THE FRANCHISE RELATIONSHIP
THE FRANCHISE RELATIONSHIP by Mark C. Siebert
A new franchisor will often find the nature of his relationship with his franchisee to be unique and even, on occasion, daunting. While you will have the right and the obligation to enforce system standards, your franchisee will often view themselves as an independent business (which they are) with the ability to call their own shots (which they are not). And while the relationship is contractual in nature, if you are ever forced to bring out the contract, the relationship is already in jeopardy.
Thus, the franchisor must pay particular attention to the franchisor-franchisee relationship from the very start if he or she is to create a long-term and mutually prosperous undertaking.
The Nature of the Relationship
Time and time again, we have often heard people compare the franchisor-franchisee relationship to that of a marriage. They will talk about the “honeymoon” period and how the franchisor and franchisee are in “partnership” together for a common purpose. And while this analogy may have some merit, our feeling is that a marriage is exactly what the franchise relationship should not be.
When we think of marriage, we think of a joint venture relationship. In a joint venture, there are partners. The partners do start out in a honeymoon phase. Because of the relatively equal footing of the “partners,” the typical joint venture starts out with a negotiation – and is often a series of ongoing negotiations. Like a marriage, there are the “who does the dishes issues,” and there are the more serious issues usually surrounding “where do we live,” and, most important, money. Because each joint venture is unique, every one of these issues is usually subject to negotiation.
Because a joint venture partner typically is compensated based on how much money goes to the bottom line, one concern that most “spouses” will have is how the accounting gets completed. On a one-off basis, this is fairly easy to monitor. But on a massive scale, it is almost impossible. Without an audit, the non-operational partner has little way of knowing if the spouse is paying for the corporate groceries, driving the corporate Mercedes, and driving to the corporate country club every afternoon. And when your joint venture spouse does cheat on you, it can become a battle among equals in divorce court. In fact, that is one of the big differences we find between franchising and joint ventures.
Unlike partnerships, franchising is much more like a parent-child relationship. The franchisee, like the child, will go through a variety of growth phases during the course of their life.
When they first come on the scene, they are typically very dependent on their parent – relying on them for the education and training that will allow them to survive in this world. And as they grow older, they become less dependent, and you will begin to allow them some latitude – first playing in the yard and eventually crossing the street on their own. As they get older still, they will begin to test the boundaries of their relationship, pushing a little around the edges – trying to change or influence the system that you have set for them – and perhaps breaking some of the rules. But they still live in your house, and what you say goes. It is simply a question of how forcefully you choose to put your foot down.
How to be a Good Parent
When I was young, I remember being envious of one of the kids on my block. Mike’s parents were rarely home, and when they were, they let him do whatever he chose. At 15, we would sneak over to Mike’s house and drink beers and smoke cigarettes. I thought he had the best parents in the world. But when my mother found out, I was grounded for a month.
Before I had served my mother’s “sentence,” Mike had found his way into a real sentence – at a juvenile detention center. And I began to understand that sometimes being a great parent means you cannot be a good friend.
Likewise, a franchisor needs to start by establishing the boundaries of the relationship. It is important that the franchisee understand that your first role as “guardian” is to guard the system and the brand – so that all franchisees can continue to thrive. Thus, one of your most important roles as a franchisor is that of disciplinarian. To do that, you need to clearly communicate the rules and your intention to enforce them from the start.
At the same time, it is important to understand that as a franchisor, discipline can no longer be meted out the way you may have when you owned all of your operations yourself. If you try to give a franchisee the “it’s my way or the highway” speech that worked so well before, you will quickly find yourself with alienated franchisees – the first step on the road to real trouble.
Franchisees are business owners, and as such, require you to communicate with them in a professional manner. While you will want to be firm, unlike working with managers, that often means providing them with an explanation for your various “requests.” A key need of most franchisees is the desire for their opinions to be heard. A franchisor should thus avoid making decisions in a vacuum, and providing direction to franchisees without a clear explanation of why the direction is being given.
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Effective Communication is the Key
The key to being a good franchisor starts with communication. And that means more than the occasional newsletter and a visit from the Field Representative.
In today’s Internet society, it is all too tempting to rely on the Internet for all of our communications. But in a franchise context, that would be a big mistake. All too often we have seen well intentioned emails ignite a firestorm when they are misinterpreted.
Relationships are built with dialogue. So it is important that the franchisor encourages dialogue in every aspect of the relationship. Good franchisors are careful to create multiple venues where constructive dialogue will occur. Annual conventions, regional meetings, and Advertising Councils all provide for this two-way communication.
The accessibility of your senior staff is also vital. I have known the senior executives of some fast growing franchisors who will not go home for the night until they have returned every franchisee’s call personally.
One of the most important tools at a franchisor’s disposal is the Franchise Advisory Council. As the franchisor, creating this council not only allows you to control the agenda, but it assures you a voice on it. The last thing you want to do is find out that your franchisees have formed an organization without you – as that is usually a sign that something is wrong and they have excluded you from the process of resolving the grievance. Whatever comes next will usually not be pretty.
To be effective, the communication needs to be more than frequent. It needs to be honest. While there are some things that you may choose not to share with your franchisees, the key to a long-term sustained relationship is trust. And trust starts with openness and honesty. Get caught in a lie once, and you have destroyed that forever.
Lastly, to be effective, you have to genuinely care about the success of your franchisees. Good franchisee relationships start with a franchisor that is, first and foremost, committed to franchisee success. That commitment, more than anything else, needs to permeate the franchisor organization at every level.
If your franchisees do not sense your commitment, the relationship can quickly become adversarial. If, on the other hand, your franchisees see you breaking your back to help them achieve their success, there is almost nothing they won’t do for you.
This article first appeared on entrepreneur.com and is reproduced here with permission.