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Having an Engaged Franchise System Matters

Engagement isn’t only about what you do; it’s how you do it.

My first franchise advisory council meeting was in the late 1980s. Our franchisees pushed for the meeting and they thought an advisory council was an important function. Senior management was reluctant, but agreed to create the council and shortly thereafter the first meeting was scheduled.

On the surface, it looked like we had a good council. We had regular meetings, showed them new programs and got their buy-in before launching anything important.

It’s obvious to me now this wasn’t an advisory council; it was merely a focus group. If we had peeled back the layers at the time we would have seen that its sole function was to rubber stamp company initiatives. We would pitch our concepts (or in many cases final programs) to them so we could get their approval and advice on how they would be priced.

Our council members weren’t truly part of the conversation. We weren’t engaging them in the right conversations or at the right time in the process.

To develop a strong strategy, management needs to get input from all stakeholders.

Defining Engagement

Engagement isn’t only about what you do; it’s about how you do it. It’s about having everyone participate and collaborate in finding the right solution so your stakeholders are invested in a successful outcome. It’s about getting positive and active participation from everyone − corporate, advisory councils, franchisees and all stakeholders − in all aspects of the business, including helping define the strategic direction of the franchise system.

Some readers may be thinking a franchisee is paying the franchisor to develop and execute the strategy. To develop a strong strategy, management needs to get input from all stakeholders. Great leaders don’t think they have all of the answers. They listen, seek out advice, value opinions and encourage input.

Collaboration Begins

The “AHA!” moment comes when you realize that it’s not only important to listen; it’s what you get from listening and what you do with the information that’s important. When you start to collaborate with your franchisees, their ideas and suggestions will be inspiring and help the franchise system grow and prosper at a faster rate.

Before you can start this process, you first need to fully believe that involving all of the stakeholders will make the franchise system stronger. You can go through the process of creating an advisory council, hosting regional meetings and increasing participating at convention. However, and this can’t be emphasized enough, it’s what you do with the information you get from your stakeholders that will make or break the engagement in your franchise system.

Before management can start providing opportunities for engagement and using the information they get from these opportunities, they need to ensure franchisees understand their role and the importance of contributing to the system as a whole. Many franchisees consider themselves customers of the franchise system and believe it’s the franchisor’s role to get the franchisees engaged. This is the biggest franchisee myth today.

Cultivating a Culture of Engagement

The concept of engagement might seem simple. Cultivating a culture of engagement, on the other hand, is anything but. It requires dedication, focus and time to take root. The result of this labor can be profound.

In a study conducted by Franchise Business Review, 24,050 franchisees representing more than 60,000 locations from more than 300 franchise brands were surveyed over a one-year period. Using the Ingage Barometer engagement tool, created by Ingage Consulting and Liminality Inc. to assess the level of engagement within a franchise, embedded in the Franchise Business Review survey, we can better understand the economic impact of engagement and the key factors that lead to engagement.

Some of the attributes that foster engagement include promoting a clear vision and having active participation by franchisees. Of course, active participation is hard to achieve if the system doesn’t offer the mechanism for franchisees to participate.
When looking at the franchisees who are most engaged (the top quartile of engaged franchisees), they are 3.7 times more likely to report strong financial results than the bottom quartile.

Sixty-two percent of the top quartile of engaged franchisees said they would proactively recommend the franchise system. And, 100 percent of the same group, when asked, said they would recommend the franchise system. On the other hand, 47 percent of the franchisees who are not engaged (the bottom quartile of engaged franchisees) said they would not recommend their franchise system; and thus, would be bad validators for future franchise sales.

Attributes that foster engagement include promoting a clear vision and having active participation by franchisees.

The evidence is quite dramatic that an engaged franchise system will fuel economic growth. How do you cultivate a culture of engagement? Here’s an example of a successful organization that (at the time of this case study) was experiencing slowed growth as the system matured and same-store sales increases were essentially flat within the industry. It was not an issue of dissatisfaction as the franchisor had recently conducted a satisfaction survey. The franchise system had an opportunity to improve engagement.

We undertook a seven-step process to get the franchisees more involved and fully engaged. Many of the ideas that were implemented were intended to create avenues for good conversations where management could truly listen to and understand the thoughts and ideas of the franchisees, and use the information in a way that would help improve the system.

1. Created Regional Network Groups Across the System. This enabled franchisees to work together in their local marketplaces to promote the brand, share best practices and encourage and help each other. Franchisor staff did not attend the local meetings, but did support them by training the group leaders on meeting facilitation and providing logistical assistance (as required).

2. Revised the Advisory Council Meetings. These meetings were changed from one-day sessions to three-day meetings. Topics on the agenda were changed from a show-and-tell of new programs and services to meaningful, strategic/tactical discussions. And finally, the timing of the meeting was adjusted to allow for the building of the strategic plan for the following year. Now, management was having the right conversations and was truly listening, and there was time to allow for the council’s ideas and suggestions to be incorporated into the tactical plan and budget for the following year.

3. Created Additional Councils. A department-specific council was essentially created for each vice president who leveraged and worked with the council at a tactical level.

4. Shared Survey Results. Annual satisfaction survey results were shared with franchisees and there was open dialogue about how to address issues and leverage opportunities.

5. Conducted Town Hall Meetings. These meetings were conducted across the country and designed to give franchisees an opportunity to interact with management, and enable management to listen to and understand their thoughts and ideas so they could be addressed in a thoughtful way.

6. Revised Franchisee Portal. The focus of the franchisee portal was changed from delivering information management needed franchisees to know to information franchisees wanted to know.

7. Changed Compliance Policy. This step enables the creation of a fair variant system combined with a strict following of the rules to deal with compliance issues head on. Franchisees lead this initiative.

The results of this process were spectacular. Same-store sales grew twice as fast as the industry. The margin that franchisees were working on increased by 6 to 8 percentage points. Ultimately, franchise sales started to increase.

Does engagement matter? Definitely. I, along with many others, have stressed the importance of engagement within a franchise system. And now we have the proof to back it up.

Evan Hackel, CFE, is the principal and founder of Ingage Consulting. Find him at fransocial.franchise.org via the directory.

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