Educate the Franchisor, Part 1: What Should We Be Doing Better?

The IFA Convention is a good opportunity to network with other franchise professionals, discuss trends and share best practices. This year, I saw a growing participation of franchise owners:  at round-table sessions, on speakers’ panels and on the big stage. Franchisors welcome this new voice. This was exemplified by several well-attended sessions at the IFA, where franchisors listened to franchisee panelists provide their perspectives on the zee-zor relationship.

I know that many of my franchisor colleagues are quietly listening to this forum from the sidelines… Yes, franchisors are listening, maybe not as much as we should, but we are listening! Blue Mau Mau offers franchisors an opportunity to gain insights and guidance to improve franchising as a whole, which is my motivation for participating in this forum.

Much has been said on Blue Mau Mau about franchise relationships going wrong. In addition to understanding what franchisors should NOT be doing, I would like to learn more about what we SHOULD be doing. Specifically:

• If you were starting with a blank slate, what characteristics would be the building blocks of a winning franchisor?
• What can the franchisor community do better?

Some items are relatively easy to measure when evaluating a franchisor – history, number of units, business model, growth of the sector, measurable financial performance of the franchisees, etc. These factors are commonly acknowledged as important items to consider when choosing a franchise. However, I would like to delve further. I am referring to building an ongoing relationship between zee and zor to create SUCCESSFUL and SUSTAINABLE franchise network.

To start the conversation, here are my thoughts… take them or leave them.  Over the past 18 years, I’ve seen the inner workings of franchisors, big and small, from both the front line and the HQ office. From my perspective, I would summarize 3 core characteristics that are common to quality franchisors:

1.  Top-to-bottom Ethics – Yes, the word “ethics” seems cliché. It’s in mission statements. It’s in “company values”. It’s preached from the highest podium. In the end, it’s proven by each person within the organization walking the talk on a day-to-day basis. Over the years, I’ve come away from franchise shows feeling like I need a long shower to wash off the residual scum from some of the cheap franchise sales techniques I’ve seen. Thankfully, those shady players are becoming less prevalent these days, and I know many more franchise executives, who I believe have real integrity to build solid franchise relationships and great franchise brands.  Some of these examples in integrity are my older mentors, and some are young and energetic newcomers, who believe in building an organization based on higher standards. Many are former competitors, to whom I have extended a hand of friendship because I value and respect their integrity as people. Bad ethics will come back to haunt both an individual and an organization. Just yesterday, I received a call from an old friend, who is a franchisee in a struggling franchise system. He asked my opinion about a manager, who had worked with me over five years ago. I was honest: based on his actions, the guy is unethical and not to be trusted. These types need to be identified and pushed out of good franchise organizations.

2.  Walking in the Franchisee’s Shoes – Few franchisors have the luxury of truly understanding their franchisees, but some have come pretty close. I believe that this is measured in several ways. First, how much REAL influence do franchise owners, or franchise advisory councils, have in the strategic direction of the franchise? It’s great to have an advisory council, but if the franchisor does not take these opinions to heart, it’s a waste of everyone’s time. Secondly, how much does the franchisor have their “finger on the pulse” of the franchisees? Part of this is about a communication and integration between field support and headquarters management. Part of it is about monitoring and managing the metrics of the business, and using this information to help the franchisees to improve their performance. Finally, are the franchisor executives viewed by franchise owners as “one of them”? For example, several years ago, AlphaGraphics hired a new CEO, who was a respected and successful franchise owner. I am unsure of the current status of that particular franchisor, but I feel that the decision to hire “one of them” resonated very well with the AlphaGraphics franchisees.

3. Setting the Right Expectations – Much of the dissatisfaction from unhappy franchisees is rooted in their expectations of the business. They either expected something more or something different in their franchise business. To avoid this, from the beginning of the franchise qualification process, the franchisor needs to set realistic expectations. If the candidate is at risk of being undercapitalized, a good franchisor needs to turn away that candidate. If the franchisee thinks that the business is a “walk in the park”, the franchisor needs to explain that starting any business requires hard work and has inherent risks. A good franchisor also needs to honestly explain what a franchisee can expect in terms of ongoing support. It helps if the franchise sales team comes from an operations background, where they’ve seen the good, the bad and the ugly of franchising.  A franchise sales person, who sets realistic expectations may not sell as many franchises, but they will bring in franchisees that are a better match for the concept. At a recent IFA session on franchise sales, one of the panelists recommended that franchise sales executives should NOT be compensated through franchise fee commissions, but based on performance of the franchisees they bring into the franchise. (There was dead silence from the hundreds of commissioned franchise sales guys in the room… but you could see some CEOs nodding their heads.)

Top-to-bottom ethics, walking in the franchisees shoes, and setting the right expectations seem to be fairly obvious, but few franchisors actually get all three right. The challenge is extending these values throughout the organization, and at all stages of the franchisee-franchisor relationship. The franchisors who can get these three things right have a good chance of growing into leading franchise brand with happy franchisees.

That’s a perspective from a franchisor, but I hope to hear other viewpoints on this forum. Educate me.