Finding and Keeping Good Franchisees

by Greg Nathan, Managing Director,
Franchise Relationships Institute

Using the Seven Laws of Loyalty to Build a More Successful Franchise System

Most franchise relationship problems can be traced back to the selection stage. At some stage, someone, either the franchisee or franchisor, has got the wrong impression of what is required to make the franchise relationship work.

For instance a franchisee may not have understood what he or she has to do to drive their business to success. (Perhaps they think their franchisor should be doing the driving). Or the franchisor may be ignorant of certain attributes that are going to ultimately undermine a franchisee’s success. (These can range from personality characteristics such as a low tolerance for frustration through to financial problems).

There are two common pitfalls in the field of selecting people:

  1. We fail to clearly define what we are talking about.
  2. We tend to make decisions based on invalid information.

Let’s look at these more closely.

Defining What We Mean

When discussing human behaviour we often use or hear statements such as “She is a team player”, “He is passionate about his work”, “She has no integrity”, “He has a bad attitude” and so on. The assumption is that everyone shares the same meaning of what we are talking about. However this is seldom the case.

One often-quoted management principle says, “If you can’t measure it, you can’t manage it.” True enough. However before you can measure something you have to first know what you are measuring. So when we are talking about human behaviour, we need to be as specific as possible and define what we mean.

What do we mean by success, for example? I define a successful franchisee as someone who:

  1. Runs a profitable business, ie. they know how to control their costs and maximise their sales.
  2. Builds a base of satisfied customers, ie. they understand that building a business is about people feeling good about dealing with you.
  3. Supports the franchise’s systems and brand. (A franchisee who makes a lot of money but is continually bagging or undermining your franchise system is not what I call a successful franchisee because they are not going to last long).

What Makes a Successful Franchisee?

A question on the minds of many franchisors is “What makes a successful franchisee?” After researching this question I have found that successful franchisees consistently do a number of things that can be grouped into four key areas.

Firstly they keep track of information and trends that tell them how their business is performing. This of course means they can use a computer, read figures and they spend time each week tracking their performance against set criteria.

Secondly, they set achievable goals because they are outcome focussed and slightly competitive by nature. It is said that luck is where preparation meets opportunity. A successful franchisee takes advantage of opportunities to promote and grow their business because they have a vision for the future of their business.

Thirdly, they understand that all the analysis and visioning in the world won’t get them anywhere unless they are prepared to work hard and maintain high standards of service delivery. This means they keep organised and plan their life so they can sustain the long hours and family sacrifices necessary to launch and sustain a successful small business.

Finally they understand that business is ultimately about people and that unless they gain the support of the people on whom their business depends, they have nothing. I am not just referring to customers but also their staff, their family, their suppliers, their franchisee peers, and even their franchisor!

The Man Who Could Not Find His Keys

The following story illustrates the other common trap in selection, (making decisions based on invalid information).

One night while taking his dog for a walk a fellow came across a neighbour who was scrambling around on his hands and knees under a street light outside his house.

“What are you doing?” he asked.

The man on the ground explained that he had lost his car keys.

Being a good neighbour, the fellow with the dog offered to help. After 10 minutes of crawling around the ground, the keys were still not to be found.

“Are you sure you dropped them here?”

“No. I dropped them in the garage.”, was the casual response.

“So why have we are we searching for them on the nature strip?”

“It’s dark in the garage stupid. The light’s much better out here!”

When it comes to selecting franchisees it is not uncommon for franchisors to do the equivalent of looking under the street light for a sign that a person is suitable.

For instance, they look at attributes that have little relevance to success in the business and ignore attributes that really do hold the key to success or failure. The reason for this of course is that relevant information may not be readily visible or might require extra time, energy and inconvenience to uncover.

What Are You Looking For?

The point is this. When selecting franchisees you need to be clear on what you are looking for and then have good systems in place to direct your mind to looking for these things in the right places — and not just from your comfort zone.

Take for instance, the phenomena known as “The Halo Effect”. This is where we make decisions about a person based on a generalisation from an unrelated aspect of their personality, behaviour or background. For instance a candidate’s uncle might be the highest performing McDonalds franchisee in the state. Impressive? Maybe. But what does this tell you about their suitability to your business? A candidate may be attractive and have a great smile. But what does this tell you about their ability to handle pressure, manage staff, use a computer, resolve conflict, keep organised, and so on? In a word — nothing.

By the way, here are a few tips on how to protect yourself from the Halo Effect.

  • Keep an open mind — during initial interviews or discussions. Be slow to make generalisations based on first impressions or one piece of information.
  • Be prepared to change your opinion in the face of new information. Don’t treat the assessment as a test of your superior psychic or intuitive abilities!
  • And of course, have an objective and clearly defined attributes profile to compare people against. This is a specific list of qualities and characteristics you are looking for because these have been shown to correlate with success.

Franchisors that invest in thorough, systematic and professional selection processes and follow these up with good training and induction systems can be reassured that they have spent their time and money wisely. Because they will have got the two fundamentals right — being clear on what you are looking for and making judgements based on good information.

The Real Business of the Franchisor

This brings us to understanding the real business of the franchisor. I define this as:

“Putting people into business and providing them with the systems and support that enables them to achieve their personal and financial aspirations.”

In other words, as a franchisor you are really in the systems, training and motivation business. Technical excellence and produce innovation may get you started but it is certainly not enough to sustain long-term growth and prosperity for you and your future franchisees.

