HOW HEALTHY ARE YOUR FRANCHISE RELATIONSHIPS?

"When I started in this business my franchisor treated me like royalty - now I am treated like royalties!"

This comment from a franchisee sums up the challenge facing franchisors who are striving to attract new franchisees while also maintaining a team of happy campers.

While some franchisors may prefer to put their head in the sand when it comes to franchisee satisfaction, if they want existing franchisees to recommend their franchise system (the most cost effective way to grow), they simply have to take this issue seriously.

Why Franchise Relationships Get Strained

Of course, maintaining constructive relationships with franchisees is a lot easier to talk about than it is to put into practice. Indeed if you are a franchisor, this is possibly an ongoing challenge. There are six common reasons for this.

1. Stress. When people are stressed they get cranky and difficult to deal with. Whether you are a franchisor or a franchisee, financial and workplace pressures will always test your patience and resolve. If stress levels get too high they can cause erratic and hostile behaviour which can lead to a breakdown in communication and relationships.
2. Change. The ongoing changes that have been sweeping the world are also impacting on franchise systems, resulting in a constant need to innovate. This means franchisees often have to adopt new systems, reinvest in their business and sell new types of products or services. Most people resist having change foisted upon them which can also create a strain in the franchise relationship.
3. The Law of Perception. We may think we have clearly explained something, but people will always put their own interpretation on what they hear. The saying “When perception meets reality, reality always comes out second best” is very true. What the listener heard is more important than what was said. For instance, franchisees sometimes misinterpret a franchisor’s motives for taking certain decisions and this can undermine the trust so important for a healthy franchise relationship.
4. The Franchise E-Factor. Franchisees will typically move through six psychological stages in their relationship with their franchisor. I call this the Franchise E-Factor, which is characterised by the stages Glee, Fee, Me, Free, See and We. Franchisees may quickly move from initial feelings of GLEE (“I am very happy with all you have done to get me established”) to the third, ME, stage (“I am working my guts out and you, Mr Franchisor, are providing little if no value”). Not all franchisees make it to the sixth, WE, stage (“I can see that together we can achieve a lot more than if I just try to battle it out on my own”). The more franchisees that are stuck in the middle stages of the Franchise E-Factor, the more unrest there is likely to be in a franchise system. (Editors note: More information on the Franchise E-Factor can be found in Nathans books, Profitable Partnerships and the Franchise E-Factor available from www.franchiserelationships.com)
5. Lack of respect. Whether you call it people skills or just good manners, franchisors need to show their franchisees adequate respect and consideration. Franchisor leaders that are overly authoritarian, intimidating or insensitive are likely to create a residue of resentment in their franchisees. At some stage this is likely to express itself as a relationship breakdown.
6. Incompetent support. Franchisees quite rightly expect to receive reliable support from people who know what they are doing. As a company grows it is common for the franchisor team to find itself out of its depth in managing the more complex demands of a larger corporation. This can also undermine its credibility and put strains on the franchise relationship.

Why Measure Franchisee Satisfaction

Most franchisors will have experienced problems with individual or groups of franchisees due to one or more of these areas. We have found that as a franchisor management team becomes more perceptive of these inevitable challenges they also become more capable of successfully managing them.

A good way to tackle this challenge is by applying the principle, “If you can’t measure it you can’t manage it”. In other words, measuring the state of your franchise relationships is good business practice. We would suggest a thorough survey at least every two years would be a good idea.

There are three common myths that deter franchisors from embarking on this journey.

Myth 1 – “There are more important things to focus on”. We have found that franchise systems that are plagued by poor relationships and do not face up to this challenge are not commercially sustainable. The cost of litigation, the distractions, the stress on the parties and the decline in customer focus inevitably takes it toll.
Myth 2 – “This stuff is too difficult to measure”. The fact is attitudes and feelings can be measured in a reasonably objective manner. This can be done by creating a forum in which people can give you feedback, either in the form of a survey, an interview or a focus group. What is essential of course is to ask the right questions and to listen to the answers with an open mind.
Myth 3 – “Asking them what they feel will just stir them up”. While seeking franchisee feedback can be challenging, it sends the right messages to franchisees that the franchisor is interested in their views. This in itself can prove to be a positive trust building initiative, especially if the feedback is acknowledged and the process is professionally managed.

How To Find Out What Franchisees Want

There are several ways to discover what franchisees want. We can interview them individually or in groups and ask them questions about what they like and dislike about the franchise system.

We can also ask them to complete a survey of carefully worded questions. To gain greater honesty it is preferable that the responses are anonymous. The use of an external consultant can ensure confidentiality.

There are two types of questions typically used in franchisee surveys. The first are open-ended questions such as:
     What do you want and expect from your franchisor?
     What’s good about being a franchisee with this system?
     What would you like to change about how this franchise system operates?

The other type of questions are linked to rating scales, which enable responses to be quantified. Results can then statistically be analysed and compared with industry benchmarks. For instance, one question we ask franchisees is, if they had a choice, how likely would they be to buy the franchise again. The industry benchmark in our database for a positive response is currently at 72%.

At the Franchise Relationships Institute we use open ended questions and rating scales, as both approaches have unique benefits. We also ask franchisees to rate both the importance of specific services provided by their franchisor and how effectively these services are delivered. This enables a franchisor to distinguish high priority services from “nice to haves” and to determine any significant gaps in how effectively the most important services are being delivered.

Our team of psychologists have been researching the franchise relationship for over 15 years. Based on this work we have developed a tool, The Franchise Effectiveness Survey, for measuring and benchmarking franchisee satisfaction and the health of a franchising culture. While positive results can help a franchisor in marketing its franchise system to prospective franchisees, we believe the more important purpose of conducting a survey is to promote a culture of continuous improvement within the franchisor management team and let your existing franchisees know that you do care!


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This article is © copyright Greg Nathan Pty Ltd and has been reproduced with permission. More information on Greg Nathan’s work can be found at www.franchiserelationships.com.