The Franchisor–franchisee Relationship
Brian Duckett has spent the last thirty years as a franchisee, a franchisor, and a consultant to companies considering or practising franchising. He was the creator of The Franchise Training Centre, The Third Wednesday Club and The Franchise Support Centre. Paul Monaghan heads The Franchise Training Centre.
BECOMING A DIFFERENT BUSINESS
Many of the skills needed to develop and run a franchised network are the same as those required to run any other business. After all, the prospective franchisor must have established a successful business in order to be able to establish it as a franchise. Marketing, operations, finance, administration and people skills are required whatever the business, and whatever its chosen method of getting its products or services to the end user.
Franchising requires the franchisor to add franchising skills to those which he possesses in running the individual franchised unit, and this is a good time to point out that when a business decides to become a franchised network, it becomes a different business.
Whatever it is that the business does now – running restaurants, selling houses, cleaning offices, styling hair or hiring cars – becomes irrelevant when operating as a franchisor. Sure, there will need to be people providing technical advice on the activities mentioned, but the job of the franchisor is to recruit, train, monitor and motivate people who want to run their own business. Franchising skills are the same whatever the end product or service, and they all revolve around understanding the franchisor–franchisee relationship.
Many people do not appreciate that the quality of the relationship developed between the franchisor and the franchisee is fundamental to the success and longevity of the network. If all the services which the franchisor provides are franchisee-friendly, and appropriate, then that is likely to be a good start.
Taking the time and trouble to understand, and implement, the principles of the franchisor–franchisee relationship is what makes the difference between a successful franchisor and a failing, or at least underperforming, network. Knowing what motivates franchisees, realising what is unique about the relationship between them and their franchisor, and speaking the language ‘franchise-ese’, are critical elements in the process of practical franchise management, the promotion of which is largely the theme of this book.
So, what is different, indeed unique, about that relationship, and who is responsible for making sure both parties are aware of their roles and responsibilities within it? The answer to the second part of the question is easy. The franchisor. But to explain it, they first have to understand it themselves.
WHAT ARE FRANCHISEES?
Firstly let’s consider, what are franchisees? It’s easier to begin by exploring what they are not. For a start, they are not employees – even though they work to instructions and will hopefully be selected with as much, or more, care as would be an employee. They are not customers – even though the formal relationship will start by them buying something from the franchisor, and they will continue to be provided with goods and services in return for some sort of payment. They are not partners – whatever the franchisor’s promotional material may say about working together towards a common aim, they are certainly not partners within any legal definition. So, they are none of these things, but they are all of these things and they will be expected to behave in many of the ways people in these categories would be expected to behave.
Above all, franchisees are people who trusted the franchisor to provide what they said they would provide during the marketing and recruitment process. Indeed they trusted him or her to such an extent that they were prepared to invest, often, their entire resources, and the future prosperity of themselves and their family, in a business venture which they were convinced was likely to be suitable for them. They were probably also told that they would receive initial training, and ongoing support, in order to facilitate their success.
THE IMPORTANCE OF LISTENING
Just rereading the previous paragraph starts to highlight where it can all go wrong. Replace the words ‘likely’ and ‘facilitate’ with ‘guaranteed’ and ‘guarantee’, ‘convinced’ with ‘assured’ and it may just be possible to understand what the potential franchisee heard, as opposed to what the franchisor said.
Prospective franchisees sometimes hear what they want to hear and not necessarily what they are actually told. Some convince themselves that the business is the most desirable opportunity available and do not hear what is said to them, not only by the franchisor but also by their own advisers.
Of course, franchisors may also hear things wrongly during the recruitment process and it is important for them to understand that that process lays the foundations for the relationship. Both parties must appreciate that there is no point in fudging issues. If they have difficulties in communicating at that stage, or do not want to hear what is being said to them, they are likely to be entering into a relationship which will hit problems.
Franchising, as a business sector, is notoriously short of empirical research, but various figures are regularly quoted which include the relative success and longevity of franchised outlets vis à vis independent start-ups, and what motivates franchisees. Interestingly, the former may affect the latter.
Franchised outlets are claimed to be anything between two and ten times less likely to fail, over a given period of time, than non-franchised businesses. A definition of failure is hard to come by because franchising can also help an unsuccessful franchisee to recover his investment by engineering a resale, so many franchisors would not count that as a failure. All this assumes of course that the original research, if indeed there ever was any, was based on franchised opportunities which had been properly developed and piloted.
Franchising attracts people for whom safety and security are among their prime motivators. The ‘what motivates franchisees’ research is said to include various surveys of franchisees who were asked, ‘Why did you buy a franchise rather than set-up your own business?’ and the quoted results from survey to survey seem to have been fairly consistent. Top of the list come things like marketing support, training, use of an existing brand, always wanted to run a business but was scared to go it alone, feeling part of something, and so on. Always well down the list is anything to do with a desire to earn loads of money. Indeed franchisees will often earn less in their new role than they did in employment, but they are happier with the lifestyle.
