Franchise Horror Stories: 5 Ways to Separate Your Brand From the (Scary) Headlines

Restaurant Business recently published an article calling for tighter franchise regulations to protect franchisees. Citing Quiznos, one of the biggest collapses in franchise history, and more recently, Burgerim, which left hundreds of people out tens of thousands in franchise fees and others losing their life savings or in bankruptcy, the piece tells a cautionary tale for entrepreneurs thinking about buying a franchise.

While these may be extreme examples, they are certainly not the only ones – nor are they limited to restaurant concepts. One of the problems, the article points out, is that franchises are often sold based on emotion. Enticed by the shininess of owning a hot new trend, or the idea of being your own boss without needing prior experience, many investors don’t do the research necessary to understand whether the franchise they’re considering is a solid investment.

With these types of high-profile franchise systems making headlines exploiting franchisees with unfair and deceptive practices, how can brands that truly provide franchisees with the support and training they need to succeed, and work hard to foster strong, supportive franchisor-franchisee relationships differentiate themselves?

5 Ways to Differentiate Your Franchise Brand to Candidates

1. Share satisfaction data. Sell franchises based on data, rather than emotion. All brands should be measuring franchisee satisfaction at least annually. Asking franchisees to provide feedback on how happy they are with you as a franchisor gives you insight into the strengths and weaknesses of your system, but also gives you valuable data to show potential franchisees what your current franchisees really think about their investment: Would they do it all over again? Would they recommend it to a friend? Do they respect their franchisor? Do they enjoy operating their business?

2. Make your FDD required reading. Franchises are required to provide potential franchisees with the FDD, but they are long, complex documents full of legalese that may not be easy to understand for the average buyer. It is intended to educate franchisees about what they can expect as a franchise operator, the initial investment, ramp up time, how much money they can expect to make – among many other things. Requiring franchisees to read the FDD and review it with you during the development process ensures that there are no surprises. Here are some tips on how to make the Item 19 of your FDD accurate, precise, and engaging.

3. Be transparent. Building on tips 1 and 2, full transparency is the best way to ensure that you set expectations with franchisees before they make the decision to buy AND after they become franchisees. One of the best ways to do that during the development process is to show candidates detailed satisfaction data. Paul Pickett, Chief Development Officer for Wild Birds Unlimited, says as part of their validation process they give candidates full access to their satisfaction survey results, including detailed feedback, both good and bad, from existing franchise store owners. “They proactively tell us that this level of transparency makes them even more comfortable with our brand and our franchise development process.”

Another best practice when it comes to transparency is vision planning, which begins during discovery day. This helps franchisees identify their personal goals for their business so you align expectations. Ask them to develop a long-term “vision plan” and present it to your team and other candidates. It should look ahead 10 years and include business and personal goals, as well as shorter-term milestones. They should include the critical factors that will help them achieve each milestone. FBR has a free workbook for franchisors outlining how to implement vision planning with franchisees that you can download here.

4. Make validation mandatory. By requiring prospective buyers to talk with your existing franchise owners, you demonstrate that you have nothing to hide and, in fact, encourage communication about the strengths and weaknesses of your system among your franchise owners. And, if you share satisfaction data in advance, you actually help candidates better understand how to ask good questions and give you an opportunity to provide context and talk about initiatives you’re working in to address areas where they may hear negative comments.

5. Showcase independent rankings. Promoting awards and reviews from other credible  sources – like FBR’s annual Franchisee Satisfaction Awards – provides a third-party endorsement of your brand. It shows candidates you’re doing things right and speaks to the strength of your relationships with franchisees.

Horror stories, like those of Quiznos and Burgerim are not the norm in franchising, but they can make many people think twice about buying a franchise. And even the best systems typically have a few “loud voices” that will complain openly about your brand. But, if you implement the tips above, you can ensure that you’ve built a strong reputation for your brand and a solid foundation for mutual respect with your franchisees.

Contact us to learn more about how FBR can help you measure the satisfaction of your franchisees and be recognized as an award winning brand.

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