NAVIGATING THE FRANCHISE E-FACTOR
Discover the six stages of a franchisee’s journey and how you can ride the ups and downs of a franchise relationship.
Ensure your team members become top performers.
Many years ago, when I was a franchisee, I travelled a path that almost every other franchisee I have met has also travelled. The places this path leads to are not physical, they are psychological in nature, and include emotions such as hope, joy, disappointment, frustration and renewed confidence.
Franchisees beginning their journey are likely to also travel along this path. In so doing, they will fall under the spell of what I have dubbed the Franchise E-Factor.
A MESSAGE TO FRANCHISEES AND
FRANCHISORS
The Franchise E-Factor is not a mental aberration or something to fear. It is simply a natural maturing of the relationship a franchisee has with their franchisor as they gain greater competence and confidence in running their business. Franchisees with a commitment to working through the ups and downs of life running their business will travel through six distinct stages. With some effort and self-awareness, most people move through these stages relatively painlessly. For others the path is full of interpersonal strain and resentment. A minority will get so stuck they will give up, and either walk away or sell their business.
If you are a potential or existing franchisee, you might find it useful to use this model to make sense of the frustrations you will feel from time to time in your role as a business owner who wants independence yet can’t quite have it.
If you are a franchisor reading this, a word of warning. What I am about to describe should in no way be used to justify poor leadership or bad business practices, nor to cover up a franchise model that cannot generate a reasonable financial return for competent franchisees who work hard and follow your systems.
As you now read through the six stages, it will become clear why I call this the Franchise E-Factor.
1. THE GLEE STAGE
“I am very happy with my franchisor. They obviously care about my success and have delivered all they said. While a little nervous, I am excited about my new business and full of hope for the future.” Initially, franchisees are filled with glee. Along with their decision to buy a franchise comes the anticipation of whether things will work out, and of course the hope of making lots of money.
During the opening stages of the business a franchisor will also be busy providing encouragement and support to their fresh, motivated franchisee. Like a wedding ceremony, the speeches at opening ceremonies of franchised outlets usually contain profound commitments such as: “We will always be here for you”; “You are the reason for our existence”; or “If you have any problems at all, just call and we will be there”.
Positive emotions run high at this stage. There is a great sense of achievement for everyone as the numerous hurdles in establishing the business have now been cleared.
The glee stage covers the lead-up period to buying into the franchise, and will usually stay with a franchisee for between three and 12 months, depending on their past business experience.
2. THE FEE STAGE
“Although I’m starting to make money, these royalty payments are really taking the cream off the top. What am I getting for my fees?”
This second stage kicks in as the franchisee gains more of a handle on the business’s finances. It comes from a growing appreciation that profit is the result of sales minus expenses. At this point the franchisee may become sensitive to royalty, marketing or other fees, which they see as annoying expenses that eat into their profits.
Questions such as “What am I getting for my money?” will surface, especially when they review their cash flow and profit and loss statements. At this stage satisfaction inevitably drops. Sceptical comments from well-meaning family or friends who challenge the value of these fees can feed a franchisee’s doubt and push them into the fee stage.
3. THE ME STAGE
“Yes I am successful. But this is largely due to my hard work and commitment to the business. I could probably have achieved these results without the franchisor.”
As a franchisee moves into the me stage, he or she will typically be thinking
their success is due purely to their own hard work and effort. This natural tendency to take the credit for the good things is referred to by psychologists as the “self-serving bias”. It comes from attribution theory, which explains the thinking process we go through as we search for the best explanation for events that happen to us. It also suggests we are not as rational as we think.
When we perform well or achieve something, we tend to attribute this to our inherent skills and personality. We take the credit. But when we make mistakes or don’t perform to expectation, we tend to blame outside circumstances or other people.
The human ego has always been a master at playing with our minds – giving us reasons why we are right and others are wrong, why we are good and others are bad, why we are smart and others are stupid, and so on. While a strong ego feeds our determination and helps us to function under pressure, it is also causes most of our interpersonal problems.
