What happened to my prospect?

Recently, one of my friends in franchise sales needed to vent about losing a great prospect at the end of the validation process.  Apparently, the contacted a franchisee at the sales persons’ urging to complete the validation process.  This owner had always been helpful with candidates, but this time, the message was less than stellar, it killed the deal.

What happened to the other 10 owners the candidate spoke with who were happy and successful?  What did this one owner say that was so powerful that months of working together suddenly disappeared and the candidate quit returning calls or emails?

If you search, “franchising” on the the Internet every blog, book and article on buying a franchise advises candidates to contact existing and former franchisees. It amazes me that many franchisors do not know what their own franchisees feel and are saying about them to their candidates. This is a time where what you don’t know can definitely hurt you.

Good validation begins with investigation. You cannot fix what you do not know is broken. But, if you know what triggers your owners’ negative comments, then you can take steps to correct the issues and have happy, engaged and validating owners.  What steps do you take uncover your franchisees’ thoughts and feelings?  Fortunately, measuring validation can be simple and inexpensive. 

One tool that should always be in the franchisor’s assessment repertoire should be mystery shopping. Shop all of your owners if possible, but if not, you should know what the majority of your owners are experiencing, feeling, and saying.

You may also wish to also employ one of the online franchise survey tools. These tools may identify areas for concern and will afford your franchisees with an opportunity to provide feedback in the process. 

Regardless of the method, it is imperative that the franchisor understands what your franchisees think about the system before choosing a strategy for improving your validation.

Even successful franchisees who typically are pleased with the system, does not mean that they will always validate positively. When a franchisee is speaking with a candidate, they may take their self-interest into account when speaking with your candidates. So from a salesperson’s perspective, it is important to make sure your franchisees understand the benefits to them in growing the system.   Although we do not want to urge franchisees to say anything that is not true, we do want to be sure that they understand that we are interdependent.

As you know, some, if not most, franchisees come have left the corporate environment in which it is constantly “us versus them”.  A good franchisor indoctrinates new owners in the culture of the system, which hopefully is one of teamwork and cooperation and continually educates all franchisees on the advantages of scale and growth. 

So what are the benefits to your franchises:

• Adding new franchisees will directly increase their advertising budgets

• More units in the marketplace will increase local brand recognition - making it more difficult for a new competitor to enter..

• More franchisees also generates more royalties and although some who are not able to shake the “us-versus-them” mentality may have a difficult time seeing this also benefits the franchisee. When the royalty base grows, so does the franchisor’s capacity to improve support to its franchisees.  Some areas which will benefit from increased royalties include:

o   more field representatives

o   the ability to upgrade support in areas such as advertising, research and development, product design, new services, information technology, training, learning management systems, convention planning, and other support functions that may be particular to a specific franchisor. 

o   more franchisees will equate to increased buying power.

o   Perhaps the most important advantage to the franchise owner, but the least discussed is increased business value. Being part of a well-known brand, the franchisee can expect to sell their individual franchise unit more quickly and at a higher sales price than for a single unit, mom and pop business with similar profits. Nevin Sanli and Barry Kurtz conducted a study and the results were published by the Franchise Law Journal by indicated that the 77 franchised restaurants included in their research garnered a 59 percent average EBIT multiple premium when compared to 356 non-franchised restaurants sold in the same period. This study indicates that franchised businesses may increase the value of franchisees business significantly over non-franchised businesses.

o   Franchisees who refuse to validate well or even speak with a candidate because the candidate is looking in a nearby territory actually end up hurting their own business because the longer the territory remains open the more likely another brand will enter the market and continue to sell franchises in the same area including the one the current franchisee holds.

o   Franchises can be helpful in validating candidates.  They will have a more casual initial impression of the candidate but by asking the candidate questions, they have a role to play in the evaluation and now have a vested interest in the validation process. We know from the Greek system that the more difficult something is to attain, the more highly it is valued. Just look at the loyalty that Fraternities and Sororities enjoy. Having franchisees evaluate and be part of the approval team makes the franchise more desireable to the candidate and the owner part of a team decision making team.  In a sense, the current franchisees receive value from their role as candidate interviewer.

Franchisees are stakeholders in the system.  Most franchisees who validate want to know if the candidates they talk with purchase a franchise.   Keep your owners involved and engaged by requesting their opinions on the candidates with whom they speak and your validation will improve. Keeping your franchisees involved in the process and educated on what’s in it for them will improve the quality of the validation for the brand.

The single easiest way improve validation

Do you want stellar validation from your franchisees?  It’s Easy!  COMMUNICATE!

