Franchisee validation is driven by three factors. The first is unit-level economics. Are franchisees' financial returns meeting their expectations?
The second factor is the quality of the franchisors' training, support, and performance management systems. Would franchisees say the value of the tools and support they receive is greater than or equal to the royalty dollars invested?
The third factor is the quality of the franchisor-franchisee interpersonal relationships. Do franchisees, employees, and leadership of the franchisor trust each other and work toward crafting mutually profitable campaigns, offers, and solutions? Do franchisees feel they are heard and understood? Does information routinely flow up and down the organization or just funnel down from on high? Would franchisees say they are informed about issues important to them? Would they say they feel like an integral part of a team or more like the low man on the totem pole?
The way franchisees would answer these questions speaks volumes about the culture of the franchise organization. And strong financial returns are not a substitute for strong franchisee-franchisor relationships. Enduring franchise brands offer franchisees both.
Franchisors with a strong, inclusive, collaborative, franchisee-friendly corporate culture will attract more sophisticated and talented franchise candidates than more heavy-handed franchisors who resort to threats, punishment, and coercive command-and-control techniques to try to keep franchisees in line.
Jay Hall, Ph.D., spent a lifetime studying the impact of corporate culture on individual performance and has identified four prevailing corporate cultures, which FPG has licensed and modified to reflect what occurs in franchising. Each culture is marked by two distinguishing characteristics: 1) the franchisor's level of concern for franchisees' results, and 2) relationships.
Keep in mind that any company can exhibit traits from any one of these cultures at any time. However, over the long haul, franchise organizations tend to exhibit a dominant pattern of beliefs and behaviors. We will look at these cultures in a progression starting with the least effective and moving toward the most effective.
Bureaucracies are highly legalistic, highly layered companies where the lower you go in an organization, the less decision-making responsibility and authority an employee of the franchisor has. The organization seemingly exists to maintain the status quo, avoid accepting personal responsibility, and elude being held accountable for producing results. When a franchisee is faced with a unique challenge or makes a special request, the knee-jerk reaction throughout the layers of management is "No," coupled with "We don't do it that way," regardless of whether or not what the organization is currently doing actually works or remains in the franchisees' or customers' best interests. Change is met with stiff resistance and individual initiative is frowned upon by management. Employees and franchisees are expected to follow the rules, do what is expected, and resist original thinking. Policies and procedures are set to control employees to ensure compliance, not to drive results.
Ponder the type of corporate employees and leadership that would survive in this franchise culture in the long term. Those franchisor employees who are dedicated, results-oriented, efficient, entrepreneurial, visionary, big-picture thinkers, or out to make their mark in the world would be ostracized, and then quit or be fired. Only those who simply want to earn a steady paycheck while hiding out and avoiding personal responsibility would want to stick around for the long haul in this environment. Think about the type of person whose goal in life is to secure a good job with the Post Office or Motor Vehicle Department. Are you picturing a real "go-getter" and "risk taker?" I mean no disrespect to those with loved ones working in either bureaucracy. I am merely saying they work there for reasons other than, "I want to make my mark on the world."
Because bureaucracies value sameness and security over performance and efficiency, they remain a breeding ground for underperformance.
Now think about the quality of the interactions between the bureaucratic franchisor support staff and the franchisees under their charge. Would these conversations and communications pertain more to tactics and strategies about how to drive franchisees' sales and results, or would the conversations tend more toward what franchisees must do to continually stay in compliance?
For example, a somewhat bureaucratic retail chain forced its franchisees to adopt a management information system at a cost of tens of thousands of dollars per location to its franchisees. Franchisees who beta tested the system reported that the system had bugs, routinely lost data, and was not ready for a national rollout. Those in charge ignored the franchisees' warnings and forced franchisees at threat of default to adopt the new system. It was more important to the franchisor that all franchisees operate from one flawed standard system than several working systems. One year later, their newly adopted system still corrupts data and transaction information, making many reporting functions meaningless. Franchisees were livid over this, but powerless to do anything about it within the bureaucratic structure of the company.
Franchising was invented to make businesses more decentralized, flexible, and nimble by completely empowering those closest to the customer. As you can see, bureaucracies are designed to create the opposite effect. Therefore, bureaucratic franchisors have little staying power in today's competitive commercial marketplace because they kill off what we all know works. This is why most surviving bureaucracies exist in the public sector, where people have no other alternatives with regard to corporate cultures.
I recently dragged myself down to the Department Motor Vehicles to get my driver's license renewed. While being cattle-herded toward the middle of the DMV's patented customer discouragement and infuriation center known as the "customer waiting area," I noticed small signs carefully placed next to each customer service window reading, "Profanity and abusive language toward employees will not be tolerated." I burst out laughing, thinking to myself, "Doesn't anyone in the DMV ask, 'What is it about the way we do business that makes our customers routinely react by being profane and abusive?'" But keep in mind bureaucracies are not designed to ask such questions. If the DMV wanted to be completely honest, the little signs would read, "We make you be here and we aren't changing anytime soon. So deal with it and have a nice day. Or don't. What do we care?"
Next month: The Benevolent Dictatorship
Joe Mathews is a founding partner of Franchise Performance Group, which specializes in franchisee recruitment, sales, and performance. This article is from his free, downloadable e-book, The Franchise Sales Tipping Point: 10 Keys to Creating a Franchise Sales Breakthrough. Contact him at 860-567-3099 or firstname.lastname@example.org.
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