Why Care About Franchisee Satisfaction?
The franchisee-franchisor relationship is not a fleeting experience; it is a major life decision for the candidate, and for the franchisor, an opportunity to build the brand or diminish it.
By Jeff Johnson
The idea of a “secret sauce” that can be the game-changing element for anything (or everything) is certainly not a new one. In terms of long-term franchise brand growth, I believe that there is a key ingredient which is not as universally appreciated for its importance as it should be. This secret sauce is franchisee satisfaction.
The hypothesis: Any increase in franchisee satisfaction will ultimately have a profound impact on sales and profits for both the franchisee and the franchise company.
The answer to “Why should you care about franchisee satisfaction?” depends on your role. Are you a franchisee, a prospective franchisee, or a franchise executive? Does the term “franchisee satisfaction” mean something different depending on your perspectives? For the purposes of this article, franchisee satisfaction is defined as the level to which existing franchisees are excited about their investment in a given franchise. This would include the quality of the relationship with their franchisor, as well as a measurement of the quality of programs designed to support franchisee success. How does their experience meet with their expectations?
Franchise Excellence Research
In my early days as a franchisee I can’t remember how often I was asked, “I understand you are a franchisee for ABCXYZ; is that a good franchise?” That question (and my answer) eventually led to the formation of a research company dedicated to studying franchise excellence. A great deal of data was available (such as investment ROI, litigation history and brand growth rates) but no metrics were available with respect to how existing franchisees rated the quality of their investment. This became the focus of our research.
What continues to be fascinating is how commonly franchisee candidates view investing in a franchise as a transaction rather than a long-term relationship. They often expect that their initial investment (X) + the brand’s “proven” product/service (Y) = Z; an automatic, predictable result. The uneducated (or naïve) candidate overlooks the importance of all that the franchisor brings to the relationship (initial training, ongoing training and support, new product development, etc.) and in turn, what will be expected of them (time, effort, and compliance). Both sides of the equation must work well in order to achieve mutual success.
The concept of customer satisfaction is intuitive to most successful business people. The basic questions of “What do customers like most (and least) about our product(s) or service(s)? What changes should be made, and what impact will those changes have on sales and profits?” come naturally. Then, the appropriate changes are made, and the process of measuring customer satisfaction begins again. How does the concept of understanding (and measuring) franchisee satisfaction compare to customer satisfaction? Why does franchisee satisfaction matter?
According to Paul Damico, president of FOCUS Brands, North America, “Franchisee satisfaction is the foundation upon which FOCUS Brands' success is built. Accordingly, it is critically important that we continually demonstrate our support and commitment to the franchisee's individual growth and prosperity.”
A Complex Relationship
Franchisee satisfaction is sometimes viewed as a sort of overall “happiness index,” yet it is really an amalgamation of many things. Customer satisfaction is the measurement of a transaction where the customer hands over money and in turn, receives (for example) a burrito. Is the burrito hot? Is it tasty? Served promptly and courteously, and at a fair price? That pretty much sums it up. The franchisor/franchisee relationship is far more complex, with many “moving parts” and elements that can be controlled (training programs) and those which cannot (the economy, legislation). By nature, it is much more like a marriage than the burrito purchase. It is not a fleeting experience; it is a major life decision for the candidate, and for the franchisor, an opportunity to build the brand or diminish it.
After over 30 years in franchising (half as a franchisee and area developer, and half as a franchise researcher) I can say with absolute certainty that franchisees are starving to be successful. They want to prove to their partners, children, parents, friends, and neighbors that they invested wisely in a good business. Even if they are not always “happy,” they are successful. From the franchisor’s vantage point, even franchisees that might not be considered happy in the conventional sense can provide critical input to help improve the system and build the brand, as long as their input is effectively collected, accurately measured, and appropriately acted upon. Successful franchisees still have something to sell (even if they are unhappy) and the brand won’t lose a location. The focus must be on success.
When we work to define franchisee satisfaction (success), we can make it as complicated as we want, but when existing franchisees respond to the question, “Knowing what you know now, would you invest again in this franchise?” it provides a profound, global measurement of the health of the franchise and investment quality opportunity. Gathering this information is the business equivalent of an annual physical; you may not like what the doctor tells you, but paying attention to the test results and addressing them positively is the obvious path to improved well-being.
Success Breeds Success
Let’s compare franchising to top-level college football. As head coach, you are always working to recruit the best possible talent for each position. You have a playbook and a game plan that each player needs to follow, you need assistant coaches to help carry out your plan, quality programs (academic support, strength and conditioning, etc.) that help each athlete become the best they can be. You need to develop a strong relationship with each player so that they are energized and engaged. It’s difficult to believe that coaches recruit top talent by expounding upon how “happy” their players are. Success is hard work in sports and business, but there is no better way to recruit top talent than by winning games (or by having incredibly successful franchisees and a growing brand). Success breeds success!
When trying to assess how most franchisees “feel” about a given topic, there is a real danger in over-reacting to “squeaky wheels” or believing false praise. The consequences of doing so can range from inertia to disaster for your brand.
Paul Brown, CEO of Arby’s Restaurant Group, began his leadership term at Arby’s with a cross-country listening tour and a confidential, comprehensive franchisee satisfaction survey. He states, “A successful franchise community relationship depends heavily on having good information and insights that can drive and guide the business.” This is clearly not a “I’m leading, and you had better follow” leadership style; it is instead one of communication and collaboration with franchisees. It means looking intently at questions like “Would you recommend this opportunity to others?” as a gauge of what is working and what needs to change, then being willing to make those changes.
While initial franchise fees certainly generate cash flow, they are no substitute for the ongoing royalties paid year after year by successful franchisees resulting in long-term, sustainable brand growth. There is no better sales force for this type of growth than a brand’s own franchisees. The growth and success of a franchise brand is inextricably linked to the success of its partners: the franchisees.
Standout Brand Leaders Paving Way to Sales, Profits and Success
I do not have empirical evidence that increases in franchisee satisfaction will have a positive impact on sales and profits for both the franchisee and the franchise company, but the anecdotal evidence is undeniably strong. With over 3,000 franchise brands in North America, the question of what is “average” in terms of franchisee satisfaction remains unanswered; science-based research of this magnitude simply has not been produced. What we can do is look to standout franchise brands, and watch what their leadership is doing. Top franchise executives are measuring their brands’ franchisee satisfaction, working to make positive changes to programs, and leading the way to increased sales, profits and success… for both the franchisor and for franchisee.
Jeff Johnson is Founder and CEO of Franchise Research Institute. He has been immersed in franchising for over 30 years; first a franchisee, next as a multi-unit franchisee, then as an area developer for a national QSR franchise.