Measuring the Franchise Relationship: The Issue of Satisfaction Looms Large

Maintaining constructive relationships with franchisees is a lot easier to talk about than it is to put into practice. For franchisors, this is an ongoing challenge. Several things can strain relationships. Among them are:

Stress

When people are stressed they get cranky and difficult to deal with. Whether you are a franchisor or a franchisee, financial and workplace pressures will always test your patience and resolve. If stress levels get too high they can cause erratic

Change

The ongoing changes that have been sweeping the world are also affecting franchise systems, resulting in a constant need to innovate. This means franchisees often have to adopt new systems, reinvest in their business and sell new types of products or services. Most people resist having change foisted upon them which can also create a strain in the franchise relationship.

The Law of Perception

A company may think it has clearly explained something, but people will always put their own interpretation on what they hear. The saying "When perception meets reality, reality always comes out second best" is very true. What the listener heard is more important than what was said. For instance, franchisees sometimes misinterpret a franchisor's motives for taking certain decisions and this can undermine the trust so important for a healthy franchise relationship.

The Franchise E-Factor

Franchisees, I believe, will typically move through six psychological stages in their relationship with their franchisor. I call this the "Franchise E-Factor." which is characterized by the stages Glee, Fee, Me, Free, See and We. Franchisees may quickly move from initial feelings of glee to the third, me, stage. Not all franchisees make it to the sixth, we stage. The more franchisees that are stuck in the middle stages of the Franchise E-Factor, the more unrest there is likely to be in a franchise system.

Insensitivity to the feelings of others

Whether it is called emotional intelligence, people skills or just good manners, franchisors should show their franchisees adequate respect and consideration. Leaders who are overly authoritarian or insensitive are likely to create a residue of resentment in their franchisees. At some stage this is likely to express itself as a relationship breakdown.

Incompetent support

Franchisees expect to receive reliable support from people who know what they are doing. As a company grows it is not unusal for the franchisor team to find itself out of its depth in managing the more complex demands of a larger corporation. This can also undermine its credibility and put strains on the franchise relationship.

Why measure franchisee satisfaction

Many franchisors will have experienced problems with individual or groups of franchisees due to one or more of these areas. As a franchisor management team becomes more perceptive of these inevitable challenges they also become more capable of successfully managing them.

A good way to tackle this challenge is by applying the principle, "If you can't measure it you can't manage it." In other words, measuring the state of your franchise relationships is good business practice. I'd suggest a thorough survey at least every two years.

There are three common myths that deter franchise systems from embarking on this journey.

Myth One: "There are more important things to focus on."

Franchise systems that are plagued by poor relationships and do not face up to this challenge are not commercially sustainable. The cost of litigation, the distractions, the stress on the parties and the decline in customer focus inevitably takes its toll.

Myth Two: "This stuff is too difficult to measure."

The fact is attitudes and feelings can be measured in a reasonably objective manner. This can be done by creating a forum in which people can give you feedback, either in the form of a survey, an interview or a focus group. What is essential, of course, is to ask the right questions and to listen to the answers with an open mind.

Myth Three: "Asking them what they feel will just stir them up."

While seeking franchisee feedback can be challenging, it sends the right messages to franchisees that the franchisor is interested in their views. This in itself can prove to be a positive trust building initiative, especially if the feedback is acknowledged and the process is professionally managed.

How to find out what franchisees want

There are several ways to discover what franchisees want. Interview them individually or in groups and ask them questions about what they like and dislike about the franchise system.

Ask them to complete a survey of carefully-worded questions. To gain greater honesty it is preferable that the responses are anonymous. The use of an external consultant can ensure confidentiality.

There are two types of questions typically used in franchisee surveys. The first are open-ended questions such as:

* What do you want and expect from your franchisor?

* What's good about being a franchisee with this system?

* What would you like to change about how this franchise system operates?

The other type of question uses rating scales, which enable responses to be quantified. Results can then statistically be analyzed and compared with industry benchmarks. One question to ask franchisees is, "If you had a choice, would you buy the franchise again?"

Using open-ended questions and rating scales are both approaches that have unique benefits. Ask franchisees to rate both the importance of specific services provided by their franchisor and how effectively these services are delivered. This enables a franchisor to distinguish high priority services from "nice to haves" and to determine any significant gaps in how effectively the most important services are being delivered.

Fifteen years of research into what franchisees want from their franchisors has uncovered the following significant findings.

Help me develop my business

Not surprisingly, franchisees want their franchisor to negotiate deals with suppliers that will reduce their operating costs and to provide ideas and systems for enhancing productivity.

