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Young Franchise Systems

If your Brand is at this growth stage, you are beginning to realize you may have done some things you shouldn’t have done, such as:

• “Selling” instead of granting franchises.  By selling franchises it has created people who do not believe they must be compliant to any of your “must be done this way” rules,
• The franchisees see you as their “vendor obligated to serve us,”
• The initial fee is perceived as “what bought me the Brand and the Operating System,”
• While the royalty is perceived as “what I pay you for supporting me” and by the way “what have you done for me lately?”
• The early “pioneer” franchisees see you as ungrateful for what they have done for you – making you successful,
• You have your 30-200 units in 10-60 markets,
• Few franchisees are following the systems,
• You’re not making money and the franchisees believe you’re getting rich on “our royalty payments,”
• Your field consultants are perceived as “cop inspectors,”
• The franchisees want to or have started, an “Advisory Committee” to negotiate anything and everything with you,
• Etc. and the list goes on from here.

The solution begins with a commitment to change the beliefs, thinking and behaviors that created this situation and to create, lead and manage differently; by changing the way franchising is viewed.  Once the way franchising is viewed changes, the franchisor and their team’s beliefs, thinking and behaviors will change, resulting in a culture shift improving relationships, unit revenue growth, market growth and better relationships with the end user customers. 

Management 2000 refers to this stage as “the messy middle.”  The way out of the messy middle is challenging but must be accomplished sooner or later if the Brand is to be successful.  Below are some of the elements of the transition from an entrepreneurially-run organization to a professionally lead and managed organization:

• Go from “selling franchises” to “granting franchises” – just as your License Agreement says,
• Explain to each franchisee they have granted the right, duty, and obligation to fully, completely and consistently implement every aspect of the operating systems,
• Explain the Initial Fee as “the way we recover some of the expenses related to putting you in our business,”
• Explain the royalty as, “the monies you remit to us are our share of the customers’ money since it was generated by you using our Intellectual Property,”
• The key to business is get and keep very satisfied, loyal, frequent user promoter customers, not just “to make money.”  Making money is never the focus.  The focus is on keeping the money you make, which is done through the retention and acquisition of profitable customers.
• No one is “in business for themselves.”  We are in business together to build a great Brand.
• The franchisor is committed to not just “supporting the franchisees,” but more importantly to helping them improve their performance, resulting in the acquisition and retention of more and more customers.
• Franchisees own their businesses but not the franchise.  They operate the businesses they own with the Intellectual Property you granted them, the right, duty, and obligation to use – in accordance with your manuals, etc.
• Other franchisees are not your competitors; rather they are your allies in developing and dominating every market entered and in winning in an increasingly competitive business environment.
• Field consultants are perceived to be business consultants and coaches working with individual franchisees and teams of franchisees committed to each others’ success and committed to helping each other use the franchise to accomplish their personal goals through the achievement of their business goals.
• Franchisor and franchisees must meet and get agreement to develop their presence in their existing markets, learn to become a team, and then enter, penetrate, develop and dominate new markets.
•  The franchisor must lead and manage this transition by changing the focus to creating a marketing mentality among all of the constituencies making up the organization.  This marketing mentality is focused on creating positive relationships with customers.  Positive relationships with customers are accomplished by asking and answering three questions;
  1. Who are OUR customers?
  2. What do they value?
  3. How can we, in our interactions with them, enhance what they value?

Going through this process will create a mutual rather than an individual focus, and it will redefine the operating system around the customer’s experience, resulting in the acquisition of new and the retention of existing customers.  When this transition is made to a Customer-Centric Culture the franchisees will make and retain more money and will be very happy they became a franchisee.  The happier the franchisees are the more ready they are to validate the concepts to franchise candidates and the healthier the franchisor’s FDD Item 19 will become.