Franchise relationships - Greg Nathan

THE

Franchise
Relationships
BOOK OF

            “Seriously entertaining”
          “Thought provoking”
     “Reminds you of what’s important”
     “The wisest advice in franchising”
           “A true expert’s insights”

      Greg Nathan
          Author of Profitable Partnerships

THE

Franchise
Relationships
BOOK OF

A collection of the acclaimed Healthy Franchise Relationships Tips

Copyright © 2013
Franchise Relationships Institute Pty Ltd
ABN 91 927 769 093

This book is copyright. Apart from any fair dealing for the purposes
of private study, research, criticism or review, as permitted under the
copyright Act, no part may be reproduced by any process without
written permission from the publisher.

This book can be purchased in bulk for distribution to franchisor
management teams.
For details contact the publishers:
Franchise Relationships Institute
PO Box 8487 Armadale Victoria Australia 3143
Email: info@franchiserelationships.com
Website: www.franchiserelationships.com
Tel International: + 61 7 3510 9000

Cover design and layout: Rebecca Nathan.
Back cover photograph: Stephen Nathan.
Printed by: Printcraft, Queensland.

ISBN 978-0-9924003-0-9

Nathan, Greg, 1955 –
The Franchise Relationships Book of Tips
1. Franchises (retail trade)
2. Business communication

What people say about Greg Nathan’s Tips
Reading Greg’s Tips is a great opportunity to step back from the everyday bustle
and remind yourself of what’s important. Both entertaining and insightful, they
always generate a thought about how I could do something better or differently.
Jonathan Layton, Executive Director, Chemmart
I’ve been in franchising for over 30 years and Greg’s Tips are the only thing that I
stop to read every time - they nearly always remind me of something important
or give me a new angle of thinking.
John O’Brien, CEO, PoolWerx
Since Greg’s Tips were introduced I have been an avid reader as they give me
new insights and help me prepare myself for the future. I am always looking
forward to the next story.
Michael Ermer, National Operations Manager, Boost Juice Bars
The two things I like about Greg’s Tips are they make me pause and reflect,
and they convey a genuine desire to assist without preaching. There is also
an analytical depth to each Tip, which is important in this era of superficial
information. Australian franchising has been blessed to have had someone with
Greg’s professional skills and wisdom providing this type of input.
Stephen Giles, Partner, Norton Rose Fulbright
Greg’s Tips are always interesting, relevant, thought-provoking and, often, ‘laugh
out loud’ funny. Greg has a humorist’s eye for the absurdities of everyday life,
a psychologist’s understanding of what creates such situations, and an expert’s
knowledge of how they relate to franchising and the lessons to be learned. I am
sure my copy will soon be as well-thumbed as Greg’s other books.
Simon Lord, Editor, Franchise New Zealand Magazine and Website
Some of the wisest advice about franchising I have ever encountered is from
Greg Nathan. I get so many emailed publications but the ones I always look
forward to are the thought provoking ones from Greg.
Bob Beaumont, Executive Chairman and CEO, Beaumont Tiles
We love reading Greg’s sharp, punchy Tips which are a fabulous gift to
franchising. They really make us think about how we can operate as a world class
franchisor.
Debb Meyer, Director, Narellan Pools and 2013 FCA Franchise Woman of the Year
I always look forward to reading Greg’s Tips. Greg’s writing style is unique and
the subject matter depth provides great insights into how to build and maintain
healthy franchising relationships.
Simon Ovenden, National Manager, Franchise Banking, National Australia Bank

About the author
Greg Nathan is an internationally respected psychologist who specialises in
the relationship dynamics of franchising. In addition to his academic training,
including a Masters degree from Monash University, he has been a successful
multi-unit franchisee and was for many years National Marketing and Operations
Manager with Brumby’s Bakery.
He has written several popular books, including Profitable Partnerships and The
Franchisor’s Guide to Effective Field Visits. He has also developed a number of
models and tools to help franchisors understand the dynamics of the franchise
relationship better, such as The Franchise E-Factor and The Franchisor Wheel of
Excellence.
He was recipient of the inaugural Contribution to Franchising Award by the
Franchise Council of Australia in recognition of his pioneering research and
educational work, and is the first person in Australia to receive certification with
the Institute of Certified Franchise Executives.
Greg is also Founder of the Franchise Relationships Institute.