So when a franchisor hears a franchisee candidate saying they will work hard to make their outlet or area successful, he had better be sure they share an understanding of what ‘hard work’ and ‘success’ mean. If the franchisor hears ‘I’ll get up early and work 14 hours a day, seven days a week to make my business market leader in my territory’ when the candidate is saying ‘Once I’ve dropped the kids off at school, I’ll be able to make at least three sales calls before I hit the golf course’, then trouble is brewing.
- 1.The first rule of understanding and operating the relationship is that the franchisor must explain, unambiguously and in writing, right from the first contact with a franchisee candidate, that what is being offered is the right to operate a proven business system, and to optimise the potential of that system, at an agreed outlet or within an agreed territory, for a defined period, for the mutual benefit of both parties. During that process of explanation the franchisor should define ‘optimise’ and start to agree a plan, objectives and personal responsibilities for the progress of that business in order to deliver that mutual benefit. He should also explain what will happen if things don’t go according to plan. Help will be provided if the franchisee cannot make it work; they will lose their business if they will not make it work.
- 2.The second rule is that a franchisor must make it clear to his own staff, and accept for himself, that if a franchisee has joined a system, and made a considerable personal investment and commitment, based on a promise of guidance, support and established systems, then that guidance and support had better be there and those systems had better work. For recruitment staff, that also means not over-promising or offering services to a standard that will simply not be available – all discussions should be confirmed in writing.
- 3.The third rule is therefore that the standards required of each party must be written down somewhere, there must be processes for monitoring everyone against those standards, and for rectifying situations of poor performance. Franchisors should be equally determined, when necessary, to rid their system of poor performers whether they be employees or franchisees.
- 4.The fourth rule is that it is essential for support staff to treat each franchisee as an individual, and to make an effort to find out what their ‘hot buttons’ are at any particular time. Personal support and motivation can then be tailored for each franchisee in order to get the best out of them, and for them. For example, there’s no point offering a franchisee schemes to generate more sales if he can’t, or won’t, employ enough staff to service the customers he already has.
The franchisor must also understand, and make clear, what the respective roles include.
Broadly speaking, the franchisor’s role is to:
- develop the business and the operating system;
- market the opportunity;
- recruit and train good franchisees;
- create and maintain standards;
- monitor and motivate the franchisees to operate the system properly;
and the role of the franchisee is to:
- operate the system to the required standards.
The franchisor is not there to do the job for the franchisee, and the franchisee is not there to reinvent the wheel. Conversely, the franchisees are not there to provide the finance and take the risk of testing the systems for the franchisor. The franchisor provides the right tools, the franchisee uses the tools right.
While it is normal to generalise about what motivates franchisees, it is important for franchisors to remember two things. Firstly, franchisees are individuals and the details of their prime motivators will differ, even if the themes are similar among all of them. Secondly, those motivators will change over time as the franchisee reaches different stages of development in the franchisee life cycle (see Chapter 17).
Another important aspect of managing the relationship is to be careful not to ignore franchisees who are doing well. It is easy to forget about those who are happy and successful. They pay their fees correctly, and on time, and are relatively undemanding compared to those who are struggling. If they are ignored, sooner or later they will start to question what they are gaining for all the fees they are paying, compared to the lower fees being paid by the people who are being given all the attention, and dissatisfaction may creep in. It may only need a mention in a newsletter, or an award at conference, to keep them onside, but nobody will know that if they never talk to them.
They will also never know whether that franchisee is ‘happy and content’ or ‘happy but wants to do better’. The former may well accept a field visit which involves a long lunch and a chat about the latest football scores. The latter will be offended and frustrated by such a visit and will prefer a business meeting devoted to analysing the performance of his or her business and proposing ways of growing it.
Hopefully it is becoming apparent that franchise support staff need to have finely honed influencing and assertiveness skills, rather than relying on authority and aggression. A field support manager who is used to telling employed branch managers to jump, and expecting them to ask, ‘How high?’ is going to find life very difficult when he learns that, even if he only asks a franchisee to jump, the reply will be ‘Why?’
That does not mean however that someone from a culture where the customer is always right will find the job easy either. The franchisee is not always right, and they will often try to flex their muscles on the basis that, since they’re doing the job every day, they know more about it than someone from the support office. They may well be right in that assertion, but if the person from the support office can factually point out where the franchisee is underperforming against agreed standards then they are entitled to insist that things get back on track and will again need those influencing and assertiveness skills. The franchising field is not a place for shrinking violets or people who prefer to avoid conflict.
It’s all a matter of balance and of finding ways of using mutually acceptable methods to reach the shared goal of building a business network using a common brand and system. Being clear about the respective roles and responsibilities of the parties involved, laying down the ground rules right from the start, then continually monitoring to ensure compliance and improve performance, is the very essence and nature of the franchisor–franchisee relationship.
Its importance is clear:
- get it wrong and neither party will have as successful a business as they could;
- get it very wrong and neither party will have a business at all.