Franchisee vs. Franchisor: What happens when you disagree?
Over the past few months, I’ve been commenting on an article from allBusiness.com about the 10 Signs of a Great Franchise Opportunity. So far, I’ve been going in order (#1–#4, so far), but in this posting, I’m going to jump down to #9: Honesty. The writer of this article encourages prospective franchisees to ask a lot of questions and then take note of whether the franchisor responds quickly and straightforwardly.
Honesty is certainly a sign of a good franchise business, and I would add something more: transparency. Does the franchisor display candor when addressing tough issues? Do they include franchisees in the tough conversations that may arise while addressing those issues? Are they clear in their response to differences of opinion?
I bring this up because of a recent article in the Wall Street Journal, written by a reporter who heard about how Great Clips uses data analysis to evaluate sales transfer situations (when an existing salon may transfer some of its customers to a new, nearby salon—even if that new, nearby salon is owned by the same franchisee).
Virtually every growing retail franchise organization experiences these sales transfer issues. When the Wall Street Journal reporter, Joel Schectman, interviewed me, I made a point to be as transparent as possible, and I shared with him some of the internal struggles we’ve had over this issue.
One of the most challenging aspects of growing a franchise business is balancing the wishes of franchisees with the needs of the brand, along with the realities of where customers shop. More quality locations—in our case, more walk-in hair care salons—are good for brand awareness. And brand awareness is ultimately good for franchisees, though it can sometimes be a little painful when the brand is expanding in their “backyard.”
Every Great Clips storefront is an advertisement for the entire system. In many cases, new salons actually increase sales at nearby salons, but certainly there are situations in which a new salon can actually receive Great Clips customers from a nearby salon. Would those customers have transferred over had the new salon been a competitor instead of a Great Clips? Probably, but it doesn’t take the sting out of the sales transfer. And that can cause tension between franchisees and the corporate office.
We’re proud of the fact that we cared enough about what our franchisees think that we created a Real Estate Task Force to address this tension. This yearlong Task Force, made up of Great Clips executives and multi-unit franchisees, developed a number of ideas to help identify and minimize impact, while still growing the brand.
As with most Wall Street Journal articles, I believe the reporter did a good job grasping the complexities of these situations. I’d be interested to hear what you think.