Franchisees are the individual units that combine to form a strong franchise organisation. A franchise model is not a mere alternative to corporate-owned stores; instead, when correctly executed, a franchise system should be run as a new business model apart from the brand. What is needed to run corporate-owned units may be different from what is needed by franchisees, who are running the same brand but not within the corporate structure. Franchisors often think of Franchisees as separate entities and may not have a clear idea of where the relationship between franchisors should sit.
The continuum can start from franchisors helping the franchisee get started and rarely touching base from then on, all the way to the franchisor being plugged into the franchisee’s operations, having an active and engaging relationship with Franchisees as they grow.
It often takes some hands-on experience for franchisors to understand what franchising really means for their business. Sometimes, franchisees are already operating in the system and may not enjoy their experience as brand franchisees.
What does it take for a franchisor to develop a franchisee-focused franchise system? Whilst we can deploy many practical solutions and tools, this article focuses on the experiential aspects of building the franchisor-franchisee relationship.
In a Franchisor Franchisee relationship, it is the franchisor’s role to provide value to the franchisee as they grow their business. Depending on where the franchisee is in the lifecycle of the franchise spectrum, the perception of what value is may be different for different franchises.
What is important, though, is the franchisee’s perception of the Value added provided by the franchisor, whether it is in the strength of the branding, marketing reach, know-how, support, quality of products and process, ongoing R&D, supply chain margins etc. is greater than the financial value the franchisee pays to the franchisor. This means if we enter into franchising with the mindset that to train your franchisee well is to train a competitor, then it could very well be that this franchise system will be designed.
Hence, the franchisee never succeeds, which will, in turn, mean the ultimate demise of the franchise system. As the franchisor, there are many elements you can control as defined in your franchise agreement. Still, at the end of the day, franchisees must want to collaborate with you because they see the value-add the franchise model brings to their businesses.
Understanding what Franchisees value at different stages of their franchise journey.
Many franchisors assume that franchisees only look for success and profit when acquiring a franchise. In fact, beyond just the financial aspects, franchisees take on a franchise for a whole host of reasons, from wanting to be a part of the brand, to be passionate about the industry, to wanting to learn management skills as an entrepreneur etc.
The franchisee’s Brand experience has everything to do with where they are at and in what phase they are in of their franchise life. What is their experience when they need help or need a question answered? Is someone ensuring they are reading the operations manual or suggesting they may need more training and development?
A brand-new franchisee’s attention is often focused on getting up and walking. This is not unlike parenting a toddler, just starting to learn how to walk. This is when parents pay extra attention to every step the toddler makes. This is akin to helping a brand-new franchisee set up their franchise, who may require more attention and care, even if the franchisee is making the smallest contribution to your franchise organisation but getting a lot of love, support, and visitations from the franchisor. As the franchisor, your main goal is getting this unit up and out of the gates in its first year.
On the other end of the spectrum, more experienced franchisees, often the highest franchise revenue contributors, end up being the ones most unhappy. The franchisees already running a profitable business and know how to manage their franchises feel left out and that the franchisors only care about the franchise fee and royalties they pay. They lament that they receive much less relevant support than new franchisees and average performers.
These negative sentiments can put a strain on the franchisor-franchisee relationship. In an age where Value creation is so important, franchisees look upon the franchisors to provide guidance and add value to help them with the successful management of their business.
Building a Sense of Unity and belonging
One of the top reasons franchisees fail to renew their franchise terms run out is often not because they have not been profitable from the franchise but because franchisees do not feel a sense of belonging and because franchisors have not done enough to help them build and navigate their businesses. In other words, they did not feel the value in being a franchisee of the franchise network and did not anticipate any changes in the future. On the other hand, franchisors may feel like they have done a lot for their ungrateful franchisees. So where, then, is the disconnect?