About The Franchise Relationships Institute
The mission of The Franchise Relationships Institute is to provide evidence-based
knowledge and tools that help franchisors and franchisees create profitable
partnerships. The Institute has a vibrant, ongoing research program examining the
factors that contribute to successful franchisee and franchisor performance.
From this research it continues to publish useful materials, and develop cutting
edge education programs and management tools for improving the performance
of franchisees and franchisor executives. These include:
The Franchise Effectiveness Survey which measures the health of the culture in
a franchise network, as well as franchisee satisfaction with the services offered by
the franchisor.
The Nathan Profiler, a scientific diagnostic tool for assessing the suitability of
potential franchisees and the development needs of existing franchisees.
Workshops and Bootcamps for franchisor executives, providing them with the
knowledge, skills and confidence to deliver effective leadership at the business
and personal levels.
Conference presentations for specific franchise sector groups which blend
scientific thinking, positive human values and pragmatic commercial strategies for
sustainable success in the unique franchising environment.
For more information about The Franchise Relationships Institute and useful
resources visit www.franchiserelationships.com.

Foreword
I have always enjoyed reading fairytales, traditional stories and even comic books.
The life lessons they contain are often easier to absorb than a more academic
approach to the question of what constitutes a good and noble life.
I have also always enjoyed writing - poems, short stories, research articles and
even the occasional song. When I failed English at high school, my grandfather,
Sol Nathan, a businessman, poet and sports journalist, encouraged me to keep
writing, saying he thought I had talent. It reminds me how important it is to have
supporters who believe in you.
My other love is good quality research. I find it genuinely exciting to hear stories
about dedicated scientists or inventors and their single-minded commitment to
finding answers to whatever their big question is. My big question has been, “How
can franchisors provide quality leadership that enables everyone in a franchise
network to enjoy their work, contribute to the community and make a sound
commercial return on their investment and effort?”
In writing these Tips over the past few years, I have combined useful insights from
research, including our own work at FRI, with light hearted stories that have a
message. Usually a piece of research or an experience will get me started. I then
keep writing, editing and rewriting until the piece feels complete.
While on the topic of editing, I am grateful to my in-house editor, aka my wife
Ann, for her trusty red pen and enduring patience, especially when I hand her a
sheet late on a Sunday night saying “I need you to read this as I want to send it
out tomorrow!” Thanks also to my other valued editors, Nicole Simpson and Karli
Furmage. They are usually softer with their initial feedback before telling me a
point doesn’t make logical sense or needs to be expressed more clearly.
Another talented colleague, graphic artist and niece, Rebecca Nathan, has always
been available at odd hours to lay out the Tips so they look good for our clients.
Rebecca has applied her usual flair to the cover and layout of this book. Thanks also
to my cousin, Stephen Nathan, photographer extraordinaire, for getting up extra
early before work to take the back cover shot. This really has been a family affair.
Speaking of supporters, a huge catch all “Thank You” to the enthusiastic FRI team
for enabling me to live my dream of writing, researching, speaking and generally
mucking around. Same goes to my advisors and mentors. I apologise for not
naming everyone because there are a lot of you. I really do appreciate your support.
Finally thanks to the readers of these Tips, especially those of you who have
sent responses to a story that has provoked your interest. I hope you enjoy this
compilation of my Healthy Franchise Relationships Tips.
- Greg

The seven-year itch
    in the franchise
    relationship

R    emember that iconic movie scene of Marilyn Monroe standing on
     a subway grate with her dress blowing up around her? It’s from the
movie The Seven Year Itch, about a businessman having a mid-life crisis in
his seventh year of marriage.
Indeed psychologists have found the quality of a committed relationship
(you can read this as a marriage or a franchise relationship) tends to decline
over the first four years, after which satisfaction stabilises. However in a
study of 500 couples, Dr Lawrence Kurdek of Wright State University, found
there was a second dip in satisfaction at the seven year mark.

Are your franchisees facing a mid-life crisis?
There are two reasons I am raising this and they both relate to important
findings from our own research. Similar to marriage, franchisee satisfaction
drops to its lowest point at around the four year mark and then stabilises.
Our study also reveals the average tenure of franchisees in Australia is
currently around seven years! Does this mean the bulk of our franchisees
are facing a mid-life crisis? I’d suggest the answer is yes.
Consider that at seven years the majority of franchisees well and truly know
the basics of how to run their business. This is not to say they necessarily
do it well. Consider also that after seven years many are probably getting
tired, bored and a little distracted.
Combine this with rising costs, flattening sales, and changes to customer
buying patterns and you have a recipe for franchisees questioning their
commitment to the future of the business. So how do we help them to get
their mojo back?

