Why Do 28% of Franchisees Get the Thumbs Down?

Greg Nathan’s Healthy Franchise Relationships Two-Minute Tip

Sometimes it takes a staggering statistic, like the fact that 28% percent of franchisees receive poor performance scores from franchisor executives, in order to create the shift necessary to improve these relationships. In this week’s Two-Minute Healthy Franchise Relationship Tip from Greg Nathan, we get great insight on the top four reasons that franchisors say they would not award a franchise to many of the franchisees they have in the past.

Why 28% of Franchisees Get the Thumbs Down

By Greg Nathan

Following a recent post on why happy franchisees go sour, here is some research on why franchisors become frustrated with their franchisees. A simple measure of satisfaction with our choices in life (applicable to buying products as well as selecting franchise partners) is whether we would make the same choice again in retrospect. This is a question we ask franchisees in our ACE Satisfaction Survey and, on average, 65% of franchisees say they would invest in the franchise again.

We have also invited franchisor executives to rate whether they would select their franchisees again. Of 2,083 franchisees rated, 6% were categorized as “definitely no”, 9% as “probably no” and 13% as “uncertain”. In this context, we interpreted unsure as “no” which means 28% were given the thumbs down.

When we looked at 355 specific comments provided by franchisors on why they would not select these franchisees again, 14 reasons emerged. The top four accounted for three-quarters of the responses.

1. Lack of operational commitment

“Failure to appreciate the work required to run a business. This franchisee is frequently absent from his business and yet expects high returns.”

A whopping 28% of comments referred to passive investors or part-time operators who were seen as having a poor appreciation of what is needed to make the business work. A significant number of comments also referred to the franchisee’s engagement with the business declining over time, with commitment levels dropping as the business matured.

2. Lack of “get up and go”

“I think this franchisee’s heart is in the right place, but she hasn’t got what it takes to take the business to the next level.”

The second strongest theme, accounting for 17% of comments, related to franchisees expecting the franchise system to drive their business for them. By the way, this concept of “get up and go” is at the heart of an attribute we call Pro-activity. Our research shows franchisees with high levels of Pro-activity achieve 14% better financial results and deliver a 12% superior customer experience.

3. Poor compliance

“They spend time chasing ‘shiny objects’ the belief this will provide a quick fix/return as opposed to following the proven system they purchased!”

The third most common reason for not selecting a franchisee again, accounting for 14% of comments, was a lack of compliance to standards and a refusal to submit financial information. Franchisors said these franchisees thought they knew what was best, rather than drawing on the proven track record of the business model.

4. Negative attitudes or behaviours

“This franchisee is out to break the company’s back to make a name for himself. He starts rumours, is absent at meetings and wants to change everything we do to suit himself.”

Negativity also accounted for 14% of the comments, in particular franchisees not willing to maintain a collaborative working relationship with the franchisor team or with other franchisees. Aggressive, suspicious and combative behaviour was commonly cited as a frustration for franchisors.

The other reasons for not selecting franchisees again, in order of importance, were lack of business acumen; lack of management or leadership ability; poor sales performance; resistance to change; personal or family distractions; untrustworthiness; lack of English literacy; personal disorganization; and emotional instability.

For anyone involved in franchisee recruitment, this is a pretty good list of attributes to look out for. Those who use the Nathan Profiler Recruitment System will be pleased to know they are all covered.

We so appreciate Greg’s insights and knowledge into what attributes and traits contribute to a healthy franchise relationships – from both sides of the equation! 

Did you know that Greg will be here in North America working with individual franchise organizations twice in 2016?  As of 10/28/15, all below dates are currently available.

February 2016 – Deadline for Confirmation: Tuesday, December 15, 2015

Monday 2/15 – Friday 2/19

June 2016 – Deadline for Confirmation: Monday, April 18, 2016

Monday 6/20 – Friday 6/24

Let’s schedule a short call right away if you are interested in working with Greg in 2016. These dates are sure to be scooped up quickly.

More soon…

Katrina