What Are Peer Groups and Why Do You Need Them?
The pros and cons of implementing peer groups in your franchise system and how you can use them to increase franchisee engagement
By John Francis, Next Level Franchise and ZorForum, and Eric Stites, CEO and Managing Director, Franchise Business Review
Peer groups, also called Franchise Performance Groups or Peer Performance Groups, are a critical franchise system business tool, particularly for mature brands that are looking for ongoing ways to support their franchisees.
Peer groups can help franchisees interact and stay committed to the brand, hold themselves accountable for hitting goals, maximize networking and sharing of best practices, and close the culture gap between newer and tenured franchisees, among other benefits. But surprisingly, based on talking with franchisors from the more than 1,200 brands we’ve worked with, less than half of franchise brands have peer groups in place today.
What Are Peer Groups?
Peer groups are typically made up of three to five franchisees (unit owners) of a particular brand, who meet regularly with a structured format to discuss best practices related to operations, finances, marketing, and other topics. Meetings are typically held with some frequency (quarterly), and allow these franchise owners to share and receive honest feedback, support, ideas, and guidance from their peers. It also gives these and other franchisees an opportunity to compare their business to others in the organization, and make choices with support from others who have shared similar experiences with the brand.
Franchisors take different approaches to peer groups:
- Voluntary vs. assigned (how the group participants are recruited)
- Expected vs. opportunistic (related to the launch environment, i.e., reactive vs proactive)
- Situational (assigned for franchisees needing more help)
- Conditional (most often they are voluntary, but sometimes can become a path for performance for franchisees who are out of compliance or a condition for other terms, or a work-out or recovery improvement plan)
Why Do You Need Peer Groups?
Peer groups are a recognized and respected tactic used by franchise brands to facilitate internal knowledge sharing and invigorate their system. This is a best practice for “enlightened” franchise systems that want to truly leverage the collective knowledge and experience to improve unit results and brand performance.
In many cases, franchisors implement new programs with the intention of adding value for all (or most) of their franchisees, but oftentimes, it’s hard to create programs that impact the more experienced, high-achiever franchisees in your system who have already figured out how to be successful. Peer groups can fill that gap by providing:
- Opportunities for franchisees to learn from each other’s real world experiences
- Structured networking time to maximize the benefits
- Bridging culture gaps between tenured and newer franchisees
- Motivation for underperforming franchisees to get back on track and/or in compliance.
Pros and Cons of Peer Groups
As you’re contemplating whether to implement peer groups in your franchise system, consider the following pros and cons:
1. Mature-stage franchisees get additional support. This is the next level of learning for franchisees who have been in the business for a while.They have achieved success and are looking for more; they want to continue to grow and have proven themselves to be leaders. Or, they’ve been in the system for a long time and have not adopted the more current approach to the brand and standards. Peer groups can offer a new way for the franchisor to positively influence the situation by providing an opportunity for franchisees to help each other and leverage their collective knowledge for their own individual benefit and, ultimately, the benefit of the brand.
2. Peer groups provide value to existing franchisees. Peer groups don’t take a tremendous amount of money or time to implement, but they do provide tremendous educational value to your franchisees—far beyond what you can provide with existing people and resources. Peer groups are a point of leverage for the franchisor to get more benefit from the existing structure and add value to the franchise owners directly.
3. Corporate staff learn from franchisees too. Enlightened franchisors recognize there is more knowledge in the system, beyond the support and best practices they directly provide. When peer group participants share ideas with each other, the corporate office gets the benefit of those best practices also. The relationships and knowledge sharing will build institutional knowledge over time, which in turn, minimizes risk when there is corporate staff turn over. Peer group participants can generate a wealth of documented best practices, available for the brand over time.
4. Brand leadership gets the credit! Franchisees appreciate your willingness to offer additional support and opportunities to make their businesses more successful and, in turn, they are more satisfied and loyal to the brand. The results over time reach beyond the unit level economics into other areas, which deepens the personal franchisee / franchisor relationships and appreciation.
5. They can be used as a recruiting tool. Having peer groups in place for your franchisees should be communicated and embraced as a competitive advantage. It lets new franchise candidates know your brand is mature and sophisticated, and you’re serious about helping your franchisees succeed, using all means and approaches to support them.
1. They might learn things you don’t want them to know. Sometimes, franchisees come up with ideas or tricks to work around the system that are not consistent with brand standards. In a peer group setting, they may share these “tips” or ideas for working around the system with others. Participants can get very candid and honest; sometimes people learn things that weren’t intended to be shared and confidentiality may be tested. It’s important to know and expect that a range of ideas will be shared.
2. Unintended outcomes. For example, you may have a struggling or troubled franchisee join a peer group in order to get advice on how to improve business or get into compliance, but the advice for him or her from the peer group is to sell the business. It’s not what you intended or expected—peer groups are made up of people, and like all people they are sometimes unpredictable. However, while difficult outcomes can occur, it may be the right decision for the franchisee in those circumstances or situation. Be open to new ideas and creative approaches from the groups.
3. Your peer groups can lose momentum. Your peer group participants invest meaningful time, money, and energy into the group, but if not handled carefully, the group can fizzle out after only a few meetings. Franchisees are much less likely or willing to put the same amount of commitment into a group a second time around. Momentum is easy to lose in peer groups, and issues that create one very bad meeting can change the trajectory if mishandled. It’s easier to maintain momentum than to restart. You can help prevent peer groups from losing momentum by giving the program plenty of structure and facilitation—especially in the beginning—to make sure the groups work well and the meetings continue to provide value. It’s Important to include a meeting evaluation process and measure group responses and results using a participant survey tool, so you have a chance to notice and repair any damage if things go wrong.
Kay Wasserman, co-founder of FPPG, notes that, “Critical elements missing from peer groups often include clear expectations, commitment, structure, and accountability. Based on our experience, research and feedback from franchise networks, we’ve learned that peer groups need a solid foundation in order to be successful. It’s tough to hold someone accountable if they don’t know the expectations.”
4. Your peer group program dies a slow and painful death and stops functioning.
The real risk here is if you launch and fail to maintain an effective peer group program it will die over time or change into something you did not intend, and you lose credibility as the franchisor by abandoning another program. It’s best to focus on maintaining and committing to this program as a long-term solution, and include the franchisees and explain their role in maintaining its effectiveness. This is a true collaboration and the responsibility needs to be shared and explained and reminded from time to time.
Increasing Franchisee Engagement Through Peer Groups
Implementing peer groups doesn’t have to be hard, but it does have to be planned thoughtfully with long-term goals in mind to be effective. In order to reap the benefits of peer groups, franchisors need to understand why, when, and how to build a peer group program from the ground up.
Increasing Franchisee Engagement Through Peer Groups is a free resource that walks you step-by-step through how to implement effective, structured peer groups that encourage participation, learning, and actionable results. It includes more tips, an implementation checklist and timeline, and sample meeting formats. You can download the workbook here.
Join us for the FBR Summit, a new event being held November 7-8, 2022 in Nashville. You’ll hear more from John Francis and FPPG co-founders Kay Wasserman and Lindsay Thomsen and leave with practical tips and takeaways for implementing and maximizing peer groups.