The human face of franchising

While the franchise agreement is an essential component of the franchisor/franchisee partnership, legal agreements do not guarantee mutually productive relationships. Co-operation, motivation and teamwork are the real building blocks of success in a franchise chain.

Contributed by Franchize Directions

To say that franchising is just a legal or commercial relationship between two parties is to provide only part of the story. To complete the picture we need to consider the quality of communication between the parties and said quality is largely dependent on the quality of relationships between the parties.

Given the long term nature of the franchise relationship and the interdependence of the parties, the franchisor/franchisee relationship is often likened to a marriage and, as in every marriage, relationships can sometimes become strained. Where a franchise network has developed a system of good internal communications, pressures on one party, rather than becoming a cause for conflict, provide an opportunity for assistance and support.

Ultimately franchising is about gaining a competitive edge through the sharing of knowledge and resources; sharing being the operative word. In a franchise network, when people stop sharing knowledge and resources, you no longer have a network, but a bunch of individuals battling it out alone.

Given the pitfalls of not maintaining healthy franchise relationships, one would think that franchisors and franchisees alike would do whatever it takes to ensure their relationship did not sour. The discord between franchisee and franchisor often relates to organisational and psychological issues and the most common of these is The Franchise E-Factor. The E-Factor model is based on a natural progression that many relationships move through — from dependence to independence and finally, interdependence. Interdependence being the highest and most mature type of relationship that requires experience, honesty and commitment.

The 6 stages of the franchise relationship

The Franchise E-Factor is a psychological journey that comprises hope, joy, disappointment, frustration and renewed confidence. The E-Factor is not a mental aberration or something to be fearful of; it is simply a natural maturing of the relationship the franchisee experiences with their franchisor as they gain greater competence and confidence in running their franchise.

Some franchisees move through the stages of the E-Factor more or less painlessly, but for others the journey is frustrating and beset with interpersonal strain and resentment.

1. The Glee Stage
“I am very happy with my franchisor, they obviously care about my success and have delivered all they said they would. I am excited about my new business and full of hope for the future.”

Initially franchisees are filled with glee as they anticipate the prospect of making lots of money and bask in the encouragement and motivation provided by the franchisor. There is a great sense of achievement for everyone as the numerous hurdles in establishing the business have now been cleared and positive emotions are running high.

The Glee stage also includes the period leading up to buying into the franchise and will usually stay with a franchisee for up to 12 months, depending on their past business experience.

2. The Fee Stage
 “Although I’m making money, the management services fees are really taking the cream off the top. What am I getting for my money?”

In the Fee stage franchisees are coming to grips with the business’ finances and there is a growing appreciation that profit is the end result of sales minus expenses. The franchisee is now particularly sensitive to the management services and advertising fees, which they see as unnecessary expenses eating into their profits and so their level of satisfaction starts to drop.

From here franchisees will either revert back to the Glee stage (should the franchisor provide some form of significant assistance) or move forward into the Me stage.

3. The Me Stage
“Yes I am successful, but it is due to my own hard work. I could probably be just as successful without the franchisor.”

In the Me stage the franchisee is convinced that their success is due purely to their own hard work and effort. This natural tendency to take credit for the good things is known in psychology as the ‘Attribution effect’ or the ‘Self-serving bias’ — positive performance is attributed to our own inherent skills and personality and when things are not going well, the blame goes to the franchisor.

Not surprising, this ‘Self-serving bias’ or ‘Attribution effect’ is alive and well in the franchise relationship and tends to be at its strongest when the franchisee moves through the Me stage.

4. The Free Stage
“I really don’t like the restrictions placed on how I run my business. I am frustrated and annoyed at the franchisor’s constant interference. I want to do my own thing and express my own ideas”.

At the start of the relationship the franchisee is relatively dependent on the franchisor, but as the franchisee’s business confidence grows, a desire for independence will increasingly assert itself. The Free stage is characterised by a need to break free of the restrictions and limitations of the franchise and a testing of the system’s boundaries.

Franchisees in the Free stage will either get bogged down in resentment and continue to bicker with their franchisor, revert back to the Me stage with intermittent but harmless grumbling, or make the quantum leap to the See stage. 

5. The See Stage
“I guess I can see the importance of following the system, and I acknowledge the value of my franchisor’s support services. I agree that if we all did our own thing, standards would drop and we would lose the very things that give us our competitive edge”.

The See stage is characterised by a shift in perception. If the franchise system has been managed fairly and effectively, the franchisee will generally come around to seeing that without consistency and adherence to the systems, the strength of the entire group would be lost.

However, conflict in relationships are seldom resolved without frank and open discussion. Mistakes and misunderstandings will no doubt have occurred on both sides, so expect some bloodletting as previous disputes or disagreements are reopened, but the aim should be acceptance and letting go of the past by both parties.

6. The We Stage 
“We need to work together to make the most of our business relationship. I need some specific assistance in certain areas to develop my business, but I also have some ideas I want my franchisor to consider”.

The We stage is distinguished by a shift from independent to interdependent thinking. The franchisee has put their ego aside and recognises that success and satisfaction generally come more easily from working with, rather than against, their franchisor.

To reach the We stage a franchisee must be mature, objective and commercially-minded, but most importantly, they must be profitable. Franchisees in the We stage are a franchise network’s greatest asset; they will often be quiet achievers who keep one eye on their profit and one eye on cultivating healthy business relationships, not just with their franchisor but with their suppliers, peers and, of course, their customers.

The ideal of a healthy interdependent relationship is something all franchisors and franchisees should strive for, and for those who succeed the result is a business that continues to grow and prosper.

Content courtesy of Greg Nathan, corporate psychologist, author and founder of the Franchise Relationship Institute.

Recommended reading
Profitable Partnerships by Greg Nathan
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