Often, these situations can arise due to a simple reason like a failure to communicate and manage expectations as well as a lack of documentation. These seemingly small and everyday gaps can snowball to create a larger problem when franchisees perceive a lack of care, sincerity, and accountability from the franchisor. After all, the franchisee is an essential “customer” for the franchise system, given the fact that franchisees carry the brand name and offer the products and services of the franchisor.
It goes to reason that the franchisor should really be paying attention to the overall experience a franchisee has whilst being a part of the network. It is important to make the franchisee a part of the “Franchise Team”, “Franchise Family”, or “Franchise Network”.
Having the Right Franchise Management Team
Often, brand owners invest time in hiring store managers, outlet teams, training managers and even an HQ support team. However, when it comes to managing their franchise system, franchisors are often tempted to have the existing management team double up to meet the needs of the franchise network.
Some franchisors do hire a dedicated headcount to support the Franchise system, and the franchise Operations manager usually occupies this role. This means much of the franchisee management is left to this Franchise Operations Manager. Whilst this sounds like a single role, it does cover responsibilities ranging from new franchisee onboarding, coordinating training and interactions between franchisees and HQ departments, updating operational documentation, ensuring reporting, quality service, compliance and working with franchisees with their growth plans.
To succeed, a committed franchisor should consider bringing franchising into the forefront of its business growth plans and place the right personnel to support the franchise system instead of having the franchise network piggyback on the existing operations.
When a franchise team is in place, the Franchise Manager’s role can shift from simply policing the franchisees to one whose focus is to add value and improve the franchisee’s overall experience.
Franchise Managers can have value-added conversations with the franchisees by bringing valuable insights to help them finetune their operations and work with them to ensure consistent revenues and spot potential problem areas before they happen.
Have meaningful and engaging performance conversations with franchisees
To have meaningful and valued added conversations that lead to impactful actions with franchisees, Franchisors need to have access to data regarding the Franchisee’s performance. Since so much information is available but hard to pull together, franchisors only rely on extracting the lowest-hanging data, like financial performance from franchisees. However, financial data only provides Lag statistical information, which is not the same as predictive franchisee performance indicators.
In order to provide value-added support to franchisees, franchisors need to be in the driver’s seat, providing support in terms of driving training quality performance, providing support on how the stores are performing operationally and offering systematic onboarding programs to help franchisees get their new team members up to speed.
Leveraging Franchise Management Software
Developing the know-how and content to offer training, audit programs, and onboarding programs is already a huge step. However, implementation of these programs can be very cumbersome if done on a manual basis. The effort to execute, record and collate all this data can be daunting if daily tasks and challenges constantly bog down the franchise management team.
Having franchise management software to help schedule, assign, record and train can greatly reduce human effort, allowing the franchise managers to focus on engaging the franchisees. Also, add value by offering insights that can help the franchisee improve operations ahead of time instead of looking into the past to discover what went wrong. This allows the franchisee and franchise manager to explore what could be done to improve or enhance performance that impacts the bottom line.
Changing the franchisor-franchisee relationship paradigm
All this can be accomplished if we take a different view of the relationship between the Franchisor and franchisee. Instead of adopting a Top-down, service provider approach, franchisors could look upon their franchisees as customers they need to delight so that they are happy to be a part of the network and keep supporting the franchise organisation.
All this sounds like a lot of effort. Is it worth a franchisor’s time and expense?
It is when you also consider that:
- Franchisees who fail to see the value add in contributing to the franchise network may end up becoming competitors.
- The cost of recruiting and onboarding new franchisees can amount loss of time to scale the franchise network.
- The loss of franchisees can negatively impact the morale of your other franchisees.
- Franchisees who are not operating optimally not only fail to add value to the brand but can cause harm to the brand.
- The more successful franchisees you have in your network, the more the value of your franchise brand and the higher your potential valuation.
- The documented and systematic know-how embedded in your quality operations will also add incremental value to your franchisee operations, your franchise management team, and the value of the Intellectual property on your platform.
Talk to our team today to see how we can help you manage all the different quality operations aspects of your franchise so that you can focus on your franchisee system’s growth goals.