Franchise companies are often perplexed by negative remarks from their franchisees during the candidate validation process.  Unhappy franchisees are more detrimental to the franchise system than any other threat. Preserving the reputation of the brand is paramount to a healthy, thriving franchise system and like it or not, your franchisee’s opinions are the lifeblood to growing the brand. 

When it comes to knowing what franchisees are thinking, feeling and saying to franchise candidates, it sometimes feels like it requires a mind reader, a psychic or a supernatural power. Peter Druker, the inventor of Management by Objectives asserted that,   “The most important thing in communication is hearing what isn’t said.”  How can we know what isn’t being said? 

Franchisees and franchisors rarely agree because each one approaches franchising from different perspectives.  It becomes problematic when the franchisor believes they are making the right choices for their system and the franchisees believe that the franchisor is out of touch or worse, disregards their franchisees’ opinions and insights.
 
The successful franchisor knows that great validation requires frequent, comprehensive communication with every franchisee..

Steps for Improvement: 

Step 1:  Franchise Development.  Communication channels are initiated the sales development process by managing the candidate’s expectations in every area of the franchise business.  So, tell the truth, the whole truth and nothing but the truth. Be certain that the brokers and sales development team represent the vision of the founder and your franchise accurately.  Remember, that the home office employees are stakeholders once the candidate becomes a franchise owner.  The staff supports these owners for years, but the sales team only a few months. It is imperative that the communication channels be open and active for the support team to know what Know what your sales team is selling.

Step:  2. Staff Meeting.  Communication about expectations and realities must flow multi-directionally to and from the Franchise Development Team to the Operations Team, Orientation Team, Marketing Team and Sales Team.  The best staff are not able to support unfamiliar products and services.  Lack of communication with the support team on new offerings erodes the trust of the franchisee in the franchisor.  How can they trust the home office if the home office does not know before the owner?

Step 3:  Educating Home Office Support Team.  Inexperienced franchisors typically begin franchising with existing staff from the first location as the home office staff.  While the specific knowledge these valued team members contribute is vital, it does not necessarily translate to a good corporate employee.  It is common to find tenured employees in high positions of responsibility with the franchisor who do not know, understand or maybe even care what validation means to the company.  Task driven employees typically make good unit employees but may not translate to an understanding of franchising, the big picture or the partnership of franchisor and franchisee.  It is possible that these employees may develop an authoritative attitude of employer rather than partner toward your franchisees. Which often leads to dissatisfied franchise owners.

Step 4:  Orientation and First Impressions with New Owners: During the sales process, the franchise candidate has been in frequent, regular communication with their sales person.  Once the candidate signs the franchise agreement, this contact ceases leaving the new owner feeling abandoned and adrift.   Franchisors must replace that contact immediately.  New franchisees are excited and terrified about their decision to invest their life’s savings and need an immediate focus for this energy.  It is vital to have a process in place to engage the new owner into the culture of the company, manage their expectations, direct their energies and provide appropriate tasks for the transition period between signing and opening.

Providing a task list with specific responsibilities that can be completed and checked off provides a psychological boost of accomplishment.  The positive feeling associated with completing tasks correctly generalize to a feeling of confidence that they made the right decision and will be successful.  These feelings are reinforced as they learn the franchise model and helps to make the new owner a coachable, engaged and happy owner.

Initially, having a single point of contact alleviates the stress and tension of the unknown.  The owner quickly comes to respect this person and bonds with them.  In the future, the person who originally decreases their anxiety and can talk them down when needed becomes their confidant into the future.  

Their first impression of the franchisor is one of support and liking that will continue long after the orientation process has concluded.

Step 5:  Business Intelligence.  Franchisors have access to the best business intelligence through their owners and the franchisor can have it free.  All the franchisor has to do is listen to their owners.  Failing listen to their franchisees signifies to the franchisees that they are not a partner and their input is irrelevant and inconsequential.  Actively soliciting the counsel and advice of your owners increases their satisfaction and they are less inclined to be negative about a franchisor who takes their advice.

Step 6:  C-Suite Conversations:  The best, easiest, fastest and most economical avenue to dramatically improve franchisee satisfaction and therefore, validation is to have one-on-one conversations with the C-Level executives and the owners. Like all customers, franchisees want to be heard and believe they have paid for that right.  A quick telephone call just to check on your owners will substantially improve validation without having to ask for it.  Pick up the telephone and make the call to an owner who is feeling less than great about their units’ sales or if they have a personal issue.  Addressing the small issues keeps them from growing into big problems.

Franchisors and franchisees share the same goal, to be a successful.  In franchising, working together for the good of the system is important as is working for the best for the individual franchise.  Either way, franchisee and franchisor are dependant on one another for not just survival but success. Druker had it right, what is not communicated creates a chasm. Communicate and alleviate virtually all the issues that contribute to unhappy franchisees and decreased validation.