7 challenges facing franchisors today

By Greg Nathan | 10 May 2019 View comments

What can you do to counter the negative view of franchising that is seeping into the public arena? At the Franchise Relationships Institute, through our research, we have found there are seven specific challenges currently facing the franchising sector.

Are you a senior franchisor executive who cares about the health and reputation of your own network and the broader franchising sector?

Then I encourage you to read through the following seven challenges.

Consider how they relate to your network and what you are, or could be doing, to address them. I have also provided three tips under each challenge below.

7 challenges facing franchisors

Challenge 1: Mistrust

The ongoing negative public conversation about franchising has created a climate where franchisees are increasingly becoming sceptical and more inclined to question the motives behind legitimate franchisor strategies. This is an unhelpful, and often unnecessary, distraction which can unwittingly slow down important initiatives and undermine business performance.

Helpful tips:   

  • Nature abhors a vacuum, so it’s better to over-communicate than to leave people wondering. Ensure there are regular opportunities for live, two-way communications. For instance, brief monthly webinars with the CEO with live chat functionality.
  • Be as transparent as possible with your decision making processes, including the evidence or data you considered when coming to final conclusions or decisions.
  • Ensure all decisions pass the sniff test in terms of their actual, and perceived, fairness to all parties. Nothing outrages franchisees more than self-serving behaviour by their franchisor.

Challenge 2: Stress

Franchisors and franchisees are feeling unprecedented levels of anxiety which are coming from a range of commercial, personal and social pressures. Sustained stress can lead to poor decision-making, low productivity and unhappiness.

Helpful tips:     

  • Provide franchisees with productivity tools that make it easier to organise staff rosters, as this is often a source of stress.
  • At conferences and meetings, include speakers and round tables that address topics such as personal wellbeing and staying positive.
  • Help them to organise to at least one day off a week to spend with family and doing the things they enjoy.

Challenge 3: Margin compression

Many franchise networks are facing declining sales and rising costs, resulting in a squeezing of profit margins. This, of course, is not unique to franchising. Combine this with market disruption from social change and new technology, and we have a commercially dangerous situation.

Helpful tips:    

  • Identify the Key Performance Indicators (KPIs) most likely to drive unit level profitability and a healthy cash flow, and provide dashboards and reports that focus on these.
  • Remind franchisees that your team is committed to their profitability, and relentlessly look for ways to save them money through better buying and productivity improvements.
  • Invest in research to identify your most lucrative customer profile, and develop specific strategies to attract more of these people and keep them coming back.

Challenge 4: Growth

Reputational damage to the franchise brand and a tightening of credit has understandably dampened enquiry levels from new franchisees, and is making it difficult for franchisors to fill vacant locations or territories.

Helpful tips:    

  • Introduce more discipline into your recruitment process by using a CRM set up for franchise sales, and use pipeline tracking to measure key metrics.
  • Have a dedicated franchise opportunity website that is separate from your consumer site. You are talking to two different markets.
  • Introduce a system for identifying and preparing high performance franchisees so they can safely and confidently become multi-unit operators.

Challenge 5: Change

While franchisors may want to introduce important initiatives to help their networks adapt to changing market conditions, franchisees often resist these changes for a range of commercial and psychological reasons.

Helpful tips:   

  • Involve franchisees in pilot testing new initiatives and use them to report on the findings at group meetings.
  • When announcing new initiatives don’t mistake silence for agreement. People will initially just be taking in what you are saying.
  • Remember all change is associated with some sort of loss, e.g. convenience, time, money, relationships, etc. Identify what this might be for your franchisees and discuss it up front.

Challenge 6: Diversity

Never before has there been such a diverse range of franchisees in terms of tenure, business size, age and cultural background. Franchisor teams wanting to add maximum value to their franchisees must consider the different needs of these groups so services can be tailored to deliver relevant support.

Helpful tips:       

  • Rather than a one size fits all approach, categorise your franchisees by tenure and ensure your mature franchisees are receiving support that is relevant to their experience.
  • Be careful that behaviours unique to different generational groups are not negatively impacting on your franchise communications, e.g. millennials generally prefer brief text while baby boomers often prefer to talk.
  • Consider how you can get people from different cultural groups sitting together in your meetings, rather than the usual “tribal clustering” that occurs.

Challenge 7: Culture

The above challenges, when combined, can erode the confidence of franchisees and franchisor teams. On the other hand, there is considerable research that shows the power of maintaining a culture of optimism in a franchise network, as this energises everyone to pull together and find solutions to collective challenges.

Helpful tips:

  • Acknowledge challenges and difficulties, both for individuals and the group, and what is being done to address these. Also highlight group achievements, with evidence that things are moving in a positive direction.
  • Keep conversations solution focused and on the things people can control.
  • Ensure members of the franchisor team are all setting an example of optimism and positive energy in their dealings with franchisees.

With this last point in mind, the Franchise Relationships Institute has organised a Franchisor Excellence Masterclass on May 20 and 21 to explore how franchisor leaders can cultivate healthy and prosperous cultures where everyone wins. We will teach a number of evidence-based techniques to address these challenges, and hear from the heads of three leading consumer research companies – Retail Doctor Group, Customology and RateIt – who will share data and insights on how franchisors can retain their customers and reverse damaging retail trends.

Let’s all stay focused on the things we can control, and pull together to keep our franchising sector healthy and positive.