Maintaining the Franchise Relationship

1. Stress. When people are stressed they frequently become 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 are too high they can cause erratic and hostile behaviour leading to a breakdown in communication and relationships.
2. Change. In franchise systems today there is an unrelenting pressure to keep changing in order to remain competitive and relevant. This means franchisees often have to adopt new systems, reinvest in their business and sell new products or services. Most people resist having change foisted upon them. This can also create a strain in the franchise relationship.
3. The Law of Perception. A franchisor may believe he/she has clearly explained something, but people will always put their own interpretation on what they hear. The saying “When perception meets reality, reality always comes off second best” is very true. What the listener hears is more important than what is said. For instance, franchisees may 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 typically move through six psychological stages in their relationship with their franchisor. I call this the Franchise E-Factor, which is characterized 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 set me up”) to the third, ME, stage (“I am working my guts out and while you, my franchisor, are providing little or 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.
5. Lack of respect. Whether it is called emotional intelligence, people skills or just good manners, franchisors need to show their franchisees respect and consideration. Franchisor leaders that are overly authoritarian, intimidating or insensitive are likely to create a residue of resentment in their franchisees. Over time this may trigger relationship breakdown.
6. Incompetent support. Franchisees quite rightly expect to receive reliable support from franchisor management. As a company grows it is common for the franchisor team to find itself struggling to manage the more complex demands of a larger corporation. This can also undermine its credibility and strain the franchise relationship.

Why measure franchisee satisfaction?

Most franchisors will experience problems with individual or groups of franchisees as a result of difficulty in one or more of these areas. As a franchisor team becomes more sensitive to these challenges they also likely to become more competent in managing them.

A good way to tackle this challenge is to apply 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. I would suggest a thorough survey at least every two years is a good idea.

In my experience there are several reasons why franchisors resist measuring franchisee satisfaction.

1. “There are more important things to focus on”. In our experience franchise systems that are plagued by poor relationships and do not face up to this challenge will not remain commercially viable. The cost of litigation, the distractions, the stress on the parties and the decline in customer focus inevitably takes its toll.
2. “This these things too difficult to measure”. Attitudes and feelings can be measured in a reasonably objective manner. This can be done by creating a forum in which people can give feedback, either in the form of a survey, an interview or a focus group. What is essential is to ask the right questions and to listen to the answers with an open mind.
3. “Asking franchisees what they feel may open a can of worms”. While seeking franchisee feedback can be challenging, it sends the message to franchisees that their franchisor is interested in their views. This can prove to be a positive trust building initiative if the feedback is acknowledged and, where appropriate, change implemented.

How to measure franchisee satisfaction

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

Have them to complete a carefully formulated survey. In order to encourage honesty and frankness, it is preferable that the responses be anonymous. For this reason 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 in this system?
• What would you like to change about how this franchise system operates?

The second type of question uses rating scales to allow responses to be quantified. Results can then be analysed and compared with industry benchmarks. For instance, one question we ask franchisees is whether, given a choice, they would buy the franchise again.

The use of both open-ended questions and rating scales has particular benefits. For example, asking franchisees to rate both the importance of specific services provided by their franchisor, and how effectively these services are delivered, enables a franchisor to identify high priority services and to determine any significant gaps in the effectiveness with which these services are being delivered.

Fifteen years of research into what franchisees want from their franchisors has thrown up the following significant findings.

Help to develop their business

Not surprisingly franchisees want their franchisor to negotiate deals with suppliers that will reduce their operating costs, and to provide ideas and systems for improving productivity.

They want regular access to useful and relevant business information that will help them grow their business and stay in control of their financial position, for example a benchmarking program that shares results on agreed key performance indicators.

While franchisors are often effective in providing initial franchise training, franchisees want more ongoing training to improve their skills in the areas of people management, business planning, goal setting and marketing. This is especially true of more mature franchisees who tend to become cynical and dissatisfied if their evolving needs are not met.

Effective marketing

Two important factors for franchisees are advertising that attracts new customers and a strong brand. In fact many franchisees buy a franchise on the strength of the brand. Franchisees also want an effective marketing strategy that will give them an edge in their local area, and help with the skills to convert enquiries into sales. They expect ongoing innovation that will attract customer interest. Finally they value unique promotional tools such as point of sale signage – things they would not be able to source if they were on their own.

Being part of a group

Franchisees often refer to the benefit of being part of a united, cohesive group. In particular they value the opportunity to interact with other franchisees at meetings and conferences. However they commonly refer to a desire for meetings to be more interactive. They also say they want more opportunity to have their ideas, questions and concerns heard by their franchisor through open forums and discussions. The introduction of operational changes without adequate consultation is particularly frustrating and puzzling to franchisees who feel they often have more insight about operational matters than their franchisor.

Credible leadership

Another theme to emerge from our research is that franchisors often have clear goals for the organization, but fail to provide franchisees with a sense of where they fit into the big picture. The result is that franchisees can feel threatened rather than excited by, for example, a company’s expansion plans. Consistent with other international research on what people want from their leaders, franchisees expect the franchisor team first and foremost to be honest and fair in their business dealings. A competent management team is also seen as essential. Loyalty from a franchisor is important. Having supported the franchise system over a period of years they expect this to be reciprocated. For instance resent may arise if franchisees feel the company has an undue emphasis on attracting new people while ignoring the needs of existing franchisees.

Getting on together

Most people dislike conflict. In fact unresolved conflict has emerged in our research as a major reason why people want to sell their franchise. Some conflict is inevitable at times in a franchise system. Our studies have found that in a mature franchise system, at any time there is likely to be around 17% of franchisees who feel they have a serious current or impending disagreement with their franchisor. While this does not mean these people are in litigation or formal disputation, it does highlight the need for robust conflict resolution processes as an integral part of every franchise system. It also highlights the need for members of the franchisor team to be able to have conversations with franchisees in which difficult issues can be discussed and resolved in a mature and respectful manner.

Concern for the franchisee’s success

Franchisee advocates are vital for growing a franchise system. Our research suggests that a strong predictor of whether a franchisee will recommend a franchise to others is whether he or she feels the franchisor is genuinely concerned about his or her success. Indeed, franchisees frequently say they would love to have their franchisor call, just to see how they are going, without any ulterior motive. On a related matter, quick response times to calls and emails are also frequently rated by franchisees as vital.

It’s not all about the money

Sometimes it’s assumed that because people are in business, everything is about the money, contracts and numbers. Whether we like it or not, much of our behaviour is influenced by emotions not by logic. While return on investment is one of the drivers of franchisee satisfaction, our studies suggest that other issues such as feeling cared for, optimism for the future, confidence in senior leadership, and the relationship between a franchisee and the franchisor management team are very important. In conclusion while a profitable franchisee is no doubt more likely to be a happier franchisee, franchisors should not underestimate the power of courtesy and respect in building a prosperous, happy and vibrant franchise system.

Greg Nathan is a corporate psychologist and author of the books Profitable Partnerships, The Franchise E-Factor and the Franchisor’s Guide to Improving Field Visits. He is Managing Director of The Franchise Relationships Institute .