Franchise Lawyer Blog

Are Your Franchisees Happy? Does It Matter?

We attended the 32nd Annual American Bar Association Forum on Franchising in Toronto last week. The opening session featured Greg Nathan, a psychologist and franchising expert, who examined the psychological dynamics of the franchisor/franchisee relationship. At one point, he posted a franchisee mood monitor: how do franchisees feel about their relationship with their franchisor and their franchisors’ attitude towards marketing, support and business in general?

As is so often the case with psychology, many of the observations seemed obvious: of course franchisees are happier when they are respected and treated fairly. But if it is so obvious, why did Nathan report widespread dissatisfaction among franchisees in terms of their perception of their franchisors’ treatment of them? Why do these concepts of respect and fairness get confused in their translation into the marketplace?

Because economics, or economic perceptions, interfere. Apparently, many franchisors believe that decisions that make sense according to the bottom line are acceptable even if they make people unhappy. There is a prevailing attitude of “It’s just business, nothing personal.” And the franchisors’ assumption is that franchisees understand that. The question was asked of franchisors: does it matter if your franchisees are happy or mad? Some thought it didn’t. Business is business. But the statistics Nathan presented strongly suggested otherwise.

Nathan suggested that everything is personal. Even decisions that make perfect financial sense can be deeply resented. It becomes essential that franchisors step away from the bottom line and examine the long term effects of short term business decisions. Nathan suggested that the construction of a healthy system might, at times, require decisions that aren’t optimum from a short term economic perspective.

Growth of a system depends on satisfied franchisees. That satisfaction must become a measured economic metric for a system to succeed. Why? Because a system is an organic thing, whose growth is dependent on the overall health of the body. Nothing slows growth more than bad word of mouth from established franchisees. Does this require blatant pandering to the moods of the rank and file? No, it requires common sense. You must convince your franchisees that decisions are for the mutual good, even if they require short term financial pain. You must also sometimes be prepared to weather difficult times as a franchisor, if the immediate short term solution is going to turn your franchisees against you.

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