Franchisors and Franchisees: Working It Out When Things Are Tough

The franchisor-franchisee relationship is unlike any other in business.  Franchisees are a unique hybrid of the franchisor’s customer and stakeholder, and yet they themselves have responsibility to the franchisor.  Customer feedback provides an important piece of objectivity in troubleshooting that relationship.

I have an interesting view of the franchisor-franchisee relationship by virtue of the fact that Customerville works with franchise organizations all over the world.  We see this remarkable relationship from both sides, both when things are really working well and when the relationship is under stress.  Over the years we’ve seen several franchise organizations use customer feedback not only to drive sales, but also as an important tool for maintaining a healthy franchisor-franchisee relationship.

The Nature of the Relationship.  Franchise relationships are based on the franchisor’s ability to package up an exciting offering in ways that enterprising franchisees can execute in local markets.  This is a real two-way street.  For every aspect of the business that the franchisor must communicate, the franchisee must execute every day when those doors open.

Franchisees can struggle for a variety of reasons, and it’s usually a combination of them.  Some of these are operational reasons that can be fixed, but dealing with operational issues can get tense when the franchisee is also fighting against a broader trend such as the economy. 

A drop in sales usually goes right to the bottom line.  As any franchisee will tell you, he or she is usually the only person in the deal getting paid on spec.  Everyone else – from franchisor to landlord to the tax man – is guaranteed to get paid.

And that can create tension, which we often see in erosion of goodwill between the franchisor and the one group of guys in the world who can help him when things are tough – his franchisor. 

Customer feedback gives clarity.  When we’ve seen franchisors and franchisees get their relationships and the businesses back on track, it usually seems to start with one or both parties taking a deep breath and looking around for objective information.  This isn’t always easy because, frankly, a lot of franchisees don’t come into the deal with a ton of business experience.  All too often, they start to feel like they’ve been sort of taken for a ride, which saps energy from fixing problems.

Looking back over, say, the past year’s customer grades – and how those grades benchmark against other franchisees in the region – can be a good starting place for dealing with that anxiety and moving the discussion in a productive direction.  This is especially true if the franchise community had real buy-in on the questions which are used to gauge the customer experience.  If the franchisee feels that the questions are actionable and realistic, he or she will look at them a lot more clearly.  And an actionable list of things to fix can be a welcome antidote to stressful ambiguity.

You can teach a bear to dance.  I once heard Gary Heil, a business advisor to retailers, say that you can teach a bear to dance, “but you’d better be ready to dance when the bear wants to.”  This is true in this case, too.  Not all elements of customer feedback point to shortcomings on the franchisee side.  Franchisors in this discussion need to be ready to accept responsibility and take action when your customers express frustration about things only home office can fix.

Customer feedback can be a valuable tool for maintaining a healthy franchisor-franchisee relationship, and for putting that relationship back on track when things get stressed.