A new model for understanding the franchisee journey
We have developed a new model around the six business stages franchisees go
through, which we call The Franchisee Journey.
1. Investigation – the franchisee is deciding whether or not this franchise
   network is right for them
2. Initiation – the franchisee joins the network and is introduced to its culture
   and systems
3. Perspiration – the franchisee works through the challenges of establishing
   the business
4. Consolidation – the franchisee is profitable, has regular customers and a
   stable team
5. Maturation – the franchisee becomes bored, distracted or complacent
6. Reformation – the franchisee creates a fresh approach to running the
   business
The fifth stage, Maturation, is equivalent to the seven-year itch. The
opportunity for franchisors is how to move their franchisees from Maturation
to Reformation. This is where they set new goals and commit to running the
business with a fresh approach. Perhaps they decide to expand into more
units, take on a mentoring role within their franchise community, refurbish their
business or bring in a business partner. It may also mean it’s time to develop an
exit strategy.
With an increasing number of franchisees in the Maturation stage, franchisor
support teams would do well to take a fresh look at their operational systems
and culture, ensuring these are relevant to the needs of this group. Is your
team capable of managing franchisees through the seven-year itch and onto to
bigger and better things?

      At the seven year mark, franchisees know the
      basics of how to run their business and are at
          risk of getting tired, bored and distracted.

The cobbler has no shoes

I  was at a large international conference of psychologists where an academic
   shared her research into the business planning styles of entrepreneurs. She
explained that most entrepreneurs were either proactive planners (goal directed
with a structured approach) or opportunistic planners (opportunity directed with a
flexible approach).
I am more of an opportunistic planner and was initially pleased to hear that both
approaches encourage high team motivation and deliver positive outcomes.
However my self-satisfaction turned to embarrassment when she presented
her findings on how each style impacts on stress levels. People working for
opportunistic planners suffer significantly higher levels of stress and strain.
We have an extremely motivated team but I had been concerned about the high
level of stress many seemed to be under and was suggesting what they might do
to reduce this stress. It never occurred to me that I might be the problem!
One of my favourite sayings is “The cobbler has no shoes”. In other words the
thing you are supposed to be an expert in is often your blind spot.
As well as highlighting my own foibles this research reminded me of a particular
complaint we regularly hear from franchisees. Many buy a franchise because they
are looking for a structured approach to growing their business and franchise
companies preach the importance of following systems and procedures.
It is not uncommon for founders of franchise companies to be opportunistic
entrepreneurs. Franchisees in these networks often say their franchisor’s lack of
structured planning when rolling out new initiatives drives them nuts. “How can I
plan my local promotions”, they say, “when our franchisor keeps moving the goal
posts with the national marketing strategy?”
All strengths turn to weaknesses when used to extremes. While some structure
is important to the efficient implementation of plans, it can turn into dangerous
rigidity when overdone. On the other hand flexibility is critical for innovation, but
can lead to chaos – and high levels of stress on other people – if not tempered.
Like most good things in life a balanced approach is recommended. This is often
best achieved by having a team around you that has different strengths from you.
And of course listening to them rather than trying to cure them!

    Your area of expertise in is often your blind spot!

11 ways to immediately
    improve field visits
F  ield managers can make a big difference to a franchisee’s business, providing
   they focus on the right things and engage with franchisees in the right way.
Here are 11 of my top tips for improving the effectiveness of field visits.
1. Work up a joint agenda with the franchisees prior to the visit. Once the
    agenda is agreed don’t deviate from these topics. If they weren’t important,
    you or the franchisee would not have raised them.
2. Have a clear purpose for every visit. Ask yourself “If the visit were to go as
    well as it reasonably could, what would be achieved?” Review this in your
    mind just before you start each visit.
3. Have your wits about you. Give people your complete attention during the
    first few minutes of the visit. You don’t know what has been going on prior to
    your arrival, so check before raising any compliance issues.
4. Be friendly but not friends. If you decide to socialise, for instance have a
    meal together, do this with a business purpose in mind. You are there to add
    value to the franchisee’s business, not for any other reason.
5. Arrive at decisions together, especially when analysing financial data. While
    you may have your own understanding, you’ll get better results by allowing
    franchisees to first contribute their thoughts.
6. Make it clear to franchisees how and why data is being collected. They can
    sometimes be defensive or even a bit paranoid about how you intend to use
    their business information.
7. Explain compliance in terms of brand protection. