Franchisee associations: friend or foe?

Certain words can strike fear into the hearts of the bravest. For some, it’s “dentist”, for others, it’s “year-end results”, and for some, it’s “I do”. By Andrew Quail, former head of quality standards and compliance at the BFA.

For franchisors, who have not yet gained the requisite experience, or lack the expertise to meet specific challenges, the word “resales” can set knees trembling (currently there is an upsurge of advice and professional assistance coming on to the market to help franchisors with their resales activities). There is, however, another phrase that often has the same effect – and that is “franchisee association”.

Such associations go under many names: franchise council, franchisee association, franchise committee, advisory group, consultative forum, advisory board, and probably several others as well.

There are as many descriptors as there are formats for these associations. Each describes a formal or informal grouping of franchisees that has an independent existence as a committee or council, and meets with the franchisor to discuss the business. There the similarities end. We shall now set about de-mystifying this phenomenon.

How do these associations come about?

Too often, a franchisee association is born out of conflict – whether that conflict is anticipated, planned, imagined or real. If the initiative to form the association comes from the franchisees, the likelihood is that they perceive a problem or a threat, and feel a need to respond to it with collective strength.

Seldom do franchisees gather together and say: “You know, I’ll bet if we had a franchisee association, it could be a force for good in our happy franchise, and improve this business for the benefit of both us and our franchisor. I’d like to give up some of my time for a cause like that to help our franchisor”.

Sadly the reality, if it is born from discontent, is more likely to be a case of: “Are you happy with everything about the franchisor, George? No, neither am I. If we all band together and gang up on our franchisor, we might be able to throw around sufficient weight and threaten to start changing a few things to make things more to our liking.”

If the franchisees get around to starting an association before the franchisor, the likelihood is that it is being motivated, to a greater or lesser extent, by negative perceptions. If for no other reason, that is why the franchisor who takes the initiative and facilitates the setting up of an association is in the driver’s seat. As well as heading off trouble before it arrives, such action will be seen as a progressive step and a very open gesture – both of which are, in fact, usually true.

You may well ask: why do we need a franchisee association at all? What is it for – what does it do? Should it be encouraged or discouraged? What would be its relationship with the franchisor? What are the expectations? Who should set it up – the franchisor, or the franchisees?

What is the reason behind it? Should it have rules? Should it have power? Who runs it? Who is on it? Are its members democratically elected, appointees, or a combination? And should the franchisor be worried by it?

Let’s start with the last question – should you be worried by it? The politician’s answer applies here: “yes and no.” Yes, if you adopt the ostrich position and stick your head in the sand; no, if you realise that it is a fact of business life and deserves to be treated as such, with confidence, professionalism and respect.

Franchisee associations are not an inevitable fact of life, like death and taxes, but nevertheless most franchise networks of any size have one.

What does a mature, integrated association look like?

Franchisee associations range from sophisticated structures, where the association might have its own written constitution, or even be a limited company in its own right, right down to a handful of people appointed by the franchisor to serve on a committee. Not surprisingly, the norm is somewhere in between.

Typically, the people who comprise the association’s committee or board will be elected – totally, or at least in the main – by franchisees. This gives the elected members a degree of acceptability and credibility with their peers that they would not gain were they to be mere appointees of the franchisor.

That is not to say that the franchisor should not have some say in who serves on the association’s committee. Input by the franchisor is highly desirable as the company does not want to find itself suddenly faced with a committee made up solely of under-achieving, moaning malcontents, who have no desire to work constructively for the betterment of the franchise.

Sometimes membership is regionally-based; sometimes there are minimum criteria to be eligible to be on the committee (e.g. not be in dispute with the franchisor, or have a minimum term of experience in the franchise). Sometimes the franchisor can help influence the selection, e.g. by specifying that it needs at least one marketing specialist on the team.

Some franchisors always host their regular meetings with the association at the company’s offices. Some pay the travel costs for members’ attendance. Some move the meetings around the country. Some prefer to hire a hotel meeting room, as it offers a neutral territory, and hence is not at anybody’s power base.

Harmonising the perceptions

On a bad day (and we all have them) franchisees can be perceived to be unreasonable, unrealistic and un-commercial, whilst on the other hand franchise managers or business development managers can be perceived to be interfering, always believing they are right, and often lacking the “street cred” of having been in the shoes of a franchisee – the “What do you know about my business – sat there at head office? I’m here at the sharp end” syndrome.

Taking these perceptions of individuals to a structural level, the franchisee/franchisor relationship will continually need attention at the interfaces. An association with a constructive and objective agenda can make its point with far more clout than an individual franchisee and yet, because it is speaking for a mass of franchisees, it can be expressed in a diplomatic manner whilst still getting the point across.

Striving towards a common goal

I recently heard the following from the chairman of a franchisee association: “Since neither party is going away, we should all be endeavouring to work together towards our common profit goal.” Wise words.

Some people like to say that the franchisor is interested only in turnover (in a franchise network based on a turnover-linked management service fee), whereas the franchisee is interested only in the profitability of his/her individual unit. This gives rise to the expression often used by franchisees: “Turnover is vanity; profit is sanity.” This is true as far as it goes, but it is redolent of short-termism.

Look at the bigger picture, take the longer view, and you will see that the interests of the franchisor and the franchisee are actually the same. Like parallel lines drawn in perspective, they in fact appear to meet in the distance.

Both parties are interested in the profitable well-being of the entire business. If the franchisees fail, the franchisor fails with them. If the franchisor fails, the franchisees are suddenly left high and dry.

Ongoing constructive dialogue and shared objectives, that are the product of properly-managed relationships between the franchisor and his/her franchisee association, can help in keeping the focus on the long-term goals that both can agree on, rather than the short-term tactics that would appear to divide them.

