Franchise sales or support - the franchisor dilemma! by Phil Blain of Franchise Right
As consultants to the franchise sector for well over twenty years, our experience has taught us that no matter if a franchisor has a few franchisees, or indeed hundreds, the franchise sales versus franchisee support dilemma is an eternal problem. The issue simply won’t go away because it changes as the business grows and as internal and external factors influence the business.
It is necessary to assume that the business is already profitable and proven – or it shouldn’t have been franchised in the first place. It should also have been proven at arm’s length from the originator and hopefully have been in existence for a number of years, although this is not always the case.
In the initial franchise stages the focus clearly has to be on the tearaway success of the first few franchisees. This is far more important than the sale of many franchises. Far too many new franchisors are so enamoured by the dream of the end goal that they launch into furious (and costly) franchise recruitment campaigns. They quickly become disillusioned with their lack of success in disbelief that others cannot see what they can see? The result is frustration, and worse, the lack of attention to the few who did see the dream and bought into it by becoming the first few franchisees.
It is the validation of the model that provides the foundation building blocks for the mature franchise system. A franchisor should have absolute confidence in referring new enquirers to the existing franchisees for comment and endorsement. This will only occur if the franchisees are happy with the level of support they have received and the financial returns they have generated are commensurate with their investment.
So rule no.1 is to make sure the first few franchisees are advocates for the brand.
However, then comes the tricky bit, which again involves a balancing act for the franchisor. To comply with the above philosophy, the new franchisor swamps the first franchisee with love and attention. There are two drawbacks in this approach.
- Firstly, the franchisee accepts with glee all the help they can get, but eventually moves to a point of view that the franchisor is being intrusive or even prying; and the franchisee craves to be left alone.
- Alternatively, the franchisee laps up and becomes dependent upon this high level of support and then feels abandoned when the system grows as many more new franchisees all crave attention which the franchisor must provide. It’s the “You don’t love me any more” reaction.
So let us now assume the franchisor has successfully managed the support at a level that is respected and appreciated by the early franchisees without becoming overly burdensome upon the franchisor. Whilst his own system is reaching maturity, the franchisor is now faced with franchisees at many different levels of maturity. Some are still raw, some are growing nicely, some may be struggling, some are at the top of their game and others are declining or losing interest. What a terrible problem for the franchisor. How on Earth can he provide the differing levels of support and satisfy the varying needs of all these groups of franchisees? What a daunting task!
The first priority is to enhance the “family” feel that franchising should always have as part of its culture. Remember the guy that felt abandoned? Franchisors must put systems in place to ensure that EVERY franchisee is contacted verbally EVERY WEEK. That’s not an email or a letter. It’s a phone call or preferably a face to face visit or meeting. Our sector continually espouses that old adage “In business for yourself but not by yourself", so if the franchisee doesn’t hear from anyone what else could they feel but forgotten or unimportant. Now the CEO cannot call everyone every week but if the franchisor’s staff ratios are correct it is certain someone in the system can make the time.
So rule no.2 Franchising is about people to people – to forget that is the ultimate sin.
So we recognise that different franchisees require differing support mechanisms according to their experience. Some are easily categorised where others are not.
The “L Plate” embryonic franchisee needs operational overload support.
The “P Plate” franchisee needs to be nurtured and managed (taught to stick to the system and not rebel) but shouldn’t be so high maintenance. Focus should now be on building the business by benchmarking and perhaps more administrative advice such as effective staff rostering.
The “Qualified Driver” franchisee is a dream to deal with and often can contribute to the system as much as the franchisor can give back. They still need loving and attention but should have their opinions respected by this stage and if necessary acted upon. Perhaps assisting with their local area marketing or budgeting forecasts are what these franchisees need.
The “Disqualified Driver” franchisee needs to be attended to swiftly and correctional behaviour or procedures immediately enforced for the franchisor must protect the brand for the sake of all the other franchisees. This will require an audit and careful sensitive handling if the overall relationship is to be protected. If the driver is a repeat offender then he needs to be managed out of the system.
So the driver examples above are generally operational categories so, rule no. 3 is to Provide the support at the level that reflects the business position of the particular franchisee. Meet the franchisee where they are at.
If life were that simple, then every franchise would have a traceable path to success. But as we have seen, franchising is about people. And people get sick, are moody, get depressed, get overly enthusiastic and behave irrationally, have marital problems and numerous other outside influences effect the business performance. A good franchisor or Business Development Manager should be able to interpret these situations and continually offer what appropriate assistance they can. E.g. While you are sick we will provide a Company Manager at cost to run your store for you. While your wife is in hospital, we will do your invoicing for you. These tokens of support, outside the obligatory ones are greatly appreciated by franchisees and reinforce the “We’re in this together” notion.
Rule number 4 – repeat rule no. 2.
The Pareto Principle is well known to many franchisors. They spend 80% of their time on the franchisees that produce 20% of their revenue. If a franchisee that is in that 20% has prospects for growth and responds well to advice, then the time is well invested.
Many franchisors we deal with do not do enough critical analysis on where their support staff time and costs are allocated. Many get a severe shock when eventually they do conduct the exercise and then embark on a restructure.
Rule number 5. – franchisors must do self-analysis.
Franchisors continually analyse franchisee performance – but forget that if the franchisor is inefficient then how can they earn the respect from franchisees or expect to grow profitably? And if they don’t possess the skills internally then they need to invest in the advice from a third party and not just press on blindly.
There is no magic solution, there are no magic wands. But patience, mutual respect and understanding and regular communication all go a long way to balancing the support see saw. Even to the point that it is not necessarily the support a franchisor may give, but the manner in which it is given. Remember rules 2 and 4 !
Phil Blain and Sue Campbell are the Principals of Franchise Right
P: 0409 808 515
F: 03 9555 3013
Phil Blain of Franchise Right
In 2014, Phil and Sue Campbell formed the franchise consultancy Franchise Right. Phil has been on the Board of the Franchise Council of Australia, President of the Victorian Chapter and is a Fellow of that organisation, holding a Diploma of Business (Franchising) amongst various other qualifications.