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We are constantly on the watch for delicious wines that won't break the bank. It has long since not been rational to belong to the Confrerie de Tastevins, those Burgudian oenophiles who foregather every fall in Beaune to celebrate the recolte of the Cote d'Or and promote the world's most expensive wine. California stepped up with truly fine wines in the 60s, 70s and 80s, and today the Australians, Spanish and Chileans are providing deliciously quaffable vintages at promotional prices. 'Tis a blessed time. Here at Muldoon's, we go to great lengths to provide the fuel for meaningful conversation about timely topics. And the remembrance of the days of the Confrerie de Tastevins suggested the simile of other convocations of differently oriented affinity groups - like franchisees. Yeah! You knew where I was going with this, right?
This piece is dedicated to my favorite folks: franchisors who really do have something worthwhile to offer and who work hard and effectively to maintain the quality of their system as well as the perception of that quality amongst their franchisees. It is now clear to me, if not to everyone else, that, for the really on-the-ball franchisor, a franchisee association is a blessing. To all others it is a curse, because their franchisees only gather to complain and to plot revenge. This piece is not addressed to the inept. It is a suggestion to the worthy that a competent franchisee association can, properly respected for its value, help a franchisor company to enhance value in many ways.
Only successful franchisees can possibly have the potential to form a helpful franchisee association. If that is the profile of the predominant constituency of your franchisee group, you are indeed blessed. They can provide extremely valuable enhancement of your system, and you need to be prepared to compensate them for doing that. It is, after all, a business relationship, not a feudal arrangement. If you are among the fortunate to whom this is addressed, consider the following.
These people know far better than any corporate headquarters types what is the most effective way to run the advertising program. They can better supervise your advertising agency, for the reason that the agency would then be working directly with the folks who's businesses will be immediately and directly effected by the quality of the advertising programs. In that configuration, the rubber really does meet the road. An excellent case study is that of the Minnesota franchisor that refused to listen to its Texas franchisees that were outperforming the chain. The franchisor insisted that uniformity was more important that profitability. Naturally, the franchisor's lawyers agreed with the notion that the contract makes the franchisor a feudal lord, leading, of course, to conflict, extensive, expensive and morale destroying litigation. In the end, the franchisees won the right to have the respect they deserved. The system is better off for their contribution and for their insistence upon being respected. The lawyers made a lot of money. With that object lesson in mind, franchisors look with greater appreciation upon valuable contributions from the field. Headquarters types who think they know everything are becoming more sensitive and humble-having so much to be humble about in so many instances. A franchisor will still maintain the final say so over any advertising and marketing plan, but owes it to the system to give credit where credit is due. The successful guys and gals in the field know far more than any headquarters people about how to sell the products and services. Let them run that function. They will be happy and you will be happy. Change the modus vivendi with a new advertising fund agreement that establishes the "fund" as a separate business, run by the franchisee association nominees with a franchisor management type on the board. Every franchisee signs up on that advertising agreement, and the advertising group has its own right to enforce compliance. In that way it is the franchisees that make slackers toe the mark, not the franchisor. Free riding will disappear.
If your system has been kept investment fresh, your franchisees, sharing as they do in the management of the system, will become the marketing department of your dreams. They will sell more franchises for you than anyone else you could retain. The subject of being investment fresh was dealt with in "How Full Is Your Monty?" and earlier article in this series.
The association will also become the test market facility you always hoped for. Potentially worthwhile concepts, products and services will flow faster from such incentivized folks, and they will be compensated for testing. Such compensation could take the form of no royalty obligations on test products and services during the test market period, and reduced royalties. Or, take no royalties on a new concept that has a successful test market and is adopted chain wide for the franchisee who comes up with it in the fist instance.
Consider also, that in such a dream world of simpatico franchising, you already will have a large core of in hand investors for any new concept you consider adopting in any diversification effort. People who live happily with you will stay with you in your next incarnations.
Copyright 1997 - 2008 || Richard A. Solomon
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