So now we know the sort of person we are looking for — someone who analyses how their business is tracking, who is prepared to put in the hard yards, who sets goals, and who has good people skills — how do we find such people?

Like most of the challenges we face in life the answer to this question is usually staring us right in the face.

Let’s Talk About Customers

Just for a moment, let’s talk about customers.

Anyone that has built a successful business understands that, in a sense, all customers are not equal. Some customers spend more with us, pay their bills on time and even recommend us enthusiastically to other customers. On the loyalty ladder we call these latter people “advocates” and they are the most cost efficient way of building a business you could ever find. It is estimated that if a business focussed more on building advocates it could easily double its profits.

The opportunity here for franchisors wanting to market their franchise is obvious. The most cost efficient and powerful method of “selling more franchises” is to build advocates out of your existing franchisee base. People tend to mix with people who are similar to themselves so who could be better to find you new franchisees than your existing good franchisees?

Let’s pursue this line of thinking further and applying what I have called here, the seven laws of loyalty.

Law #1 — Deliver Outstanding Quality and Value

If you don’t get this right there is no way you can ever build advocates, because nobody wants to recommend a shoddy product to a friend or colleague.

How does your franchise system stack up in the product/service quality stakes? Do your support systems add value to your franchisees’ businesses? Do you return phone calls when you say you will? Does your franchise provide a good return on investment? Are your franchisor executives competent in their roles? Does your system deliver on its promise? Would your franchisees answer “yes” to the following questions?

“If I had my time over I would buy this franchise again?”
“I would recommend this franchise to others?”

Law #2 — Be Sensitive to Moments of Truth

I define a moment of truth as when a person is vulnerable in some way and you make an effort to assist them. This is the single most powerful way to build loyalty. Think of your own experience where someone has helped you when you were feeling exposed in some way. How did you feel? Grateful? Encouraged? And would you go out of your way to put in a good word for this person? You bet you would.

When a franchisee is vulnerable and needs a hand, do you go all out to support, reassure and motivate them and in doing so build an advocate? Or do you use this as an opportunity to show them how tough you are and in doing so alienate them for life!

Law #3 — Offer Transformations

Any marketer will tell you that people are not interested in products or services — they are interested in having their needs met and transforming their lives in some positive way. For instance they may want to be successful in the eyes of others, to belong to a group of like-minded people, to enjoy challenging work, to have a sense of independence, or to have a happier family life. Does your franchise system offer people the opportunity to experience such a transformation?

Remember — you are in the business of providing people with the systems and support that enable them to achieve their personal and financial aspirations. Or at least that’s what you’re supposed to be doing!

Law #4 — Become an Expert in Your People

The more you know about a person, the more likely they are to be loyal to you — providing of course you do not abuse this knowledge. Do you treat your franchisees as individuals with unique interests, needs and goals? Do you keep track of their level of business development and give them appropriate support? Do you understand their behavioural style and treat them in a way that they like to be treated? Or are they all just a bunch of “franchisees” who have a job to do and obligations to fulfill.

Law #5 — Be a Pleasure to Deal With

How is it dealing with your organisation compared to the numerous other franchise businesses that are available? When someone enquires about your franchise are you straight-forward and easy to communicate with? Does your promotional literature provide comprehensive answers to their questions? Is your franchisee selection process a thorough, enlightening and pleasant experience? Or is it an unprofessional ordeal where potential franchisees feel they are always second guessing you or wondering what happened to their confidential application form in which they have disclosed their intimate financial details?

And what about your dealings with your existing franchisees? Do you genuinely want your franchisees to be successful and do you show this concern through your actions. A franchisee who thinks you genuinely care about their success is far more likely to recommend your franchise to others than someone who feels all you are interested in is your weekly royalty cheque.

Law #6 — Be Consistent

People want to know who they are dealing with. If you are a different person every time they meet you and have different types of deals going with different people you will leave them wondering. If you want to earn the loyalty of others they must be able to see you as honest and fair. And for most people, consistency is equated with fairness.

Is your company consistent in its dealings with franchisees? Do you walk the talk with your company’s values? Do you stick to your agreements? Are you consistent in your behaviour — or are you up one day and down the next?

It’s great to be innovative with your ideas, products and services providing you are consistent with your values, attitudes and behaviour.

Law #7 — Grow from Within

Here’s a thought for franchisors that have franchise systems requiring a reasonably high level of technical competence. You probably already have a pool of high calibre potential franchisees already working within your system.

I am or course referring to the staff of existing franchisees. Sure, it may take them a few years before they are ready financially or personally to take on the responsibilities of a franchise. But why look out when the answer is within. I would much rather find a way to finance good people that I know into my franchise than take a risk on a stranger.

Because some franchisees may be reluctant to lose their best employees, clever franchisors provide incentives for existing franchisees to act as mentors who will encourage their employees to become their franchisees of tomorrow. What better people to back into your system than those who know how your system works and who have a proven track record of performance.

What we are talking about here is a virtuous cycle because, by offering these people a powerful career opportunity you are also building your advocates of tomorrow.

Water Your Own Lawn

I guess my message is that if the grass seems greener on the other side of the fence, maybe you need to put more effort into watering your own lawn.

In other words, you want to attract strong inquiries from high calibre people then you are best to focus your efforts on building advocates from within. Not only will these people be the most cost effective form of advertising you could ever hope for, but in delighting them you are also laying the foundations for a truly awesome franchise system that will surely stand up to the inevitable strains and stresses of franchising life.

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