How Strong Is Your Validation?: Satisfied franchisees are Your Trump Card

How happy are your franchisees? In an honest and lucid moment, would they encourage other candidates to invest in your franchise, or tell them to run like the wind? If given the chance, would they make the same investment again or hightail it in another direction--and how would you know? Have you anonymously contacted franchisees to pose these questions, conducted a franchisee satisfaction survey, or are you just relying on a gut feeling?

If 80 percent or more of your franchisees do not indicate that: 1) they either are successful or expect to become successful according to how they measure success, and 2) they would make the same decision again today, then 3) your franchise sales results will suffer

Consistently positive franchisee validation fuels franchise development results. If franchisees paint a different picture than the recruiter presents, or dismisses the financial performance highlighted in the FDD, then the franchisor (not the franchisees) will lose credibility. Trust plummets and strong candidates seem to enter what experienced franchise salespeople jokingly call "the franchise candidate witness protection program" and stop returning calls and emails.

Franchising is ultimately a two-metric business: 1) franchisee unit-level economics, and 2) the quality of the franchisee/franchisor relationship. If you do not possess a community of happy and profitable franchisees regardless of how many franchisees you are currently selling, your business is already in decline.

Unpleasant truth

Recently, my company was hired by a high-flying franchisor to create a breakthrough in franchise sales results. When it came to franchisee satisfaction, the optimistic CEO proudly proclaimed, "We have the happiest franchisees in franchising."

When we conducted our research, including mystery shopping the opportunity, we found that a majority of franchisees, although initially happy with their investment decision, were becoming increasingly dissatisfied with the corporate culture. Franchisees posted strong financial returns, but no franchisee we interviewed enthusiastically stated they would make the same decision again. Many said the franchisor appeared to have stopped communicating with them and was more concerned with franchise sales than franchisees' profitability.

The franchisor was shocked by our feedback, but to their credit, took immediate and positive action, creating an outreach program to their franchisees, and turned around what would have been an increasingly negative situation. As a result, this franchisor continues to expand, even in the current difficult market.

An "Aha!" moment

One of the biggest "Aha!" moments I had about franchisee validation stemmed from a conversation I had several years ago with Eric Stites, president and CEO of Franchise Business Review, about the results of his "Top 50" franchisee satisfaction awards. In one particularly crowded residential service category, I noticed that one franchisor was rated higher than two other stellar franchisors I had worked with in the past.

I said, "I have studied this category and these two companies have tremendous training, great financial returns, the highest sales in the category, skilled operational support teams, and visionary leadership. They are stronger money-making opportunities and better-run companies than the one you gave the highest marks to. How can this company be ranked number one?"

His response was brilliant. "Joe, satisfaction isn't about what the franchisors do more or better." He said satisfaction is about what franchisees expect to receive in the beginning and what they end up experiencing in the end. The top company promised little at first and ended up delivering more than they promised. The franchisees of the other companies entered the relationship with much higher expectations and thus demanded more. Stites added, "The two franchisors you mentioned have a harder time living up to their franchisees' heightened expectations."

Here are four tips on how to improve your validation:

1. Know what your franchise candidates will hear and read before they do. Do you know what expectations your franchise salespeople are setting? Are your salespeople setting up your franchisees for future dissatisfaction and killing your future momentum by what they are saying or doing today? Do you routinely mystery shop your franchise sales people and process and compare candidates' expectations against what franchisees actually experience afterward?
2. Monitor your online reputation. In the social media age, franchisees, suppliers, and customers can post anything on the Internet. While their attitudes may change over time, their blog posts, comments, and social media mentions can create permanent impressions, as their comments will circulate in cyberspace forever.
3. Drive your online reputation. Don't let it unfold favorably or unfavorably on its own. Know what information a candidate will find on the web before they talk to you. Actively work to shape their impressions before they make themselves known. Use Franchise Business Review, FranSurvey, or other franchisee satisfaction surveys.
4. Ensure your "average" franchisees are making the money they expected. If you were a franchisee, would you be happy with the returns? Could you run your household, send your kids to college, and save for retirement on the money they are making? If not, you have a unit-level economics problem you need to fix now. There is no higher priority.

Joe Mathews is a founding partner of Franchise Performance Group, which specializes in franchisee recruitment, sales, and performance. He has more than 20 years of experience with national chains. He is a regular presenter at IFA conference, an instructor with the ICFE, and book author. This article is from his free, downloadable e-book, The Franchise Sales Tipping Point. Contact him at 860-567-3099 or joe@franchiseperformancegroup.com.