Franchisors reboot and rise


As we look back – who could have ever anticipated 2020? It was meant to be a year of recovery with experts abuzz with commentary of the 4th industrial revolution and a 20/20 vision. Until everything came to a grinding halt. How to survive a global pandemic is not a chapter in any business strategy book on the shelves.

Disruption is ever present in the business world but it would be hard to find something in memory as catastrophic as this one, with absolutely everything as we know it falling out from underneath us with 3 days warning. If there was a management or leadership book that addresses ‘Pandemic 101 for Dummies’, most of us missed that edition!

Fast forward, and on reflection it all feels quite surreal. Did this actually happen or were we all in a prolonged nightmare? Worst of all it appears that it is a long way from being over. Much of the fall out will only be seen in 2021 and the fears of a second wave and further lockdowns remain present.

The CEO of a well respected fast food franchise chain noted that it wasn’t the decisions they made during the lockdown that made the greatest difference to survival, it was their decisions and behavior beforehand that stood the network in better stead. Franchisors operate two businesses. They have to be at the forefront of innovation, product development and marketing whilst traversing the tight rope of their second business of franchising. Franchisors need to be continually finding the strength in the collective.

The best battles were won by debriefing, extracting the learnings and adjusting behavior accordingly. They say a crisis reveals more than it conceals and this was certainly the case with COVID-19. Elements of the franchise model and the franchise relationships within those models that were not sound before the pandemic were exposed during the pandemic and the responses that ensued. What can franchisors learn from 2020, and then more importantly, move on towards and focus on in the future?

Honest Leadership

This time called for accessible, and sometimes vulnerable, leadership. Franchise champions had to become more accessible to their network especially in a time of uncertainty. They had to be honest if they didn’t have the answers. Napoleon said that a leader is a ‘dealer in hope’. Good leaders are honest, transparent and act with humility. There was no place for arrogance or ego, and Franchisor leadership had to be both agile and adaptive – not to mention resilient! This time called for collaboration and compromise – not command and control.

Franchisors need to look at what they can do to add value both within in the context of a pandemic as well as the recovery period thereafter. Franchisees must take care of day to day issues and trade. Franchisors can proactively address macro issues like innovation, landlord negotiations, legislation, mobilising the power of group marketing and supply chain management.

Fostering good relationships

Greg Nathan, corporate psychologist and Founder of the world renowned Franchise Relationships Institute expresses why franchising is such a magical mechanism for business expansion. He says it is because it’s a combination of “social conscience, collaboration and entrepreneurship”. A competent franchisor looks after its most important stakeholders, his franchisees, who in turn look after their team, customers and their community. Beyond the franchise agreement which is legal contract which binds parties, Greg says you “maintain a psychological contract with franchisees too, which could be defined as the beliefs and implied mutual expectations that people have of each other.

These beliefs and expectations tap into social instincts that are deeply coded into the human brain, and include such things as feeling respected, being kept informed, having a sense of belonging, feeling in control of the things that affect us, and being treated fairly. The first and last of these needs – being respected and treated fairly -are particularly important for a healthy franchise relationship. Franchisees can’t be left in the dark; their plight must be acknowledged with genuine concern and constructive solutions agreed.

Good relationships are the key to success. The manner in which we fostered these over the years came home to roost during the pandemic. We very quickly learned the value of our relationships when we needed to draw on them- whether it was funders, landlords, suppliers and other key parties. A collaboration to ensure lockdown did not result in shutdown.

Making sure the house is in order

When the floodgates of relief funds were opened for application many a franchisee didn’t have the required supporting documents, management accounts, statements or certificates on hand or up to date. Scurrying to load employees onto the overwhelmed u-Filing site or realising too late that team members had been employed without valid work permits meant relief was not accessible.
The statutory requirements of small business owners are onerous. Critical document repositories should be mandatory and well maintained. Central administrative services – even if outsourced to third parties – would ease their burden and can be negotiated as a franchise group.

Saving for a revamp (or a rainy day)

Just about every Franchise Agreement refers to the obligation of a revamp within the term of the contract and if not, we generally find it will be one of the criteria for renewal. Franchisors should insist at the outset that provision is made for this. A separate fund that allocates a fixed amount or a percentage of turnover saved over the term would be ideal. No reasonable franchisor would have insisted on a revamp over this time. What a relief of oxygen any untouched savings would have been to franchisees to utilize over the lockdown period.

No avoiding technology

Channels of open communication were required and franchisors who stuck their heads in the sand did their franchisees and their brand no favours. E-mail is a necessary evil but it is not an effective form of communication. It’s impersonal and a grey noise of spam. Franchisees that were flooded with communication from various departments or sources eventually lost interest or found it difficult to sort through what was critical and thus failed to prioritise accordingly. Access to relevant information from a single and reliable source has become essential, not an advantage. Communication and the manner in which we engage with each other has changed. Whilst it may shift back a few notches it will never be the same again.

Performance indicators and accountability are the name of the game. Most businesses have been forced to re-evaluate their operating models and costs. In an effort to plug liquidity issues expenses have been cut wherever possible. These have unfortunately heavily impacted operational support staff with them taking the brunt of the impact. The net effect is lower cost to the franchisor but also lower levels of effective support to the franchise network. The reality is now when the franchisees need support more than any time preceding the COVID 19 pandemic, the infrastructure they ignored before has now shrunk. Also keep in mind that franchisors are also potentially in breach of their franchise contractual agreements relating to providing effective support to their franchise network if they are not doing so.

It is at times like these that robust management support systems that aren’t people intensive are worth their weight in gold. Good quality management support personnel are essential at all times but effective management systems have the ability to expand support operators span of control. The numbers stack up for the franchisor who doesn’t have to carry top heavy salary bills but still offers world class support through the implementation of effective systems. These ideally would have been in place prior to the catastrophe. It’s however, never too late to adopt good practice and implement quality management tools that offer value at multiple levels. These management systems are not capital intensive and are written off as operating expenses. They are also flexible in their costs with most models offering pay-as-you- use subscriptions.

Most management systems don’t require dedicated administrators and are almost always managed by existing management structures (low cost of adoption). Effective Key Performance Indicators are easily measured and managed in well-structured systems.

Digitisation cannot be avoided and those who were mindful of this before the pandemic were best placed to ride the wave of the disaster. Where are the opportunities to use technology to our advantage within our franchise models? They are in both internally and customer facing support systems.

Balancing act

We all experienced loss, whether directly or indirectly by COVID 19, and it has put things into perspective. Physical and mental health had to become a priority. Let us not resume the rat race but still find ways to maintain a healthy balance of work and life. Despite having to recover financially, a healthy franchisee must be able to balance commitment, prioritise what is important and still make time for life.

Our colleagues at Talisman Tool Hire say ‘Rise Up’ and we agree whole heartedly. Don’t lose the learnings, let them be the scaffolding bars that assist your franchise network to rise up changed for the better. Put your brand through the “new” test for survival – would you make it through a second lockdown if a second wave hits us?

It was a wise person who said, “There’s always a blessing in disguise in every situation. Something far greater always comes out of moments that test you.

Franchise Firm is the appointed support of the Franchise Infinity Operating System
Reference: Greg Nathan, Franchise Relationships Institute

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