Lifting the franchisee performance ceiling

In private, franchisors often express feelings of frustration toward franchisees who they believe could run much better businesses, if only they would follow the system.

“Just follow the system” is perhaps the most common advice any franchisor could give their franchisees, but it begs two main questions: Firstly, how thorough is the system, and secondly, how thoroughly do franchisees execute the system?

In the main, franchisor founders are entrepreneurial types who see an opportunity to build a business in an underdeveloped niche. A typical characteristic of entrepreneurs is that their long-distance focus on realising potential is often matched by a lack of attention to detail in the short term.

This short-term lack of attention, if not addressed by other members of the entrepreneur’s team, can compromise the effectiveness of systems to train and support franchisees.

In their rush to capitalise on a business opportunity ahead of competitors, new franchisors often fail to invest sufficient resources in the organisational details necessary to create outstanding business performers from the uninitiated.

Not surprisingly, many new franchisors find they have much greater support demands placed on them by new franchisees than by experienced franchisors, who have learned the hard way that extra resources invested into training reduces the reactive consumption of support resources later.

Consequently, advice to “just follow the system” rings hollow in the ears of franchisees who perceive the system to be lacking, and whose growing knowledge of “the system” increases their concerns that it was underdeveloped from the outset.

The role of the system

While “the system” – that special blend of training, know-how and marketing nous that creates a successful franchise – is intended to help launch a franchisee to hitherto unobtainable heights, “the system” could equally create a performance ceiling that limits the very heights to which a franchisee can soar.

Let’s consider the example of a system where a franchisee is required to manually complete complex and time-consuming reports about business activities. Such work is laborious, and reduces the amount of customer-facing or business development time available to a franchisee.

On the other hand, “the system” could be developed so that such reports are automated by linking to the business’ point of sale technology and require no additional effort on behalf of the franchisee to produce.

Such an innovation will be self-apparent to franchisees often before it is self-apparent to a franchisor (or at least, before a franchisor acknowledges that it requires a further investment in the development of their system).

Where franchisors can create improvements in their system which save franchisees’ time and resources, it follows that the time and resources saved can be reinvested by the franchisee to lift the performance of their business.

To raise the overall performance level of franchisees, franchisors need first to examine their system to see if it has inefficiencies or other barriers that create a structurally-embedded performance ceiling.

Of course not every franchisee will be equally affected by a structural performance ceiling due to each franchisee’s individual combination of skills, attributes and experience, but nonetheless, any kind of systemic performance ceiling will limit the overall performance of franchisees across a network.

Then there is the performance ceiling that franchisees impose on themselves (rather than imposed on them by an inefficient system).

The self-imposed performance ceiling is the result of the 3C’s: confidence, capacity and complacency

A lack of confidence in their ability to run a business, or lack of confidence in specific aspects of the business’ operation can limit a franchisee’s potential. This may stem from concerns over their own competency to operate a business which should have been identified by the franchisor during the selection and induction process (and again highlights the importance of a highly-evolved franchise system).

A lack of capacity where the franchisee cannot devote sufficient time to the proper conduct of their business, or at the other end of the scale, the franchisee has dedicated every available moment to the business and has worn themselves out in the process.

While a lack of confidence and a lack of capacity are two of the reasons for a self-imposed performance ceiling, the third reason is the most confronting: complacency.

Franchisees and independent small business owners who are comfortable with their current income and lifestyle become complacent and operate in cruise control, and no longer feel compelled to operate the business more aggressively.

Franchisors can instigate strategies and tactics to help franchisees overcome confidence and capacity issues, but are more challenged to overcome franchisee complacency. These are some of the tell-tale signs of the complacent franchisee:

• They are generally undemanding of their franchisors when things are going well, but if times get tough they are soon shaken from their complacency and often look to blame their franchisor for their declining fortunes.
• Often don’t appreciate how far off course their business might have drifted until it’s about to crash into an iceberg.
• Are accustomed to a financial or lifestyle outcome from their business, but don’t fully understand the range of variable inputs that are required to produce these outputs.
• Are quick to blame their franchisor if something goes awry in their business, and slow to respond to advice.
• Don’t understand the dangers of complacency, or appreciate its contagiousness.
• Often need a close encounter with an iceberg to shake them from their complacency, and sometimes by then it may be too late.

There is no silver bullet to raising the franchisee performance ceiling. But ensuring the system is constantly improved, and that franchisee confidence and capacity can be addressed, makes it easier for franchisors to identify limits in franchisee performance caused by complacency. And then the real challenge begins.

Jason Gehrke is the director of the Franchise Advisory Centre and has been involved in franchising for 20 years at franchisee, franchisor and advisor level.

He advises both potential and existing franchisors and franchisees, and conducts franchise education programs throughout Australia, and publishes Franchise News & Events, a fortnightly email news bulletin on franchising issues and trends.