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Not All Franchisees Are Created Equal

by Ed Teixeira

It’s a proven fact that buying a franchise is not a guarantee of success. Moreover, there are few McDonald’s in the franchise world where a powerful brand, top notch operating system and a history of near flawless site selection leads franchisees to success by following the “Program.” Rather, many franchise systems fall short in certain areas, which may require its franchisees to overcome these shortcomings.

Individuals purchase a franchise based upon the expectation that by investing in a franchise built from a successful business model the probability of success is high and risk of failure low. In many cases, franchisees anticipate that by following the franchise program they will achieve their financial goals. However, apart from the highly successful franchise programs like a McDonald’s, many franchises require a certain level of business skill and commitment for success. Some franchises may require a level of experience in the industry that the franchise is a part of. In any case this means that simply following a franchise program may not be enough.

Despite the best of intentions certain franchisors, should recognize that some of their franchisees may not have the business acumen to achieve success on their own but rather require added assistance and support. Franchisors may have an in-depth and thorough franchisee selection process; however, some franchisees are just smarter, more experienced and better performers than others. Combine this factor with franchise operational requirements and you have a situation where operating a successful franchise will be easier for some and more difficult for others.

If a franchise system finds itself in this situation I believe its incumbent upon the franchisor to face the problem and respond.

As an analogy, consider the coach that employs a particular system and expects his or her team members to follow the system. A good coach recognizes that some players may need extra coaching and motivation to maximize their potential. By knowing who to coach and how to coach, the probability of having a successful team increases.

Franchisors that observe inconsistent franchisee performance should have a way to deal with this situation.

Following is a suggested plan of action:

Have a sound and objective method for evaluating individual franchisee performance using key performance indicators.
The most competent franchisor staff should indentify the strengths and weaknesses of its franchisees or at the very least those that have below par performance. Include surveys of franchisees in order to identify possible causal factors.
Confirm that the better performing franchisees are not required to work or operate at extraordinary levels to be successful. If this is the case then the franchise program may need adjusting.
Determine if the performance issues are the result of franchisee competency, staffing, lack of capital or lack of commitment.
Identify those franchises that require support and assistance and those that may need to be counseled from the franchise program. In some cases a buyout may be appropriate.

There are benefits that the franchisor can realize from employing this approach. Of course if a franchisor takes the position that by simply following their franchise program the franchisees will be successful, then the franchise had better be darn good. However, in the real world people have differing talents and in franchising it’s important that franchisors work towards maximizing the talents of their franchisees. If a franchisee is unwilling to make the commitment and accept sound advice then other steps will need to be taken.

Here are some of the benefits that franchisors will gain as a result of evaluating and coaching particular franchisees:

Franchisee performance can improve resulting in more sales and royalties.
The franchisor will enhance the sale of new franchises by demonstrating their commitment to their franchisees in tangible ways.
Improve franchise relations.
Head off potential franchisee litigation by being proactive.
Franchisor staff will improve their level of competency and gain a level of satisfaction by enabling improved franchisee performance.

It’s important for franchisors to recognize that not all franchisees are created equal. Some have better marketing skills while others may be more adept at organizing and managing the franchise operation. Franchises don’t run on auto-pilot and the basic responsibility for the daily operation of the franchise rightfully rests upon the shoulders of the franchisees. If the franchise program is fundamentally sound and some franchisees are performing below acceptable levels for themselves and franchisor staff, it’s important to find out why. If the franchisee is committed but needs some support and coaching, provide the assistance. If the franchisee is not committed to the franchise than they should be out of the system.