Franchisor Focus: All Franchisors Should Practice FRM

A key attribute of a successful franchise system is positive franchise relations, which indicates a stable relationship between the franchisor and their franchisees. The signs of a positive franchise relationship are zero or minimal litigation and a lack of major disputes between the parties. When there are positive franchise relations, franchisee prospects will receive a convincing validation from existing franchisees and franchisors and franchisees will be able to work towards similar goals.

There is a commitment needed by the franchisor to reach a state of positive relations with its franchisee’s. To achieve this it’s necessary for the franchisor to practice franchise relationship management which I refer to as FRM. I define FRM as the use of certain tactics and policies by a franchisor to promote a harmonious and constructive relationship with its franchisees. There needs to be a commitment by the franchisor and its staff to practice FRM.

Managing conflict between the franchisor and its franchisees

Over the course of my franchise career, I have witnessed numerous examples of minor disagreements between a franchisor and a franchisee where one or more franchisee issues escalated into a major dispute between the parties. Whether it’s a case of franchisor ego or not understanding how serious an issue can be to a franchisee, franchisors should avoid dismissing a franchisee complaint out of hand.

Maintain open lines of communication with franchisees

Franchisees should expect they can bring their questions and concerns to their franchisor and receive a timely and adequate response. Some franchisors have a policy that states a franchisee should receive a response to an important question or concern within 24 hours. Also, franchisors have an obligation to inform their franchisees about changes to franchise operations, upcoming marketing programs and other activities that can affect franchisee operations. Failing to inform its franchisees about these changes in a timely manner can lead to franchisee dissatisfaction.

Identify franchisee satisfaction levels

Franchisee satisfaction levels should be measured on a periodic basis to identify the level of franchisee fulfillment with franchisor support, services and the overall franchise program. Surveying franchisee satisfaction levels is essential during the various stages of a franchisee operation whether emerging or mature. It’s particularly important during the initial years of a franchisee operation when franchisees are at a critical phase in their development. Knowing the level of franchisee satisfaction enables a franchisor to identify and address those areas that require improvement and correct any potential problem areas.

Measure franchisee financial performance

Key Performance Indicators (KPIs) represent certain financial metrics like sales per square foot, gross profit, payroll costs and pre-tax profit. KPIs can differ depending upon the type of franchise. These results are identified by collecting and tabulating specific franchise financial information. KPIs should include monthly sales, gross margin percent and dollars, payroll costs and other pertinent franchise financial data. A franchisor should guide each franchisee toward achieving their financial goals, therefore it is essential that the franchisor is aware of whether their franchisees are meeting their financial objectives by identifying and comparing their individual financial results.