Building franchisee trust
Franchising involves collaboration between the franchisor (concept-developer) and the franchisee (concept-implementer). The franchisee not only places their trust in the proven operational blueprint, but also in: the franchisor, the members of the franchisor’s team, other franchisees in the system, the brand, and their own employees.
The late Yale scholar William Deming suggested that trust is essential for the optimisation of a system because without trust each component will protect their own immediate interests, to the detriment of the long term success of the entire system.
Research conducted through Griffith University revealed the importance of four critical components necessary to build healthy levels of franchisee trust.
Firstly, Franchisees must feel engaged in the system; franchisees who feel engaged and empowered are more likely to have trust in their franchisor. Engagement involves substantial emotional and intellectual commitment both in their work role and in the wider franchise system. One franchising consultant said, “franchisees who buy mentally into the system do the best” and those who do not are in danger of falling through the cracks and becoming disenfranchised.
Secondly, the franchisee must have confidence in the strategic direction of the franchise system. Typically, the franchisor is responsible for creating – and perfecting – the proven blueprint of the business and the franchisee is responsible for implementing it. A franchisee’s willingness to comply with the franchisor’s leadership – even on divisive parts of the system – allows trust to be built. But there will be times when difficult (and sometimes controversial) decisions have to be made, this is when the franchisee must place their trust in the leadership team.
Thirdly, the culture of the franchise system is a crucial element necessary to create an atmosphere where trust can flourish. The CEO of a retail franchise described his personal belief in the power of developing a strong organisational culture. He said, “the values underpin the culture of a franchise. If everyone buys into the culture – and all the people who work for me buy into the culture – then it’s infectious.” Ensuring certain values are understood and shared between all members of the franchise – such as honesty, cohesion, kindness, encouragement – allows the people within the system to work to the best of their ability.
Fourth and finally, franchisor trustworthiness is fundamental to building franchisee trust. Trustworthiness includes competence (proven ability or an expertise in a specific area) and character (high levels of integrity and benevolence). The research revealed seven traits of a trustworthy franchisor.
1 They say – and show – that integrity is an important value within the franchise system.
Integrity is an important value to cultivate within a franchise system. Acting with integrity means that one acts in accordance with strong moral and ethical principles. Franchisees judge the level of the franchisor’s integrity if he or she is seen to be honest, have a strong sense of justice, and consistently fair. However, integrity also filters down to the members of he franchisor’s team. For example, area managers, marketing managers, master franchisees, as well as administrative staff also need to act with integrity for it to be viewed as an important value upheld across the entire franchise system.
If integrity is high, it is more likely that the franchisor will be viewed as trustworthy, therefore franchisee trust will increase. As one franchisee said, “I believe that more transparency will lead to more trust.” Acting with integrity, and being upfront, open, and honest, in a competitive business environment is not always easy, however the benefits outweigh the costs. It is also important to remember that “it is still possible for honest people to have disagreements” (franchising lawyer). The franchising relationship is a type of relationship that involves high levels of sincerity, frankness, and straightforward communication. Saying – and showing – that integrity is an important value within a franchise system is an essential trait of a trustworthy franchisor.
2 They prove their ability, expertise, and skills in leading the franchise.
The ability of a franchisor captures their knowledge, expertise, interpersonal skills, prior experience, and general wisdom necessary to lead the franchise through the good times and the turbulent times. Role performance was found to be an important attribute of a trustworthy franchisor. A franchisor – as well as the members in his or her team – must prove their ability to perform their duties in an effective and timely manner.
Furthermore, franchisees require visible examples of their franchisor’s ability, such as a successful and well implemented marketing campaign, an effective pricing strategy to suit the current market trends, or a well handled resolution of a dispute. A franchisor who can consistently prove their ability, expertise, and skills in leading the franchise allows the franchisee to perform better in their own work role because they have faith in the leadership.
“I have a very competent team of management that have been with me for many, many years. They are experts in their silos, but they’re also very well connected with our franchise partners.” - Retail Franchisor
3 They are willing to take the blame and admit they made a mistake.
As the leader of the franchise system is a highly visible personality, franchisees take notice of their franchisor’s actions – especially when a mistake is made. Everyone makes mistakes, this is human nature, yet the important thing is how the situation is handled. Franchisors who can demonstrate the confidence to admit they were wrong, take the blame, and admit they made a mistake, are more likely to be trusted. However, a mistake and the wider implications should never be ignored. Even if the franchisor was not fully responsible for the mistake – acknowledging and fixing the problem – will enhance their overall reputation and perceived trustworthiness.
