America’s most famous cowboy, John Wayne, said: “Courage is being scared to death and saddling up anyway.” There are many difficult conversations franchisors need to have, but fear holds them back. Cheryl White, founder of the Mercury Franchise School Ltd, explains how to have three of the toughest conversations in franchising – even if it results in a parting of ways:
Finances
Most franchisors will have experienced times where their franchisees have not paid their monthly management service fee. Typically, these incidents are a temporary blip – and often due to personal crises. If lack of payment becomes persistent and pervasive, however, and your franchisee has accrued significant debts, this calls for a courageous conversation.
Invite your franchisee to a meeting – being clear that the intention is to hold them accountable for their financial mismanagement (never ambush someone, or you’ll put them on the defensive). Ask for detailed profit and loss figures in advance so that, together, you can discuss excessive expenditure and identify missed opportunities to generate additional income.
The goal is not to be punishing or confrontational, but to come to a shared understanding of what the finances need to look like for a healthy franchise. Set a reasonable timescale for your franchisee to hit their new financial objectives and agree a repayment plan for any debts. Be clear on the consequences of failing to miss these targets whilst also reinforcing what support (both practical and pastoral) is available to help them succeed. This could include being paired with another high-performing franchisee in a mentorship role.
Brand protection
The franchise business model depends on your ability to trust your franchisees to act as ambassadors for your brand – behaving in a way that is always aligned with your values. Any whisper of poor conduct on the part of one of your franchisees, therefore, calls for immediate, decisive action. Whether your franchisee is being rude to their team or outside providers, or consistently challenging the vision and practices of your franchise in a non-constructive way, it needs to be nipped in the bud – and fast.
Red flags include an unusually high turnover of staff, a consistently underperforming franchise or persistent rumours of impropriety that are supported by evidence. As uncomfortable and stressful as it may feel, as a courageous founder, you must invite the franchisee to a meeting – confronting the issue head on. Your franchisee should be advised of their right to bring a companion, and you will need to ask someone to take notes.
If disciplinary action or termination of the franchise agreement is a potential outcome, then ask a Human Resources professional or a lawyer to advise you on best practice. A good franchisee will want to address any negative behaviours. If they don’t, take pride in bringing about a necessary ending to protect your brand.
Growth
Some franchisees accomplish a modest level of market penetration; then, they get comfortable. Having earned enough to cover their overheads, they let go of any ambitions to set the world alight. But this behaviour is not in the spirit of the franchise agreement they have entered. When a franchisee takes on a territory, they are responsible for helping to embed your brand right across that region. Failure to do so impacts their bottom line and it minimises your return.
If turnover has plateaued, then it is time to talk. Revisit your original contractual agreement and discuss the expectations set out for both the franchisor and the franchisee – identifying the gaps. How can you work together to get back on track? If your franchisee’s appetite to grow the business remains, agree and monitor stretch targets for the next 12 months. If not, then you may need to have the ultimate courageous conversation about parting ways.
To build a successful brand, your franchisees must play their supporting roles to the highest of standards. It is natural to fear the fallout of a tricky conversation, but legacies are not built by acting without courage. It is kinder to intervene and course-correct when a problem first arises than to let a great franchisee fall short of their potential. Set clear expectations from the outset, then use these as the measure of all future success.