They also want regular access to useful and relevant business information that will help them grow their business and stay in control of their financial position. A benchmarking program that shares results on agreed key performance indicators is a great start.

While franchisors are often very effective in providing initial training, franchisees want more ongoing training to improve their skills in the areas of people management, business planning, goal setting and marketing. This is especially true of more mature franchisees who tend to become skeptical and dissatisfied if their evolving needs are not met.

Make my phone ring

Marketing is a broad term so let's be more specific. Two important factors to franchisees are advertising that attracts new customers and a strong brand. In fact many franchisees buy a franchise on the strength of the brand.

Franchisees also want a well-thought-out marketing strategy that will give them an edge in their local market and help with the skills to convert inquiries into sales. And they expect ongoing innovation that will excite customer interest.

Finally, they value unique promotional tools such as point-of-sale signage-things they would not be able to source if they were on their own.

Listen to me

Franchisees often refer to the sense of security they get from being part of a united, cohesive group. In particular, they value the opportunity to interact with other franchisees at meetings and conferences. However, they frequently refer to a desire for meetings to be more interactive.

They also say they want more opportunity to have their ideas, questions and concerns heard by their franchisor through open forums and discussions.

The introduction of operational changes without adequate consultation is particularly frustrating and puzzling to franchisees who feel they have more insight about operational matters than their franchise system.

Credible leadership

One theme to emerge from our research is that franchisors often have clear goals for the organization, but fail to provide franchisees with a sense of where they fit into the big picture. The result is that franchisees can feel threatened rather than excited by a company's expansion plans.

Consistent with other international research on what people want from their leaders, franchisees expect the franchise system and foremost to be honest and fair in their business dealings. A competent management team is also seen as essential.

Loyalty from a franchisor is important. Having supported the franchise system over a period of years they expect this to be reciprocated. For instance, they may become resentful if they think the company has an unbalanced emphasis on attracting new people while ignoring the needs of longer-standing franchisees.

Getting on together

Most people dislike conflict. In fact, unresolved conflict has emerged in our research as a major reason why people want to sell their franchise.

This highlights the need for robust conflict resolution processes to be an integral part of every franchise system. It also highlights the need for members of the franchise system to be able to have conversations with franchise in which difficult issues can be discussed and resolved in a mature and respectful manner.

Show me you care

Franchisee advocates are vital for growing a franchise system. Our research suggests that the strongest predictor of whether a franchisee will recommend a franchise to others is whether he feels the franchisor is genuinely concerned about his success.

Indeed, franchisees frequently say they would love to have their franchisor call, just to see how they are doing, without any ulterior motive.

On a related matter, quick response times to calls and e-mails are frequently rated by franchisees as vital.

What about the money?

Sometimes it's assumed that because people are in business, everything's about the money. While most might not like to admit it, most behavior is influenced by emotions not by logic.

While return on investment is one of the drivers of franchisee satisfaction, there are other issues such as feeling cared for, optimism for the future, confidence in top leadership and the relationship between a franchisee and the franchisor management team that are just as important.

While a profitable franchisee is no doubt more likely to be a happier franchisee, franchisors should not underestimate the power of good old-fashioned courtesy and respect in building a prosperous, happy and vibrant franchise system.

Association Makes Franchise Relations-Building Resources Easily Accessible

The International Association provides a variety of valuable resources to help those seeking to enhance franchise relations within their companies.

The IFA Self-Regulation Program includes several components that are designed to provide alternatives to litigation and legislation.

The program consists of a Code of Ethics to serve as a guide to assist members in conducting franchise relationships. It also utilizes an ombudsman who will act as a confidential third-party to resolve conflict in the most constructive manner.

Another avenue to consider is the use of existing programs such as the National Franchise Mediation Program, which is administered by the CPR Institute for Dispute Resolution and draws its mediators from a panel of attorneys located throughout the United States who will help resolve disputes between franchisees and franchisors.

In addition, IFA's Franchise Relations Committee, which is chaired by Golden Corral Buffet & Grill Senior Vice President Larry Tate, has prepared several handbooks that are free and available online.

The titles include:

* "IFA Franchise Relations Handbook: Improved Communications Means Improved Franchise Relations"

* "IFA Franchise Relations Handbook: A Dispute Resolution Handbook for Franchisors and Franchisees"

* "IFA The Network Expansion Conflict Handbook: Developing a Successful Solution"

* "Advisory Councils: Effective Two-Way Communications for Franchise Systems"

For details about available resources or to download the handbooks, visit Franchise.org.

Greg Nathan is managing director of the Franchise Relationships Institute. He can be reached at gregnathan@franchiserelationships.com.