Time and again, prospective franchisors say that the only thing holding them back from franchising their business is the fear that franchisees won’t sustain the quality standards they’ve established. A typical lament is, “I’ve worked too long and too hard building this brand to let someone else screw it up.”
Frankly, I’m always heartened when I hear these words, because that tells me the prospective franchisor is focusing on the right things. Maintaining quality in your franchise system should be a key focus for a franchisor. This is what differentiates great franchise brands from those that don’t succeed.
What’s more, if done correctly, franchising can improve quality.
That’s right: franchising, done right, can be responsible for increased quality.
The problem is that many people who contemplate franchising associate franchised operations with fast food. In doing so, they confuse the ultimate quality of the product (which can be judged as low) with the quality of the operation.
The fact of the matter is that McDonald’s is among the world’s most quality-oriented brands, but the value proposition and price point aren’t appropriate for steak and lobster. There are, however, high-end franchise brands known for detailed attention to quality.
Quality is not about what’s on the menu; it’s about consistency of the operation.
The Hen and the Pig
When entrepreneurs fear a loss of quality, what they really fear is a loss of control. As a franchisor, they cannot fire a franchisee simply because they don’t like the way the franchisee runs a unit. They cannot fire the franchisee’s unit managers or employees. And they cannot force the franchisee to comply with their standards in the same way their own employees do.
But a closer examination of the situation tells a different story.
The franchisor has a tremendous amount of power over the franchisee. With a unit manager, poor performance can lead to job loss. With a franchisee, poor performance can lead to the loss of the entire franchise, which in turn can lead to the loss of the franchisee’s investment, home, lifestyle, children’s college fund and retirement plans.
There’s an old joke about a bacon-and-egg breakfast. The hen was involved, but the pig was committed. And it’s precisely that type of do-or-die commitment that a franchisee brings to the table.
The franchisee is not only committed, but is also motivated to excel, as the rewards for strong performance far exceed the rewards associated with managing a business. In addition to increased compensation they’re likely to achieve from a strong performance, franchisees can build the business and, in the long term, sell that business as an asset.
Franchisees are also motivated by pride of ownership. They relate to their businesses far more deeply than even the best employee can. In fact, time and again when I see a franchise system that has trouble controlling quality, it’s often the best franchisees of that system who complain the loudest about poor franchisees that aren’t maintaining standards.
Finally, franchisees almost always have a longer tenure on the job than managers. Over time, these owner-operators continue to accumulate knowledge and expertise. Most managers, on the other hand, move on, leaving the business owner to hire, train and supervise a new manager who, in turn, will leave the system in a similar bind years (or even months) down the line.
Here’s the bottom line: in many ways, franchising facilitates improvements in quality at the unit level. One study on this subject showed that franchisees outperformed their company-owned counterparts by an average of 10% to 30%. In addition, case studies abound in which franchisees, who’ve taken over stores previously run by managers, are able to increase sales by 30% or more almost overnight. I’ve even heard from more than one franchisor who stopped running their own operations because they couldn’t manage them as well as the franchisees.
Highly motivated franchisees drive a higher unit volume.
Whether it’s because they run their units better, work later, do a better job with add-on sales or are simply more involved in their communities, their consumers are voting with their money, and the results say it all.
Talk is Cheap
Of course, franchising alone is not a prescription for quality. When it comes to quality control, there will be good franchisors, and there will be bad franchisors. From a franchisor’s standpoint, there are four pillars of quality and each of them has a cost.
– Franchisee selection
– Franchisee training
– Ongoing support
Quality starts with franchisee selection.
The best franchisors award franchises only to well-qualified candidates, and they walk away from the rest. Of course, that means the franchisor will sacrifice the fees and royalties he might have obtained from those rejected, but in exchange, quality is maintained.
Training also comes with a cost – in terms of time, salaries and the expense associated with developing training programmes and learning management systems. But training is equally as important as franchisee selection when it comes to maintaining the brand. The best franchisors routinely provide the most – and the most comprehensive – training to their franchisees.
Ongoing support can come in many forms and, again, all of them come at a cost. Field support has associated salary and travel costs, so the frequency and length of site visits will increase staffing ratios and associated expenses. Advertising, purchasing, public relations, technology, the list goes on and on. All have associated costs, but all also contribute to both higher-quality and more profitable franchisees.
Finally, the franchisor must be committed to compliance with the franchise’s systems and standards. While the franchisor cannot fire franchisees the way that he or she could fire an employee, a well-crafted contract will grant the franchisor the ability to terminate a non-compliant franchisee. From a quality control perspective, the question isn’t whether a franchisor can enforce these standards, but rather if the franchisor will. Enforcing standards, when done from day one, can be relatively painless, but it must be done.
If standards aren’t rigorously enforced from day one, chances are these standards will continue to slip, and in the process, they’ll become more and more difficult to maintain. Again, maintaining compliance comes at a cost – ranging from the costs of having an attorney send a compliance letter to the costs of franchisee termination (and potentially the costs of defending that termination), along with the forgone royalties such a termination would entail.
Quality control is all about commitment. For a good franchisee, that commitment comes naturally. For the franchisor, it comes at a price. But franchisors who are willing to pay that price will find their ability to build a quality brand greatly enhanced.