In February I attended the International Franchise Association’s (IFA) annual conference in San Antonio. Why? Because 785,000 franchise locations in the United States account for about half of the total retail transactions nationwide and will create nearly 250,000 jobs this year. Franchising is an entrepreneurial engine that drives growth, employment, and innovation. These are people I want to meet.
The business offerings of IFA members cover every imaginable sector of our economy – both consumer and B2B. I met with some of the most established franchise organizations in the country, as well as tech vendors, attorneys, and an entrepreneur who just sold her first franchise location. (If you need your stroller or car seat cleaned – and if you own one you do – check out Tot Squad.)
The conversations were as varied as the businesses in attendance, but there was a clear theme: trust. To be successful, the relationship requires the franchisee to trust that the franchisor is going to support them, and the franchisor has to trust that the franchisee will be a steward of the brand. No contract, audit, fee, penalty, or bonus can replace trust. And, if they both get it right, the relationship delivers on every promise – growth, jobs, innovation, and profit.
So what are the key elements to establishing and maintaining this trust?
- A shared understanding of the truth. Both sides of the relationship need to have access to the right KPIs – that much is obvious. But what I came to understand is that the need is much deeper than access. The franchisor must understand the unit-level metrics and contribute to their success with the support and economies of scale that define effective franchising. But this is a two way street: the franchisee for their part must understand the related brand-level numbers. They must be willing to view their contribution to these numbers not as an unwanted fee or sacrifice but as a strategic investment that pays healthy returns in the long run.
- Transparency. Consider the Spanish Prisoner confidence trick and similar logic problems. Both parties must contribute something valuable to get the maximum benefit. If only one party contributes, both suffer. Franchisees have real data on customer sentiment, competition, product or service development, and even marketing campaigns or leads. With access, the franchisor can react, adapt, and distribute resources more effectively to serve the whole system well. To balance the equation, franchisors should be willing to show what’s behind the curtain and offer insight to finances, costs, and roadmaps that any entrepreneur would want to understand in making unit-level decisions about staffing, expansion, or just keeping the doors open. If one side or the other obscures or withholds data out of fear, distrust, or ego, then both sides suffer.
- Accountability: This is most often thought of in terms of holding up your own end of the franchise agreement or contract. But think about this: if either party finds themselves in court making the case for compliance to that agreement, you’ve both lost. Of course you should adhere to your agreement, but I am talking about a bigger idea. Be accountable to do what is best — best for the customer, best for the brand, best for the other franchisees. Even if you are committed to the idea, the harder part is defining what is “best” and then delivering it. A clear and shared understanding of status, priorities, and action plans is a great start. Being an active and honest participant in the audit or review process is the big finish.
The best franchise organizations spend less time worrying about what could go wrong and more effort considering the possibilities. Congratulations to the IFA members and their associates on a great conference! I look forward to next year.
If you want to know more about how Square Root and our CoEFFICIENT® platform can contribute to trust within your organization, request a demo. We’d be glad to share our ideas.