Are you headed toward a happily ever after or will you be felled by the woodsman?
A long time ago in a far away land lived the happy residents of FranchiseLand. Each year residents of FranchiseLand held a big meeting called FranchiseConference to learn about what does and doesn’t work in franchising. One year, two CEOs were invited to speak at FranchiseConference. Gary Getsit and Danny Doesntgetit were part of a two-person panel, moderated by the distinguished Mayor of FranchiseLand.
Danny Doesntgetit was the new hotshot, hard-charging founder and CEO of SellFranchisesAsFastAsYouCan, a new, rapidly-growing, home-based residential service business and the most recent darling of the franchise broker networks. Gary Getsit, the good-natured and well-respected CEO of the iconic national brand called FranchiseBuiltToLast, was a perennial franchise favorite on all the franchising publications and websites’ “best-in-class” lists. Most of FranchiseBuiltToLast’s growth came from their existing franchisees expanding into new markets. The remainder of their growth came from new franchisees who learned about the business from its reputation or were referred to the business by existing franchisees and suppliers.
Danny Doesntgetit, eager to make a positive impression and make the most out of his 15 minutes of fame, decided when the Mayor asked the panel the first question, he would jump in with a quick answer. Gary Getsit, a frequent and popular panelist at FranchiseConference, understood his colleague’s enthusiasm and peacefully chimed in after Danny had spoken his piece.
The Mayor opened the session by asking the two panelists, “What business are you in?”
Danny Doesntgetit quickly answered, “I am in the residential home service business, a multi-billion dollar, recession-resistant industry.”
Gary Getsit answered a bit differently. “We believe we are in two businesses: the food service business and the business of franchising. We see franchising as a business unto itself. In our experience, a company can be masterful in the food business yet still unskilled in franchising, and everyone still loses. So we are in two businesses and work towards mastering both.”
The Mayor then asked, “How would you define ‘the business of franchising?’’”
“According to the dictionary,” Danny Doesntgetit responded, “franchising is a legal relationship where a franchisor grants the right to a franchisee to sell the franchisor’s goods and services under the franchisor’s brand, and the franchisor makes their money on franchise fee revenue and royalties.”
Gary Getsit respectfully disagreed. “We think the business of franchising is a complex personal and business relationship comprised of two pillars: strong financial returns for the franchisees and trusting franchisee-franchisor relationships. Franchising degrades into a legal relationship only when trust and respect are lost or never established in the first place. So the business of franchising is about recruiting, training, resourcing and leading a team of skilled entrepreneurs.”
The Mayor continued, “How would you describe your franchisee-franchisor relationships?”
“Franchisees serve our customers by using our brand and distributing our products and services using our systems and vendor relationships,” said Danny Doesntgetit. “It’s our brand, our product and our systems. Franchisees know they need to follow the system and do what we say.”
Gary Getsit again disagreed. “We believe the quality of the franchisee-franchisor relationship chunks down into two buckets: trust and utility. If franchisees and franchisors don’t trust each other, we will spend more time fighting each other than fighting for market share. On the utility side, franchisors exist to support franchisees. Franchisees exist to satisfy the customer. The perceived value of the tools and support we offer franchisees must exceed their dollars spent on royalties, much in the same way the perceived value the customer receives from the franchisees must exceed what the product costs them. You can’t build an iconic franchise brand until you first get these two value equations right.”
The Mayor then asked, “You both mentioned concern for your brand. Who owns your brand?”
“I own the brand,” Danny Doesntgetit said. “I designed the logo and built the company from scratch. We love and trust our franchisees, but when push comes to shove, ultimately they know it’s my brand.”
Gary Getsit said, “Of course legally we own the brand. However, we look at our brand as community property. It belongs to all of us — customer first, then our franchisees, the stakeholders within the franchisor, and all of our suppliers. If you want to build an iconic, beloved brand, you have to let customers, franchisees and suppliers add value and build relationships with the brand on their own terms. Then they will build the brand together in magical ways you could never predict.”
The Mayor then shifted gears to talk about brand purpose. “What’s your purpose?” he asked. “Why does your company exist?”
“To make money of course,” said Danny Doesntgetit. “We don’t do this for charity.”
Gary Getsit had a different take. “We exist to make each community we serve better off because we are there. We want them to know who we are and feel our presence. We are very engaged in local community, and then customers reward us by becoming engaged with our business. Profits are a byproduct of customer and community engagement and serving our purpose well.”
“Well then,” the Mayor asked, “how do you describe your vendor and supplier relationships?”
Danny Doesntgetit was proud of his tactics. “We beat them up for the lowest price and best terms. We accept proposals for new vendors every year.”
Gary Getsit didn’t see it that way. “We are fiercely loyal to our vendors, making sure they generate a fair profit so they are motivated to help us grow our brand and go the extra mile for our franchisees. While we know we leave a little money on the table, we also know this allows us to call in favors in a pinch.”
The Mayor shifted gears again by asking, “What does it take to win as a franchisor?”
Danny Doesntgetit’s answer was simple. “Whoever sells the most franchises wins. A franchisor succeeds by growing as fast as they can, and staying ahead of the competition.”
Gary Getsit had a more thoughtful response. “We win by maximizing franchisees’ profitability and building trusting franchisee-franchisor relationships. If our business model makes money and franchisee-franchisor relationships remain workable, existing franchisees expand and more new franchisees will want to join. Growth becomes inevitable.”
At this point, the Mayor was beginning to wonder how far apart these two panelists really were. “What is the best leadership style to run a franchise organization?” he asked.
“Command and control,” said Danny Doesntgetit, unsurprisingly. “It’s our brand and our systems. Franchisees do what we say or run the risk of default. We have to keep them in compliance by following the system.”
That wasn’t at all how Gary Getsit felt on the topic. “Servant leadership,” he said. “We must adequately resource and support the franchisees and position them to win. Then we let them do their thing with minimal interference… and their thing continues to be serving their customers to the best of their ability.”
Afterwards, the good townsfolk of FranchiseLand slayed the evil dragon, rescued the fairy princess, destroyed Sauron’s evil ring in the fires of Mordor, and then blew up the Empire’s Death Star. Then they all lived happily ever after.***
***I’ve never written a fairy tale before and don’t know how to end one. Plus I have a headache and I have other work that needs to get out. Stop judging me.
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About Franchise Performance Group (FPG)
FPG is a leading consulting firm specializing in helping franchisors create a breakthrough in franchisee recruitment results. We offer a full range of services, including:
- Cutting-edge franchise buyer lead generation (franchise sales website design, brand storytelling content strategies)
- Franchise sales process design
- Franchise sales force assessment, training, ongoing coaching and skill development
- Outsourced franchise sales
- SBA financing
- Strategic consulting to improve the value proposition of the business
About Joe Mathews
Joe Mathews, CEO and Founder of Franchise Performance Group, is a thought leader in the area of franchisee recruitment, franchise lead generation and franchisor growth strategies. He has published dozens of articles on franchising and is author or co-author of four books on franchising: Street Smart Franchising, Franchise Sales Tipping Point, How to Create a Franchise Sales Breakthrough, Guaranteed and Developing Peak Performing Franchisees.