How to play and win

A good franchisor and franchisee relationship is like a successful marriage. Sergio Alderuccio, Director in the Private Client Services practice at PricewaterhouseCoopers explains that not only do you need to select the right partner, it also requires a long term commitment, trust and mutual respect.

There is a wide misconception that making franchisees happy is difficult. This really is not the case. More often than not, disagreements originate from mismanaged expectations, misunderstandings, and differences in opinion over management styles and approaches. In some cases, the divide is so great that it makes a relationship untenable, costing time and money and it hinders future growth. Franchisors can avoid these situations altogether by better managing the relationship from the beginning.

Choosing the right franchisees

In the pursuit of growth, franchisors sometimes sign-on franchisees that do not fit the brand identity of the franchise. Identifying individuals with the right mix of skills, personality traits and a sound business plan, can insure against future disappointment. It is sometimes important to look beyond short-term business opportunities and consider how a potential franchisee will interact with and complement the group.

Bob Jane T-Marts, for example, appoints new franchisees conditional to the successful completion of their orientation and training program. This ensures franchisor and potential franchisee can realistically gauge their suitability to the business and understand their obligations to one other, upfront.

Once franchisees sign the dotted line, they effectively become ambassadors and representatives of the franchise brand. Choosing the right franchisee is in everyone's interest, including existing franchisees, and can impact how external stakeholders and future franchisees perceive the business.

Franchisor leadership

Leadership is not about a wall-mounted mission statement. It is about fostering relationships and bringing out the best in others. Good leaders can clearly articulate their vision for their group and guide others along that same path. This entails transparent and regular communication, the ability to listen, and having empathy for the needs of franchisees. Good leaders are committed to helping their franchisees grow and succeed, and demonstrate this through leading by example, and providing appropriate support mechanisms.

Communication

The key to building strong franchisee relationships is quality communications. While technology has made communicating easier and more convenient, it is no substitute for traditional dialogue. Email as a primary source of communication can often be misdirected or misinterpreted. It is much better to give a personal touch: a telephone call to recognise milestone events, such as a franchisee's new store opening, a marked sales improvement or the birth of a child, will be long remembered.

Quest multi franchisee and former Franchisee of the Year, Robert Sumpton, values his exchanges with Quest founder and chairman, Paul Constantinou, when attending meetings at the Quest head office. He says that a face to face meeting often has more meaning and impact than a phone call or an email. While this does require more effort, a face to face interaction is vital to building long- term goodwill and trust between parties. On the other hand, a franchisee who had been with a service franchise for over 10 years expressed disappointment about senior personnel not visiting him in far north Queensland when attending to other business in his area. Good relationships are built on open dialogue and regular interaction. Wherever possible, franchisors should seek to maximise every opportunity to communicate with their stakeholders.

Other communications

Regular newsletters are an effective medium for communicating information to a wide audience. Newsletters are an optimum medium for communicating and celebrating success. It is important to ensure newsletters are relevant, timely and easy to understand.

Periodic regional franchisee meetings and national conferences are another valuable communication forum. To make these meetings work, it is essential the purpose of these meetings are well defined.

On the other hand, franchisors must be enthusiastic, committed and open minded to exploring new ideas at these forums. Importantly, all meeting actions and agreed outcomes must be followed up to ensure franchisees recognise the value of attending future events.

Franchise Advisory Councils (FACs) are another way to foster relationships among franchisees and share ideas. There is a misconception that Franchise Advisory Councils are there to indoctrinate all franchisees into a single way of thinking. This is not the case, rather these forums allow members to share ideas and receive objective feedback.

The best Franchisee Advisory Councils are constructed with input from both the franchisor and franchisee. Creating a shared environment means both sides have ownership of the processes and outcomes. This ensures everyone has an interest in making the council as mutually productive as possible.

Us and them

The truest measure of a franchise's cultural state of health is how the franchisor and franchisee talk about one another behind closed doors.

