Franchisee unrest – fix it or fail

The media has been full of stories recently of franchised brands who have disgruntled franchisees taking legal action against the franchisor.  This not only trashes the brand publicly but presents the franchise with a significant distraction that takes the focus off the day-to-day franchise operations.  Not to mention the financial cost.

Why do things get to this point?  Can these franchisors look back and identify processes or policies that led to this destabilisation of their business?

In my experience there is usually not one issue that leads to franchisee unrest, but a collection of sore points that haven’t been adequately addressed – either deliberately or through neglect.  And so they compound.

These are what I believe are the most frequent causes of rebellion:

  1. Lack of clear, frequent communication
  2. Over promising and under delivering
  3. Lack of transparency both on business direction and on financials
  4. Personality clashes between Franchisor staff and franchisees
  5. Franchisees who are strong influencers within the group, fermenting dissent
  6. Market conditions

The problem: Lack of clear, frequent communication

People buy a franchised business because of the reassurance it provides to what is essentially a small business owner.  They want the comfort of a network of like-minded people facing similar experiences.  They want to know that there’s someone competent guiding the mothership, protecting their back and exploring all possible avenues to improve the franchise offering.

When there is very little communication from the franchisor the franchisee can feel like they are operating in a vacuum.

The solution:

  1. Weekly email updates – include new marketing, proposed training, changes to standard documentation, planned events
  2. Regularly scheduled liaison visits by performance coaches. From an annual meeting to review and establish business plans to catch-ups when financial reporting shows a downturn, to monthly phone calls.  This program catches problems early and establishes a relationship of trust between the franchisee and performance coach.
  3. Ensure your Corporate Office team is trained in all methods of effective communication.
  4. Emails or phone calls from other Corporate office experts – marketing, human resources etc. – just to talk about new initiatives / changes to processes.
  5. Hold events where your franchisors have plenty of opportunity to network.
  6. Take every opportunity to make your franchisees proud of the brand. Conferences, awards nights.
  7. Utilise technology! Use Zoom, Hangout, video conferencing etc to hold forums and provide avenues for open dialogue.
  8. Use this technology to have monthly “Dear CEO” Q&A sessions. It can be initially daunting for the CEO, but the reward is feedback, pulse-taking and enhanced trust.

The problem: Over promising, under delivering

You’ve done a great job of recruiting franchisees, they’re onboarded, and excited. But where’s the high level of support you promised them, where are the manuals?  Where’s the product upgrade that you said was on the horizon?  Where are the sales you said would drop into their laps? And that highly accredited subject matter expert that you had at the Corporate office has quit – what now?

The solution:

  1. Be honest when you’re recruiting. Yes, it’s a sales pitch but it needs to be balanced. The Franchising code requires disclosure of a range of issues to potential franchisees but there can be a lot of difference between cold words on a document and a clear discussion between people on their implications.
  2. Go over the finances with a potential new franchisee and make sure they are realistic. There’s nothing generates bad-will more than money issues.
  3. Be clear on your product development plan and if there’s a slippage on your schedule, re-set everyone’s expectations.
  4. Handhold a new franchisee and ensure that once they are set up, they know where to go for information, who to call for help. And remind them regularly.
  5. Talk frequently to the influencers amongst your franchisees – listen to them and act quickly on any issues they raise.
  6. Understand that sometimes a franchisee will call just needing to talk, share, be heard and ask questions with no judgement. Always make the time to give them the opportunity to do this.
  7. Franchisees are sensitive to changes at the Corporate Office – let them know when someone is leaving (along with a plan to fill the gap) – let them know when you hire and talk up the credentials of your new person with an emphasis on how the experience / expertise of this person can impact in a positive way on the group.

The problem: Lack of transparency both on business direction and on financials

Nature abhors a vacuum and where there’s no information, rumours fill the space. This can generate a real level of distrust between Franchisor and franchisees. While the Franchisor has the right to privacy about the financials of their business, when you get into the area of sponsorships and rebates from suppliers, the Franchising Code requires you to disclose this.  It’s also good practice to put this money into the Marketing Fund so that it can be used for the greater good of all franchisees.

The solution:

  1. Marketing Funds, requests for refurbishment and product upgrades are all hot issues and need to be communicated about clearly. While the Franchise Code has regulatory framework around these topics, consultation then timely communication to all franchisees explaining the process are important to keep your franchisees on the same happy page.
  2. Have at least one meeting a year (more, if distance isn’t an issue and if it is, consider video conferencing) with your franchisees to share your vision with them. Talk about upcoming innovations and other issues that will impact on their business.  Be clear on timelines and be very clear if there is no discretion for franchisees to opt out of any planned changes.
  3. Share benchmarking data. It can be made anonymous and reduced to percentages – as in “Best Practice business spends 8% of operating budget on stationery.” This will help franchisees understand what areas of their business are sucking up (against the average) a greater percentage of their budget.

