How to Build a Strong Franchise Network

It's all about relationships.

Whether it's in marriage or in business, the key to a successful relationship is mutual trust. Nowhere is that truer than in the relationship between franchisor and franchisee. Franchisees have trusted franchisors with their life's savings while we have trusted them with our brand name and reputation. Therefore, a strong franchise network, like a strong marriage, is a bond of trust.

But what does that look like? Here are some characteristics of a strong franchise network.
Whether it's in marriage or in business, the key to a successful relationship is mutual trust. Nowhere is that truer than in the relationship between franchisor and franchisee. Franchisees have trusted franchisors with their life's savings while we have trusted them with our brand name and reputation. Therefore, a strong franchise network, like a strong marriage, is a bond of trust.

But what does that look like? Here are some characteristics of a strong franchise network.

1) Solid support from the franchisor to the system. Support falls into three broad categories: operations, marketing and training. One franchisor with excellent training support is Great Clips hair salons. When Great Clips makes a decision to enter a new market, it opens a training facility in that market and organizes full-time local operations support. The facility provides ongoing training for everyone from stylists (who attend Great Clips' seven-day School of Hair), to owners and even receptionists.

2) Low turnover of units. Obviously, there will always be turnover within any system, but a mark of a strong network is one where franchisees are happy to stay with the system. One such network is SERVPRO, which provides fire and water cleaning and restoration services. Founded in 1967 by Ted and Doris Isaacson, the first of the company's five core concepts is "Build relationships." True to its word, last year, SERVPRO's turnover rate was under four percent.

3) Franchisees exiting the system because their financial and personal goals have been met. To me, the bellwether of a strong network is why owners are selling. Are they dissatisfied or have they simply reached their goals? As one of our franchisees put it to me when he sold his center, "I chose FASTSIGNS because I felt that it had the greatest potential given the initial investment and I was right. But, now that I've reached my goals, it's time to try something else."

4) Close personal ties among individuals. At FASTSIGNS International, Inc., we are fortunate that our personal bonds are strong because when tragedy strikes a member of our franchise or corporate community, everyone responds. For instance, when a corporate franchise development employee was involved in a motorcycle crash that left him paralyzed from the neck down, our franchisees raised the money to buy him a wheelchair-accessible van. Later, when the son of another of our employees was injured in a school bus crash, members of our network flew in from around the country to raise money for his care by playing in a golf tournament.

5) Employees successfully purchasing units. When employees (either of the franchisee or the franchisor) invest in the system, it's a vote of confidence that you're doing something right. Two of the most successful franchisees of McAlister's Deli (a Mississippi-based casual restaurant chain with 133 units in 17 states) got their start making sandwiches. Today, one of those employees owns nine units and the other owns eight. All told, 30 percent of all McAlister's Deli locations are owned or managed by former employees.

Knowing that a strong franchise network depends on its relationships, how can we set up our organizations to foster them?

For starters, we can look at our business model and ask ourselves, "Are we a franchise sales organization or a franchise support organization?" A franchise sales organization is one that makes its money from selling franchises. There are plenty of successful franchise sales organizations. However, networks that focus on selling units may do so at the expense of their existing franchisees.

On the other hand, franchise support organizations (and FASTSIGNS® considers itself one) understand that they make more money when their franchisees do. They are still concerned with growing the number of units, but their primary focus is ensuring that the existing network achieves maximum results.

It takes an enormous commitment of resources to be a franchise support organization, but seasoned franchise executives suggest that you grow your infrastructure as your network grows. For instance, Great Clips gets numerous requests each year to open centers in major markets like Boston and New York, but turns every one of them down. According to Alan Majerko, senior development marketing manager, "Our number one criterion is support. We won't even consider opening a market unless we have the appropriate resources like training staff, a regional director, and training center [in place]." Yet, despite this restriction, Entrepreneur magazine has ranked Great Clips among the top 25 fastest growing franchises for the past five years.

One way to ensure that your resources can support your network is by expanding in ever-widening circles around your corporate base. McAlister's Deli has successfully followed this strategy. In fact, McAlister's won't go into a new state unless it touches one of its existing ones and, typically, expansion in the new state occurs where the two meet. This strategy began as a practical way of efficiently securing distributors for the network and has now become a source of pride for the company. According to Patrick Walls, chief development officer, "In order to properly service the franchisees, we felt that the concentrically expanding system was the way to go. [Otherwise], I think the franchisee gets short changed."

While methodical expansion may not be practical for every organization, you certainly want to avoid the example of one toy and gift franchise, which had explosive growth during its early years and then quickly disappeared. According to a 1995 press release, when the Florida-based company had just 12 stores, it was scheduled to open multiple units in Atlanta and Vancouver, BC "within the next sixty days." How the company expected to be able to support stores in the Southeast and the Northwest at that point in its development is a mystery and, perhaps, may help explain why it no longer exists.

Beyond infrastructure and expansion, the key to developing a strong franchise network is staying in touch with the needs of your franchisees. For instance, every Monday morning, Fish Window Cleaning distributes The Fishing Report, an in-house newsletter that lists the top ten producers and top five new accounts people for the past week. Founder and CEO Mike Merrick makes a point of calling each of these franchisees to congratulate them and ask how things are going. With 101 franchisees, Mike speaks with 10 percent of them each week.

While it would be impractical for the CEO of a more mature system to call 10 percent of his or her franchisees each week, many systems have formed Franchise Advisory Councils or Committees (FACs). FASTSIGNS, for example, has franchisee committees that provide counsel and advice in operations and marketing. Members are elected by their peers and each region of the country is represented on the committees. At FASTSIGNS, our FAC meets monthly by phone and twice a year in person. The FAC members have been instrumental in addressing, resolving and implementing network opportunities and concerns before they develop into major issues.

Some systems have begun scheduling field visits to different markets by their top executives. At FII, we have instituted a series of town hall meetings where our CEO, Gary Salomon, and a member of the executive team visit different markets each year. During these visits, we invite all the franchisees in surrounding markets to join us for a discussion of our plans, give us feedback on how we are doing, and provide their input on new programs and ways to meet evolving needs. In addition, the executives will visit many of the stores in the market. It's a great opportunity for us to hear from our people in the trenches and it means a lot to a store manager or customer service representative to be asked their opinion or receive a compliment from top management.

Jeff Johnson of FranSurvey, a company that surveys franchisees, says that dissatisfaction with a franchisor often begins as a simple miscommunication. "It starts off as little things: 'They don't return my phone calls or I don't hear from them enough,'" he says. "If it's allowed to continue, it can move to a point of mistrust."

As a franchise executive, what can you do to improve the relationships in your network?

The most important thing you can do is ensure that there are open lines of communication between your franchisees and staff. Advisory committees and town hall meetings help, but the first thing I'd suggest is that you implement an open-door policy and make sure your entire network knows about it. So many times I hear from our franchisees, "I'm sending this request to you, Susan, because I know you'll get it done."

Next, create as many opportunities as possible to hear from franchisees. Develop online bulletin boards, schedule Q&A sessions at your annual conventions, or harness the power of the Internet and host a live online forum between your franchisees and executives.

Whether we like it or not, there are times when our franchisees think of us as living in an ivory tower, disconnected from their very real problems on the ground. The truth is that our franchise communities are interconnected and depend on each other for success. Open communication dispels the "us vs. them" attitude that infects many franchise networks.

Like I said: It's all about relationships!

Susan Last, CFE, is senior vice president of franchise services for FASTSIGNS International, Inc. Her current focus is overseeing the support provided to the franchise network, which includes managing the technical services, operations and training departments.