A successful and flourishing franchisor is unlikely to make cynical remarks about its franchisees and vice versa. A healthy and respectful environment fosters constructive dialogues, timely submission of reports, and a positive flow of ideas, in the most extreme cases, a negative franchisor attitude can cause a group to fail.

Listening

Effective listening is not easy to achieve, but being a good listener can pay dividends. Scott Ramsay, owner of several Pack and Send franchises, learnt how FACs helped other franchises during a conversation with a Subway franchisee.

When Scott shared his thoughts with his franchisor he was pleasantly surprised when his ideas were adopted and introduced into the network. Their Franchise Advisory Council is represented by a mix of franchisees and franchisor personnel, who meet every six months. Franchisees are nominated by their franchisee peers, as well as the franchisor. Most Franchisees are keen to have their opinions acknowledged. It is important that franchisors create channels where open feedback and knowledge sharing can take place.

Accountability

Few things frustrate franchisees more than asking for help and not receiving a response. While giving bad news or declining a request can receive an unfavourable reaction, not responding can have far greater consequences.

Avoiding a potentially volatile situation can be as simple as answering a phone call, being prompt with email replies, or following through with a promise. Even when answers are not positive, franchisees will often appreciate an honest response over no communication at all.

Likewise, be honest about your own failings and shortcomings. Cover ups, no matter how well packaged, ultimately undermine any goodwill and integrity.

Business planning

Planning is not just for large companies, it is something all businesses can benefit from. Progressive companies, big and small, have a clear idea of where they are, where they want to be, and how to get there. High performing organisations plan and set a path to achieving their goals.

Franchisees draw enormous confidence from well defined objectives, directions and plans. A well considered business plan carries more weight than a polished sales pitch that lacks depth. Franchisee candidates are now savvier than ever so the smart franchisor will win them over with substance and insight, not gimmicks and theatrics.

Franchisee support programmes

To build enduring and profitable franchise relationships, having in place support programs that address franchisees' current and future needs are essential. Field visits are an integral aspect of franchise support. Although there is no 'one size fits all' approach to field visits, all programs should incorporate visitation cycles, calibre of personnel define the scope of the visits. Rod Baecher, franchise support manager for Pack and Send, believes the objectives and parameters of field visits should be established early on into a franchisor's growth. From the outset, Pack and Send have placed an emphasis on face to face interaction. Field visits focus on Key Performance Indicators (KPIs), financial performance, and are a forum for discussing opportunities and challenges. Similarly, Snap Printing runs a Flexible Learning Week for franchisees. At these training sessions specific short courses are provided to the network. Snap Printing supplements its existing support programs with additional head or regional office support in the form of specialist technical, operational, buying, IT and tendering resources.

When it's not working out

Relationships do not always work out. In some cases, relationships may end badly. During these times, do not rely upon impersonal forms of communications such as email and telephone to resolve the situation. Remember, the golden rule is that face to face discussions almost always work best.

If no breakthrough is achieved, mediation is the next best step. Anecdotal evidence suggests that formal mediation is successful in about 80 per cent of situations.

Legal resolutions, which can be costly, stressful and divisive, should always be seen as a last resort, not the first. The disruptions of a legal challenge can have a crippling impact on running the business, the franchisee's business and future franchisee recruitment efforts.

The franchisor should want to work with a franchisee to reach a speedy outcome; to assist them to lift their performance or work on a mutually agreeable exit plan. How a franchisor performs will be watched by other franchisees who will observe their conduct with interest.

A final note

A strong franchise relationship begins with a franchisor that is genuinely committed to the success of its franchisees. This attitude needs to penetrate through to every level of the group.

The absence of a genuine commitment built on honesty and transparency will be quickly discovered by franchisees and create a source of tension. Ultimately, franchisors must never lose sight of the franchisee's need to be profitable. It is astounding how often this single obvious point is overlooked.

This article appears courtesy of Franchising Magazine