“Where we make decisions that are fairly at the fault of the franchisor, I won’t walk away from them – I will fix those at our cost.” - Franchisor
4 They do their best to ensure conflict is constructive instead of destructive.
Conflict between people can take many forms. It can also intensify over many years so that the initial reason for the conflict is long forgotten. The typical length of a franchisee’s contract is five years (renewable), thus it is in the best interests of the health of the relationship to deal with conflict early, comprehensively, professionally, and fairly. Edward de Bono, he father of lateral thinking, defined conflict as simply a clash of interests and unmet expectations.
Unfortunately, most conflicts tend to be destructive because of strong personality clashes, ego, reputation, and dogmatism. However, conflict can be constructive whereby emphasis is placed on flexibility and working together to accomplish mutual goals, as opposed to always being ‘correct’ for the sake of being ‘correct’. Constructive problem solving requires high levels of communication skills, patience, and a commitment to working toward a favourable resolution for both parties. It may also require the flexibility to allow the other party to ‘save face’ and uphold their reputation. Franchisors who focus on constructive conflict instead of destructive conflict are more likely to be trusted.
“You can have good conflict and bad conflict – but most conflict is bad – and unless it is managed, often it is not possible to resolve the conflict. All you can do is manage it in a constructive way, If it is not constructively managed there are real challenges down the track.” - Franchising mediator
5 They ensure the psychological climate reflects recognition, innovation, and fairness.
The psychological climate of the franchise plays a considerable role in the overall levels of franchisee trust. In the daily running of the business, franchisees are susceptible to the psychological climate set by the franchisor who has the power and ability to influence the overall mood within the franchise. For example, a franchisor may wish to emphasise high levels of performance in strict time-frames, thus increasing the pressure levels on the franchisees. However, this type of climate had the least favourable results. The top three types of limate were fairness, innovation, and recognition. Franchisees placed great emphasis on fair objectives and reasonable decisions made by the franchisor. Consistently fair and reasonable actions were highly valued by franchisees. Secondly, franchisees enjoyed the freedom and flexibility to innovate. They reacted favourably to being empowered to develop their own ideas and improve existing methods and procedures. Finally, franchisees reacted favourably to being recognised for good performance. They enjoyed receiving a ‘pat on the back’ from their franchisor when they did well. Thus, the ability to shape the psychological climate within the franchise is an important trait of a trustworthy franchisor.
6 They demonstrate that they care for their franchisees.
An important trait of a trustworthy franchisor is their commitment to showing genuine care for their franchisees. This display of care and support is an essential contributor to building franchisee trust as the interaction between the franchisee and the franchisor is susceptible to outside pressures, difficult economic conditions, increased competition, personal issues, as well as the challenges and stresses that come with running a business.
The franchisee and the franchisor are inextricably linked to one another in many ways: commercially, legally, professionally, and to an extent, personally. One franchisor said, “we tell our franchisees we are proud to have them as part of our franchise and we also do our best to empower our franchisees to be amazing.” The power of the emotional connections made and sustained) within franchising relationships is often underestimated, however this research suggests it is not only important - but necessary - for franchisors to show genuine care for their franchisees throughout the duration of the franchising relationship. “If the franchisor doesn’t sincerely care for their franchisees and how they succeed in the business, then trust is never going to happen.” - Franchisor
7 They act in good faith toward their franchisees.
The new Australian Franchising Code of Conduct, effective from the 1st January 2015, introduces an obligation to act in good faith. A failure to comply can incur a civil penalty of up to 51,000 (currently) per contravention.
It is clear from the new provision that actions of good faith by both the franchisee and the franchisor are an important factor in the Anthony Grace Building franchisee trust franchising relationship. At the core of the good faith provision is the importance of acting honestly. As suggested earlier, an important trait if a trustworthy franchisor is their commitment to saying and showing that integrity is an important value within the franchise system. Trustworthy behaviour is indicative of acting in good faith as the behaviour is considerate of the other party involved. It also shows a commitment to sustaining the relationship for the long-term. In summary, franchisee trust is built when they feel engaged, when they have confidence in the franchise system, when the culture of the franchise system is positive and supportive, and when the franchisor acts in good faith.
The benefit of acting in good faith is increased levels of trust. Where trust is high, the franchise system can perform at its optimal potential. Without trust (and good faith) each person will look after their own self-interest to the detriment of the long term success of the entire system. As one retail franchisor said, “we were acting in that way before the good faith provisions in the legislation. It’s just the proper way to act - we don’t wait for legislation to tell us what to do. What we do is simple: be transparent, keep our promise and make sure the franchisee is getting the best possible return that we can manage.” Anthony Grace currently lectures at Griffith University in the Marketing department. He is in the final stages of completing his PhD through the Asia-Pacific Centre for Franchising Excellence, his topic is centred on the importance of building franchisee trust.
For more information contact Anthony at:
T: (+61) 410 809 643