We often hear franchisors speak about transparency or visibility into franchisee performance. It is usually framed as being something good and valuable and lauded as ‘best practice’. There tends to be a sense that it is in everyone’s best interest.
But what exactly do franchisors mean when they say they want transparency and why is it so important?
Most times when franchisors talk about transparency they have good intentions.
For instance, they want to know how things are going financially so they can do their best to help franchisees. Transparency sounds something we would all agree is good.
However, many people are reticent about sharing details of their business performance. Despite the fact that we are getting used to more transparency in our lives, for example sharing information with Facebook, there’s some stuff we are reluctant to share so openly.
Most business people are very cautious about sharing their financial results with others. This is why it’s so important to understand why a franchisor is asking for information and to use precise rather than vague language.
What do we mean by transparency?
Transparency has reached the status of a buzzword in some circles. For example, we hear leaders promise ‘greater levels of transparency’. It has become fashionable as marketing speak when a business wants to demonstrate that it is different from others (those that lack transparency), or to gloss over previous lack of honesty. It is this vague use which turns a word into a buzzword.
However, transparency has a meaning of its own. It means something is clear and easy to perceive.
A business is acting in a transparent way when it prominently discloses the contents and source of ingredients in food products. Another is transparent when they make public to their employees the formula for determining pay based on role, seniority and experience. A franchisor acts transparently when they distribute minutes of marketing committee meetings to all franchisees.
When a franchisor says transparency
What are franchisors getting at when they talk about transparency from franchisees? I think there are at least two ways this word is used.
We often hear people talk about transparency in the context of financial reporting. For instance “We want you to be transparent about your numbers”. What is usually meant is something like “We would like you to provide a copy of your profit and loss statement each month or quarter.”
The second use, and one I suspect is becoming more common, is in the context of employment arrangements.
In the light of changes to the Fair Work Act, some boards and directors have doubtless become much more interested in the terms under which franchisees’ staff are employed and how they are paid. No doubt some are contemplating whether to ask for franchisees to report the pay arrangements they have with their employees, but what may be called for is ‘more transparency about wages’.
In my view, it would be better to drop the buzzword and say what we mean! But whether or not the word transparency is used there are good reasons for franchisors to foster an environment where information is provided by franchisees.
Everyone in a franchise network stands to benefit when franchisors know the operating results of franchisees and use this information effectively.
It means that trends and patterns can be identified and acted on. When we know the specifics about the income, expenses and debts of a business we can rightly identify areas to work on. Without proper financial information any conversation about business operations will not be fully informed.
What about employment conditions and wages? Some franchisors may want their franchisees to be prepared to reveal the details of employment conditions and wages. Sharing of information can help the franchise avoid the reputational damage and financial penalties that can result from breaching the Fair Work Act.
So, a push for more disclosure by franchisees can make sense, for example, if there are concerns about whether employment arrangements are in line with the law and if there’s a plan to help franchisees rectify arrangements where necessary.
Without information, we can’t make properly informed decisions in business, whether that’s for the overall franchise direction or for an individual franchisee.
And with increasing public and government concern about pay and conditions, it makes sense for franchisors to be more interested in the details of employment matters.
Whether we call it transparency, or drop the buzzword and talk about the information we’re really after, sharing a business information is helpful within a franchise network – even if it seems personal.