And if you think you do, how do you know what you think you know?
It might surprise you that I can say with a high degree of certainty that most franchisors do not know how they are thought of and perceived by their franchisees. And especially in franchise relations, perception is truth. It is the reality that all franchisors must live with and the reality they must deal with every day.
Franchisors have different ways and methods of trying to communicate with and understand their franchisees and their needs. They might conduct field visits and inspections, arrange various meetings throughout the year, maintain telephone and email communications, newsletters and often create Franchise Advisory Councils. Yet in spite of all of these, most franchisors still don’t get it. They still do not really know the hopes and dreams of their franchisees, their true concerns and frustrations with the franchisor and what the future has in store for them.
In making these statements I can just sense an array of strong reactions from franchisors reading this. I can hear the words, “What is the basis for these strong accusations?” “Who is he and how does he know what he thinks he knows?” Those are fair questions that certainly deserve a fair response.
In my more than 35 years in franchising, I have been a franchisor, a franchisee, Past Chairman of the International Franchise Association (IFA), board member of several franchise companies and a consultant to hundreds of companies. In these experiences, I have attended dozens, if not hundreds of franchisor/franchisee meetings and I and my consulting staff have personally interviewed hundreds of franchisees. These interviews have been part of many consulting assignments intended to evaluate and assess the effectiveness of franchised networks. They are prompted by franchisors who see the value in learning how they are viewed by their franchisees and also by potential acquirers of franchise networks who realize that comprehensive due diligence must include an assessment of the franchisor/franchisee relationship. In addition, many financial entities considering various loan and equity transactions with franchisors understand that it is essential to conduct due diligence that includes more than the obvious financial and legal evaluations. Whether it is an enlightened franchisor that truly wants to know what their franchisees think of them or an entity contemplating an acquisition or a financial transaction involving eight figures, knowing the health of the franchise relationship is an absolute must.
The initial part of an evaluation includes in-depth discussions with franchisor management. When asked the question, “how would you describe your relationship with your franchisees?”, in the great majority of cases their answers range from terrific to pretty good. But then when the same type of questions is asked of franchisees, the answers are so different that it becomes clear that most franchisors do not truly know their franchisees and are in varying stages of denial. It should be pointed out that the interviews are conducted in person by very experienced consultants and with a pledge that whatever is told to them is totally confidential. It then becomes a cathartic experience for franchisees. An outpouring of concerns and problems is typical. There is much negative criticism and an equal amount of constructive criticism yet the overwhelming majority of franchisees only want things to get better and to have the franchisor understand their concerns and be able to better communicate with them. In some cases, the problems are more severe and is either approaching a high degree of acrimony or leading to the likelihood of litigation.
Franchisors who understand the value of knowing franchisee perceptions have so much to gain. They not only open up a previously closed door but are able to receive recommendations as to how to make the system better for their benefit and that of their franchisees. Potential acquirers of franchise companies can take steps to know in advance what the true health of the franchise company is and what if anything should be done to make it better. We have seen where an entity considering a $40 to $50 million transaction restructured the proposed deal because of what we learned in our franchisee interviews, and we have experienced some well known and enlightened franchisors who only wanted their relationships to be better. They were able to take the information received and analyzed from franchisees and convert it into positive action steps with immediate and long term benefit to both parties, and to the benefit of the entire franchise system.
It is common in many segments of franchising to utilize mystery shoppers to help assess the performance of a unit and evaluate the customer’s buying experience. Isn’t it ironic that most of the companies that see the value of mystery shopping programs do not likewise understand the value of some form of franchisee mystery shopping? It is a win-win proposition if seeking the truth and improving their company’s performance is a primary objective. It further amazes me that companies considering major financial investments in companies with hundreds and thousands of franchisees do not usually see the critical need to understand the health of the company’s relationship with their franchisees as part of their due diligence process.
Lastly, there is an additional and very powerful benefit to taking the time to know how your franchisees truly perceive you. When they understand that you are interested enough to have an evaluation performed by outside professionals who are totally objective, and that your only interest as a franchisor is to make the system as good as it can be for both parties, they have the utmost respect and admiration for your initiative in taking this step. We have seen franchisors that were on the verge of serious problems turn things around because of what we were able to learn from franchisee interviews; and we have seen some wonderful companies with highly recognized and respected brands whose goal was to be a “World Class Franchisor” learn enough in the process to achieve that goal.
Success in franchising is not measured solely by the financial results of a franchisor. The measurement must include the financial results and satisfaction of franchisees. About this there should be no question. Yet for a variety of reasons, most of which totally defy logic, most franchisors today still do not know what their franchisees really think about them.