How can franchisors encourage creative thinking without new and potentially risky ideas endangering the network as a whole?
At its core, franchising is a relationship between mitigated risk and shared profit. Both parties accept a reduced risk in return for sharing the winnings. On the franchisee’s side, they share an element of their profit by paying an ongoing management service charge to the franchisor and they take on a reduced risk by using the franchisor’s intellectual property and business systems. And having invested in accessing a proven model, you’d probably expect most franchisees to adhere to it. But that’s not always the case: you’ll usually find that when problems arise it’s likely that a franchisee hasn't followed the system properly.
You can see how it happens. Most franchisees start their own businesses because it gives them freedom and independence. And this can mean that they occasionally want to innovate and deviate from the established route. However, this can affect the success of the franchisee, the integrity of the brand and potentially other franchisees in the network. What’s more, franchisees tend to be closer to the customer than the franchisor and this can mean that they’re able to recognise changes in the market and identify potential innovations. Determining the boundaries and addressing consistency is something that all franchisors need to consider.
In practice, a good franchisor will have systems in place to manage the innovation of its franchisees. Everything in franchising is a process, so managing the balance between a franchisee’s adherence to the proven system and their desire to innovate should be no different. This might be through a franchisee council or a good ideas forum that screens suggestions. At Tutor Doctor, for example, we have a number of thought leadership committees for this exact reason. So while innovation might seem like something spontaneous and uncontrollable at first, it’s actually something that can be managed and tested. No idea, however groundbreaking, should be rolled out if it doesn't benefit the entire network or can't be duplicated. And if a franchisee is deviating too far from the brand and trying to implement new changes, it’s up to the franchisor to rein them in.
But you want to do this without stamping out creativity. After all, even in some of the most tightly controlled franchise systems in the world, innovations have come from franchisees that have delivered benefits to the whole network. Ten or more heads are better than one, so instead of having a single team working on product or service development in your head office, the most successful franchisors tap into their entire network to crowdsource ideas.
It’s also important to communicate the boundaries to the network and any potential franchisees. They’ll want to know about what systems a franchisor has put in place to control consistency and innovation within the network, so it should be discussed from the outset. That way, they’ll know where they stand in terms of what they can do to develop their own business and be creative without going too off piste. This mix of freedom, control, innovation and compliance is something most franchisees accept as the norm and they’ll usually understand that they can't make changes that might not sit well with the rest of the network.