The self-serving bias tends to be strongest when franchisees are in the me stage. They will attribute their wins to their own hard work and initiative. But if things are not going well, the franchisor is inevitably blamed. (By the way, franchisors can also fall prey to the self-serving bias, taking credit for the success of new initiatives, but blaming franchisees if these initiatives don’t work!)
4. THE FREE STAGE
“I don’t like the restrictions my franchisor is putting on me and feel frustrated at their constant interference. I want to be able to do what I think is right for my business.”
As a franchisee’s business confidence grows, so does their drive for independence. A franchisee at this stage might feel resentful having to follow the franchisor’s standard operating procedures, especially if they believe these are unnecessary or hampering the profitability of their individual business.
The free stage is characterised by a need to break free of restrictions and limitations, and test the system’s boundaries. The franchisee might, for instance, deliberately fail to comply with certain procedures to see what happens, or try to break free of their contractual obligations under the
The Franchise E-Factor can help both parties make sense of the strains that will inevitably occur as their relationship moves from dependence to interdependence, with people choosing, rather than feeling compelled, to
participate.
franchise agreement.
Franchisees in this stage can also become vulnerable to the influence of people inside or outside the network who are looking for allies to further their own agenda. Another established franchisee might want to pressure the franchisor to give them more power or concessions; a lobby group may be recruiting for members; or a legal or consulting firm might be looking for new business.
If a franchisee stays in this stage for too long, they can become negative, distracted and divisive. Others might start to avoid them and their business will inevitably suffer, creating further agitation.
5. THE SEE STAGE
“I can see there is a bigger picture here. And I do acknowledge the value of some services provided by the franchisor. I appreciate that if we all did our own thing the brand could be damaged and we could lose our competitive edge.”
Conflict in relationships seldom goes away by ignoring it. For a franchisee to move to the see stage there needs to be some frank and open discussion, with both parties listening carefully to each other.
Previously unresolved disagreements may need to be revisited and some steam let off. Mistakes and misunderstandings will no doubt have occurred on both sides. Acknowledging and accepting these can help people let go of the past and agree to focus on a fresh start.
The franchisor might need to be more open to involving the franchisee in future planning or appreciating their specific needs. If the franchise network is being managed fairly and effectively, the franchisee will generally come around to seeing that without consistency and adherence to systems, the strength of the group would be lost. It is this shift in perception that characterises the see stage.
6. THE WE STAGE
“I am looking forward to working with my franchisor to make the most of our business relationship. I need some specific assistance to develop my business further, and I have some good ideas I want them to consider.”
From the see stage there is a natural progression to the we stage – a move from independent to interdependent thinking. The franchisee becomes more aware of the need to manage his or her ego, and recognises that greater success and satisfaction will come from working with, rather than against, the franchisor.
To reach the we stage a franchisee needs to be mature, objective and commercially minded. Most importantly, they must be profitable. If a franchisee is losing money and feels their franchisor is not interested in them or responsive to their needs, they will rattle the cage for change.
Franchisors who want their franchisees to move to the we stage must show concern for franchisee profitability, make competent decisions, and be fair and consistent in their dealings.
Franchisees who have negotiated their way through the franchise relationship journey to the we stage are a franchise network’s greatest asset. They will often be quiet achievers who keep one eye on their profit and one eye on cultivating healthy business relationships, not just with their franchisor but with their suppliers, peers and, of course, their customers.
A NATURAL PROGRESSION
The Franchise E-Factor is based on the natural progression many relationships in life move through – from dependence, to independence, to interdependence. If you think about your close personal relationships, such as with your partner or children, you will recognise some parallels here.
The Franchise E-Factor can help both parties make sense of the strains that will inevitably occur as their relationship moves from dependence to interdependence, with people choosing, rather than feeling compelled, to participate.
I have great faith in the ability of the franchising model to deliver superior success and satisfaction to all parties in business, providing the business model is sound and people manage their relationships effectively. Good luck.
Greg Nathan is a leading researcher and global thought leader in franchising. He is a business psychologist, founder of the Franchise Relationships Institute, and author of several best-selling books, including Profitable Partnerships, available from www.franchiserelationships.com