By Alicia Miller, Managing Director, Catalyst Insight Group
One of the most efficient ways to predict future franchise brand performance is to examine franchisee survey results. Why? Because franchisee profitability and happiness are your future growth engine. When franchisees are doing well and are happy, they will want to expand. New owners will be attracted to the success and great outcomes your current owners are enjoying, and will want to join. Understanding how your franchisees really feel about your brand, their key pain points, and their ideas for improvement are a window to your brand’s future. In which direction is your brand headed? It is such an important leading indicator that most private equity firms now require a recent franchisee survey as part of their standard due diligence process, prior to making an investment or acquisition. Smart boards of directors and executive leadership also incorporate franchisee surveys as part of their annual corporate team performance assessment and compensation review process.
Despite the valuable information surveys provide, why do some brands avoid conducting franchisee surveys?
1. Management is worried about what franchisees will say.
Even when the relationship between the franchisor and franchisees is a good one, some inevitable pain points can surface in survey results. A survey may feel to some managers like an invitation for franchisees to complain. Management teams also may worry that bad survey results put their own jobs or compensation in jeopardy.
Reality check: If you have unhappy franchisees, your job is already on the line. Growth can stall out, validation may go sideways, system performance may drop, turnover may increase, and franchisee discontent may spill into meetings or onto the Internet. You are far better off knowing what is being said, so you can get in front of it. Franchisees create alternative communication channels when they don’t feel they are getting what they need from the corporate team. Surveys can help franchisees feel that management is listening to their concerns. Surveys can also bring great new ideas to light; it’s well known that some of the best ideas come from franchisees themselves. Also, if you don’t have the feedback, how do you know if your corporate team is delivering any value? Surveys can help identify additional resources needed or areas where resources could be deployed. Adopt the mantra: “Maybe they’re right” and find out what your franchisees think. They may have incredibly valuable advice and identify areas for improvement that can vault your brand to the next level.
2. Management wants to control the message, because they know the feedback is likely to be bad.
It takes a big person to solicit feedback about their own performance. Some management teams simply don’t want the scrutiny, or are trying to control the message.
Reality check: If things aren’t going well, and if you allow franchisees to get frustrated enough, eventually you will lose control anyway. Franchisees can organize, go over your head, or go public with their concerns. As an example, franchisees in one system got so fed up with perceived bad treatment from their CEO that some reached out to internet review sites and posted extremely detailed accounts about their concerns. Others in that brand escalated their concerns directly to the private equity owners and board of directors. Franchise sales collapsed, and the CEO was replaced. It took several years of relationship re-building and some significant operational changes to win franchisee support and rebuild the development pipeline. The meltdown could have been avoided altogether if management had really been listening.
3. “We already know our franchisees, and our franchisees are happy.”
Some brands already conduct internal surveys of sorts, or have what they believe to be open and effective lines of communication. Management may avoid detailed third party franchisee surveys because they don’t see a need.
Reality check: There may be gaps between your perceptions as the franchisor, and franchisee realities. This may extend to the “effectiveness” of your current feedback and communication mechanisms themselves. Franchisees may have needs or feedback that are not being captured. You may think you’re listening, but franchisees may feel differently. Responding to third party surveys can also often elicit more candor than internal surveys. This is especially true if franchisees believe that prior negative feedback has been downplayed or filtered by the corporate team. Even if you’re right and franchisees are largely satisfied, a detailed annual survey can uncover new ideas and opportunities. Just the fact that you’re open to a survey and want franchisee feedback is viewed positively by franchisees.
4. We already have strong franchise sales, so why participate?”
We often hear, “I’m selling tons of franchises without a franchisee survey, so why participate (and potentially find out something I don’t want to know)?”
Reality check: Great survey results can accelerate your brand! For example, strong FBR satisfaction ratings will drive awareness of, and interest in, your brand. If you have a strong offering and your survey results prove it, it can be a very effective franchise development marketing tool. Some brands go so far to share their survey results, including detailed comments, with prospective candidates prior to signing the franchise agreement as one of the final steps in the buying process. This serves two purposes. First, it arms candidates with as much information as possible so they can make a good decision. Second, it reduces liability for the franchisor because they have been highly transparent with candidates about franchisee feedback.
Franchisee satisfaction is the most important indicator of the future trajectory of your brand. Detailed, annual surveys of your franchisees is an excellent management discipline to maintain. It can also help to uncover great ideas from the front lines, reveal trends, and head off problems before they become derailers. Knowledge is power, and will help maximize the long term value of your brand.
Looking for ways to improve your brand performance and grow? Connect with us!
Alicia Miller, Managing Director, Catalyst Insight Group, [email protected]
The [Franchise] Happiness Project
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