The problem: Personality clashes between Franchisor staff and franchisees

This is just human nature acting out in the franchising space, but it can be incredibly damaging when you have a franchisor who needs help but, because of personality clashes, is unable to access the help.

The solution:

  1. Use personality profiling when recruiting your Corporate Office team. Someone who has succeeded in the industry isn’t always a great choice as a mentor and motivator.
  2. Train your Corporate Office staff on how to handle different personality types.
  3. Train your Corporate team to listen, listen, listen and not judge. If the problem is in their realm of expertise, act. If it’s not, get help and follow up to ensure the problem is solved.
  4. If the situation is dire between the Franchisor staff member and a franchisee and you have no one else who can take over the relationship, seek a mediator to unearth the problems, air them, solve them and provide a clean slate for the relationship to move forward.
  5. Don’t force a franchisor to deal with a set person. Yes, it’s convenient to have a list of which performance coaches handle which franchisees, but often a franchisee will gravitate towards a personality type that they relate to.  If a performance coach receives a call from someone not on their list, they should liaise with their colleagues for a co-ordinated response that doesn’t just “hand them off.”

The problem: Franchisees who are strong influencers within the group, fermenting dissent

If you are recruiting innovative, intelligent franchisees, you are setting up your franchise for success as well as creating respected business owners who are role models for the rest of your franchisees.  However, these same franchisees, if unhappy, can be the ringleaders in fermenting dissatisfaction.  This is especially true if they are long-term franchisees with a powerful emotional and financial investment in the business.

The solution:

  1. Bring these franchisees “in the tent”, keep in frequent contact with them, taking their pulse and acting immediately to investigate any complaints
  2. Establish a Franchise Advisory Council (FAC) and encourage your leading franchisees to join and contribute. An FAC is a sounding board between you as Franchisor and the franchisees.  It is the FAC’s responsibility to receive feedback and suggestions on areas that impact on the whole group and to investigate, discuss and provide recommendations.
  3. Consider letting these influencers know about upcoming plans so they can socialise them and provide feedback.

The problem: Market conditions

Economic conditions are beyond your control, but they can gut your franchise if despair sets in.  Similarly, if your main product is a fad, then when fashions change, you are exposed to a plummet in sales.

The solution:

  1. Half the battle when facing poor economic conditions is state of mind. Gather your franchisees together and have a brainstorming session to work out what you can practically do to provide additional support (PR campaign, marketing, specialised training) and then ask your franchisees to consider what, in the current situation, they can control and what they can’t.  Ask them to focus on those areas that they can control – even if they are things such as providing sensational customer service, attending more local events etc.  These one percenters do add up and focussing on them can alleviate depression.
  2. Over-communicate in these times. Help your franchisees understand the conditions, break it down to their level.  Help dispel the media hype that may be feeding their mindset.
  3. Be hyper-alert to signals of distress. If a franchisees KPI’s are not being met, if they are disengaging with the group – immediate action is required.
  4. Have an Intensive Care Program ready to roll out to those franchisees in business distress. Assess, understand, re-set, retrain, support.  Action the plan then monitor.
  5. A healthy mind is the key to success. Make sure your team knows the symptoms of mental health issues.  Set up support organisations they can consult with or refer people to.
  6. Listen, listen, listen. Train your teams in situational awareness, reading the clues, hearing the sub-text.
  7. To avoid being left with an obsolete product invest in research. This could be continual surveys to map consumer engagement, looking at future trends, keeping aware of what market leaders in your field are doing and, of course, planning your own innovation.  Once again, liaise with your franchisees, who are at the coalface, to get real time intel.
  8. Have a culture of innovation within the franchise. Encourage ideas, reward them, share them then hand over to a taskforce for franchisee input.

Franchising is often juggling diverse personalities, fluctuating marketplaces and products.  But strong systems, two-way communication and an agile, flexible approach will often head off problems before they form.



Author: Corina Vucic
I thrive in an active environment and climb bridges for the thrill of it but my real passion is supporting businesses to meet their potential and flourish. Whether your goal is to franchise your business, take your franchise to the next level or simply move your business in another direction, I can lead, support and motivate you, step-by-step.