The only 3 things that matter in franchising

The findings from Franchise Relationships Institute research into franchisee success and satisfaction are especially important for franchisor teams responsible for leading, supporting and recruiting franchisees.

Let’s start with a definition of franchisee success, which has three crucial components. Successful franchisees:

  1. Run a profitable business
  2. Maintain high brand standards
  3. Participate constructively in the franchise network

In our talks and training programs to franchisors and franchisees, we call these the only three things that matter.

A franchisee who makes money on the short term, but damages the reputation of the brand by cutting corners on quality or customer service, or who is consistently unreasonable or antagonistic, is not going to cut it. Nor is someone who is a model franchisee citizen, but is consistently losing money. All three components are important for sustainable success.

Back to our study, which reviewed the behaviour and characteristics of 1,570 franchisees from 35 franchise networks, we were able to predict the factors that led to high levels of franchisee success. Some fascinating interactions between social factors and the performance of franchisees also emerged.

Personal characteristics that drive success

Based on previous research, we predicted that proactivity would impact on franchisee success. This is a personality characteristic that involves looking ahead and making things happen.

Proactive franchisees live by the philosophy “If it is to be it is up to me.” We discovered that proactivity can contribute up to 14 per cent to a franchisee’s financial performance.

We also predicted that optimism would improve a franchisee’s likelihood of success. Optimism is an attitude of hope and confidence that things will work out for the best. Optimistic franchisees are more likely to stay positive and persist when the going gets tough.

We found that optimism contributes up to 14 per cent to both financial performance, and the maintenance of high brand standards.

Finally we predicted that brand passion would impact positively on franchisee success.

Franchisees with strong brand passion talk enthusiastically about their brand, defend criticisms against it, and promote its benefits to others. Not surprisingly, brand passion was a particularly strong predictor of high brand standards and contributed up to 15 per cent to constructive participation in the franchise network.

While this is interesting, a more remarkable finding emerged when we looked at the impact of two additional social factors on franchisee performance.

Social factors that drive success

Family and social support measures the extent a franchisee believes their family and friends care about their success, and are positive about the business.

We discovered that high levels of family and social support act as a booster for both optimism and constructive participation in the franchise network, which in turn drives greater success in all areas.

Think about it.

Running a franchise business, especially in the early years, requires a considerable investment on time and energy. This inevitably impacts on the family of the franchisee. A family that is accepting and supportive of this sacrifice, even when the fruits of success are not initially forthcoming, enables the franchisee to keep putting in the effort needed to succeed.

But if their family is unsupportive or resentful, they are less likely to invest the additional personal effort needed to make the business a success, which may impede its performance.

Our research also found that perceived franchisor care made a big difference to performance. This is the extent a franchisee believes their franchisor cares about their success.

We discovered this feeling of franchisor concern boosts a franchisee’s tendency to be proactive, which in turn leads to higher levels of success, particularly higher levels of financial performance.

What is amazing is, the opposite was also true. The belief that your franchisor is self-serving in their behaviour and doesn’t have your back, actually turns off the tendency to be proactive!

In case you missed it, there is a significant opportunity here for franchisor leaders who set the culture of their networks.

Lessons for franchisors

Here are some take outs from this research:

  1. Include an assessment of proactive and optimistic tendencies when recruiting new franchisees. Also include the development of these attributes into your ongoing training and coaching programs.

  2. Facilitate high levels of brand passion by reminding franchisees about their good work, and the positive difference their business makes to the local and wider community.

  3. Encourage the family of franchisees to engage with the franchise network, for instance at conferences. And remind franchisees about the importance of positive family relationships and of developing a network of supporters.

  4. Let franchisees know that you genuinely care about them as people, as well as their profitability. This needs to be backed up with actions, such as checking in on how they are going, reviewing their financial performance, and investing time in useful business discussions.

  5. Ensure your field consultants understand that all their interactions with franchisees must focus on the three things that matter – improving profitability, maintaining brand alignment, and encouraging constructive participation.

This is from Greg’s Healthy Franchise Relationship Tips #171.