Yes, there is no doubt that the franchise industry has seen a decent share of negative publicity over the last few years. Moreover, yes, in many cases, franchisors have not lived up to franchisee and shareholder expectations. However, I believe that all stakeholders, who have a vested in the industry, including retail customers, need to understand that it takes two to tango. In this article, I discuss the importance of franchisees and industry bodies taking their share of accountability, for the current shortcomings of the franchise segment.
A few years ago, while holding a senior leadership role for a major Australian franchisor, I spent the majority of my working week, putting out fires and facilitating franchisee grievances. On the surface, I became to understand the daily difficulties facing franchisees, rising overheads, increased competition, staff turnover and the constant battle to juggle work and family life. All of this had a direct impact on franchisee profitability. While franchisors were trying to increase their financial returns, franchisees were under tremendous pressures to make ends meet. Falling profit margins for franchisees usually translated to budget constraints for the franchisor.
Many franchisees started to work longer hours; others found ways of cutting costs, not necessary in line with legislative and franchisor guidelines. The issues of under-reporting revenue and non-compliance grew year after year. Some disgruntled franchisees had to find a scapegoat. The easiest scapegoat was obviously the franchisor.
Many franchisees that I had met on a regular basis would be adamant that they had done all that they can and it was solely the franchisor to blame for all their woes. In many meetings, I would point out the lack of merchandise or food in the pastry cabinet, the dirty floors and cracked utensils, the lack of emotional connection of their team members. The answer would still be the same. The franchisor was to blame for the difficulties.
It takes two to tango. There is always two sides to every story.
Here is the side, many franchisees never saw and would acknowledge.
Back in the head office, the majority of the franchisor’s support staff had a genuine desire to see their franchisees succeed. As the franchisors faced profit pressures, their support teams were also under an immense burden to deliver. They also worked longer hours as a result of cost cutting and profit improvement projects. They faced uncertainty which affected their state of being.
Yes, there is always two sides to every story.
Let’s face it. The franchisor-franchisee relationship is like an arranged marriage. The values and attributes needed for a successful marriage are not so different to the one that exists between a franchisor and franchisee.
Trust, respect, accountability, transparency and care are values that should be shared by both the franchisor and franchisee.
So, let’s flip the coin and look at how franchisees can help franchisors succeed. I am also assuming that franchisors reinvest profits back to the growth of their franchisees.
You give before you get. You have to sow before you reap.
Franchisors are also humans. Surprise Surprise. They do not always get it right when it comes to franchisee recruitment. However, in my experience, many franchisees fail to undertake adequate due diligence before they join a franchise. While many brokers, independent financial advisors, and franchise lawyers need to lift their game in providing advisory services, franchisees need to spend the time and money in effective due-diligence. The effects of poor due-diligence are many, in several cases leading to business failure and bankruptcy.
Franchisors need accountability. However, so do Franchisees. Accountability is the ability of the franchisee to look holistically, to sift through business complexities and take ownership of current limitations facing their business. Successful franchisees accept responsibility for their actions and do not place blame on the franchisor in the first instance.
- A Positive Mindset
At the end of the day, a positive mindset needs to exist for both franchisors and franchisees. A negative mindset tends to deflect problems and point blame. The easiest target for the franchisee is the franchisor. When we blame, we lose power and control. It is a vicious circle that ultimately destroys any business. There is immense value in professional business coaching for franchisees. However, franchisees need to invest time and money into this game-changing process. Through experience, negative franchisees are like cancer in a franchise network. Negativity always breeds more negativity.
Franchisees tend to blame franchisors for their non-compliance. The usual reason cited for non-compliance is the lack of profitability in the franchisor model. I used to get this same answer all the time. I would usually then ask the franchisee to list ten things they are actively engaged in to increase sales. Many of the times, I would get blank looks. Franchisees drive Non-Compliance. It is not the franchisor’s direct doing.
The above list is not exhaustive, and it does not take the responsibility away from franchisors. However, stakeholders including the general public need to understand there are two sides to every story.
It is the actions of the few that tend to dominate the news.
Unfortunately, our society has programmed us to connect with each other through problems.
The next time you read about a franchise failure, remember it takes two to tango, it is not always the franchisor that has caused the misadventure.
Emmanuel Martin is the founder of a boutique franchise consulting firm, The Metamorphosis Project that helps emerging franchisors build robust and long-lasting foundations for long-term growth. He is also a principal for The Alternative Board, a global company providing small- to medium-sized business owners and leaders help and advice with facilitated monthly business advisory boards together with one-on-one coaching. He is currently writing his first book, The Psychology for the Hungry Franchisee.