Our firm recently completed a research project that required interacting with a substantial number of the companies that are currently marketing and operating franchises in the North American real estate market. Although not part of the research objectives themselves, we could not help but notice a significant level of disconnect between the value proposition, customer experience, market vision and services being offered and promoted by the franchisors and the level of buy in and adoption by franchisors.
It appears that this situation has been a part of the business landscape, for those firms that participate in the market through a franchise agreement, for some time. It also appears that as competitive differentiation becomes more and more critically acute throughout the industry, the likelihood of this disconnect causing serious branding and competitive disadvantages significantly increases.
The discussion of this subject is not intended to be judgmental or skewed in favor of either franchisors or franchisees. A great deal of additional research would be required to determine whether the issue at hand is one of disrespect, communication or misinterpretation. It is sufficient to say that it appears as though at the present time franchisors are expending a great deal of thought, effort and expense in designing and implementing programs, products and services intended to assist their franchisees to differentiate and be more competitive in today’s increasingly transitional marketplace. It further seems to be the case that way too many franchisees are either consciously or unconsciously rejecting these efforts in favor of either the status quo or other solutions that may be totally at odds with the approach being designed and promoted by their franchisor.
Disconnects are a common attribute of relationships of all kinds. The bonds of friends, spouses, families and organizations are often scared by misunderstandings that seem to live on though the years. In some cases, the scaring is permanent. Many scars become accepted parts of the culture and many more become the subjects of comedy and entertainment. However, given the critical nature of today’s real estate industry environment, our industry may not have the luxury of entertaining dysfunctional relationships, especially if they create destructive dynamics and destroy competitive potentials.
In the odd event that franchisors and franchisees are missing each other relative to a number of key points the following is offered:
- The value proposition of any franchise today must go way beyond the sign and the brand. There was unanimous agreement with respect to this idea from the franchises we interacted with. Everyone seems to understand that, even if they are not offering a complete integrated business system, a franchise system and relationship must include programs, products and services that the franchisor sincerely believes will make its brand and franchise group more compelling to today’s consumer.
- In the same vein there was near unanimous agreement that the current market environment of change and transition requires every franchisor to develop and implement a future plan relative to how their particular brand’s franchisees are going to interact with the vastly changed market and the new consumer, say in 2014. Business as usual is simply not acceptable approach any longer.
- There was widespread agreement among franchise executives that a significant part of their franchise’s value proposition would be derived from the dynamic created through the franchisee’s efforts to present a common front or value proposition to the consumer. While franchisors might like to think that they control their own destinies, it is clear that, in this particular area, their fate is currently in the hands of their franchisors. It seems to be the common wisdom that “brand only” franchises will face a tough future as consumers become more and more sophisticated with respect to programs, products and services.
- We noted that, in some cases, the information that top Franchise executives receive relative to the franchisee relationship comes from the individual in charge of a particular geographic area. This individual may have been in charge of that area for a long period of time or may have inherited that relationship directly from his or her predecessor. In too many cases we observed reports of relationships “ruts.” District or zone executives would report; “you know how they are,” “he or she is up to their old tricks again,” or “you can never convince them to get with the program.”
With this in mind the following recommendations are being put forward with the express objective of improving implementation relationships between franchisees and franchisors at this critical time in our industry. They apply to both franchisors and franchisees:
- Every franchise should make sure that they have a clear and concise vision of the future and a blueprint for success in that future, and that it has been communicated to every franchisee, preferably by whatever company communications system is responsible for that program, perhaps not the zone executive. New directions require new voices, new relationships and new passions.
- Franchises should consider undertaking a franchisee relationship audit by a third party. The analysis that “some like us and some don’t” is not going to make it in the new market. It is going to take a high level of synergy and collaborative spirit to meet the challenges. Some relationship repair might be in order.
- Fall is just around the corner and with it comes fall meetings and conventions. One is left with the distinct feeling that many will measure the value of their franchise relationship based upon the loudness of the music and the size of the shrimp. Recall that old fable about someone named Nero who fiddled while Rome burned. This is not a time for partying; it is a time for coming together for serious discussion about strategies and tactics.
- There seems to be a certain percentage of franchisees that are withholding participation in anticipation of not renewing their franchisee unless the deal is really sweet. Two points here. Not engaging during the last three years of your franchise is like not engaging in a marriage for three years. It becomes a self-fulfilling prophecy that hurts everyone involved including your organization. A sweet deal on a sinking ship has no lasting value. If you can’t engage with your franchise because of something they are or aren’t doing, get involved and be heard. Perhaps your concerns aren’t being communicated to the right person or in the right manner.
- The time has come for universal accountability. This means that both the franchisee and the franchisor must be responsible for what lies ahead. We observed way too many franchisors whose staffs are spending all of their time trying to promote a number of excellent programs and initiatives while way too many of their franchisees are exhibiting a ‘devil may care’ attitude regarding engagement and participation. Franchising is not a game. Franchising is more than a brand. Franchising is all about being part of a national or international team that comes together to present the marketplace with a better way of doing it. There is an accountability owed to one’s franchise and one’s fellow franchisees. Holding out participation is not a sign of courage or independence; it is a reflection of an attitude of indifference and a lack of loyalty.
- Finally there is the subject of the big guys and the little guys. By their very nature franchises have units that operate at different volume levels in different markets. The big guys would do well to give some thought to the fact that the little guys are contributing to the overall success of the franchisee as well. On the other hand the little guys would do well to understand that size should not be determinative of attitude, value or success. Quit acting like a victim.
Franchises are a unique and distinct way of doing business, with a long history of success. They aren’t for everyone, but for those who embrace the value proposition, they represent an opportunity to be something special in the marketplace. In today’s consumer centric market, that special nature only comes when everyone works together to present a common front and a dynamic value proposition to the consumer. Don’t miss the very opportunity for which you became a franchisee. Get on the team and make it work.