successful franchising is the use of franchisee advisory councils. These councils should include a cross section of franchisees from different regions of the country, representing various sales volumes and lengths of time in the system. The advisory council gives management feedback on programs and initiatives and gathers input from fellow franchisees. Getting franchisee input as programs are developed—rather than afterwards—is another best practice. Additionally, another method to involve franchisees in the development of new programs, systems or improvements is the use of task forces.
Listening to franchisees and obtaining their input is critical. Franchisees are on the front lines, dealing with customers every day. They are a tremendous source of information on what works and what doesn’t, what the customer wants and changes in the marketplace. Franchisees often have suggestions for new products or services. Successful franchisors ask franchisees for their input and suggestions. Management should create a process for the field staff to share franchisees’ ideas and input and management should spend time in the field visiting franchisees. Successful franchisors consider, test and try franchisees’ ideas, and when they decide not to implement a franchisee’s suggestion, they get back to the franchisee as to why they didn’t take the suggestion. Closing the loop in this manner demonstrates to the franchisee who gave the suggestion that you listened and evaluated their idea, and helps them to better understand the company’s goals and objectives when the franchisor explains the business reason behind not implementing the idea.
Survey, Survey, Survey
Another best practice is to regularly survey franchisees. Survey them on the value they receive from programs, the effectiveness of marketing and advertising, the quality of support and training, the quality of field visits, the value of the franchise relationship and more. Consider asking franchisees if they trust the organization. Create a scale for surveys and use that same scale year after year. Measure the results and benchmark against them with the objective of improving the ratings year after year. Another benefit of surveys is identifying franchisees who don’t understand the company’s strategies or systems, allowing the franchisor to provide additional training or support.
In highly-successful franchise systems, both parties view themselves in a partnership. While it is not an equal partnership—the franchisor owns the system and trademarks—it is helpful that both parties understand the different roles that the franchisor and franchisee have. While successful franchise systems are built on a relationship of trust and interdependence, their relative roles should not be blurred or interests confused. The role of the franchisor is to develop the brand and the system, refine it and enforce it. The role of the franchisee is to provide the capital, unit management and to follow the system.
Maintaining and enforcing system standards is critical to the success of the entire franchise system. The success of a brand depends on the franchisor’s ability to ensure that all members develop and maintain the brand, which is the signal of quality to the customer. The value and perception of the brand is lowered if a franchisee does not maintain the standards or quality, sells an unapproved product or provides a poor customer experience. Ensuring the system is executed well at each location benefits every franchisee. Good franchisees want the franchisor to enforce system standards and ensure errant franchisees are brought into compliance or terminated. This is essential in protecting the brand. Successful franchisors establish a culture of voluntary compliance with the system standards and vigorously enforce compliance by errant franchisees.
Communicate key objectives for the coming year and beyond with the franchise network. Share with them the vision for the franchise and where the franchisor wants to take the network. Explain the rationale. This will help franchisees understand their part in achieving that vision and help guide their actions as they work to grow and improve their businesses.
Effective, positive franchise relationships are the cornerstone of a successful franchise organization. The essence of all leadership begins and ends with trust.
Catherine Monson is president of PIP Printing and Marketing Services. She can be reached cmonson@franserv.com.