What powers should an association have?

This question is in danger of being redundant if the franchisees beat you to it and formed the association because they saw a need which could be addressed by “negotiating” with the franchisor from a position of strength. If this happens, the franchisor starts off on the back foot.

Invariably the newly-formed structure with which the franchisor is faced will be seeking greater influence than the latter will want to grant. Immediately, therefore, it is in the position of somebody who has fallen overboard from a boat, and is frantically swimming to the surface. This is not a good starting point.

Assuming you plan to take the initiative and recommend to your franchisees the forming of an association be clear with them what you expect it to do, what will be the extent of its influence, and be clear on who has the last word (and that has to be you – the franchisor).

You cannot abdicate the strategic direction of your franchise to a committee of franchisees and have the tail wagging the dog.

Every franchisor sees instantly that this is an anathema, but the opposite is also pretty unpalatable to franchisees: a committee made up of yes-men/ women who are there to tamely agree the dictates of the franchisor, thereby attempting to add a fig leaf of democracy and participation. In fact, it is more like the emperor’s clothes, and will quickly be seen as such.

The very act of helping the formation of a franchisee association means you are allowing some input to the decision-making process. You’re not so much giving power away as sharing it in certain clearly-defined areas. This may not come easily to you if it’s your own business which you have set up and built – so don’t give away critical powers.

Your association could be anything from a sounding board to something approaching a junior board. This is for you to decide, depending on what you want them to do, where you want their input, what areas are taboo, and your general management style.

The key is not to pass over the control of your franchise to the association. However, there are many areas in which the association can contribute in great strength to your franchise for everyone’s benefit. Obvious (and common) areas include: the choice of new technology for the business, and marketing plans.

It pays to remember that when your franchise network is up and running it is likely that the majority of good ideas – those that will drive the business forward, unleash more potential, attract more customers, or reduce operating costs – will very likely come from your franchisees.

There will also be a lot of unsuitable ideas. Using an association to screen, examine and debate all proposals in the areas that are open for discussion, sends a message to franchisees that you are prepared to listen to good ideas from wherever they come, and their views are valued. At the same time, providing common-sense prevails at the association meetings, the bad ideas will be rejected (with or without your need to be assertive about it) and the rejection will be far more easily accepted by your network if it comes from their peers, not you alone.

Whatever influence you want your association to have – from discussion forum to voting powers – you must have total clarity about the rules and the extent of their influence, and be firm if you see any attempt to gradually increase those powers. It’s your franchise, and you get to set the limit to which an association can be involved in the business.

Getting the best from your association

You will need to give careful thought to what matters (and at what level) you would like the association to deal with. This is closely linked with the powers you grant to the association.

If an association is not clear about its mandate, or if you exhibit weakness or indecision about it, you’ll probably find that it will start to make its own rules and it will decide the extent of its influence. So, to get the best out of your association – to ensure it’s a force for good – make sure it has a clearly-defined role.

There is energy and creativity amongst your franchisees: harness them. Give the association a clear mandate.

The franchisor should set the agenda for meetings (being sure to create the agenda in consultation with the chairman of the association, so that the items the members wish to discuss are on there, but in a managed way), and chair the meetings yourself. Make sure the association has plenty to do – or it will find things to do!

Examples might be to have a technology sub-group, or a sub-group to road-test new marketing ideas and report back. The old psychology applies: if franchisees have had a say in the decision, they will buy into it and help you sell it to the rest of the network. By the same token, if they are all opposed to an idea of yours, they could well be saving you from making a bad decision. A well-constituted association will not always be right, but it will always be worth listening to.

Structure

How formal should your franchisee association be? In large measure the degree of formality of the association should be a reflection of what you want it to achieve, which in turn is directly related to the powers you give it (or the powers it assumes for itself). Here are a couple of examples of the use and recognition of associations at a serious level.

In the case of the Independent Kall Kwik Franchise Owners’ Association (IKKFOA), senior managers from Kall Kwik meet with the franchisee members formally on a quarterly basis, and the subjects discussed provide serious input into the overall franchising direction and success of Kall Kwik. The franchisor supports the association’s AGM and its communications throughout the franchise. In addition, a number of user groups covering specialist areas meet and their reports are fed back and discussed with the association’s council.

At McDonald’s Restaurants, the National Leadership Group (NLG) represents the franchisee community at a strategic level in the company (comprising only franchisees voted onto the group by the franchisees as a whole).

The primary objective of the NLG is to ensure that system success is achieved through a mutually supportive relationship between franchisees and the company. These executive/NLG strategy meetings take place quarterly, to discuss the prevailing trading environment and agree priorities and actions to maximise business opportunities over the short to long-term. Additionally, franchisee priorities are discussed, providing the executive team with an opportunity to take these into account and agree actions.

There are also engagement sessions (regional communication sessions) with members of the executive and franchisees, marketing co-operative meetings involving members from both the company and franchisee community, and finance committee meetings, whose primary objective is to seek balance, fairness and flexibility to allow franchisees and the company to innovate, develop, compete and grow their businesses more profitably.

Unless you are in the McDonald’s or Kall Kwik league, you will probably kick off with more modest aspirations, but it just goes to show where you could end up.

Nobody said running a franchise network would be easy, and dealing with a franchisee association often isn’t. However, you don’t have to be all on your own in developing your business. In addition to the resources in your own company, you have the community of accumulated experience and best practice that exists within the BFA and its members, and you also have your own franchisees.

We all talk frequently about franchising being a partnership. Having a positive, active and focused franchisee association can be a very positive way of strengthening the partnership, and reaping benefits for the good of the entire franchise.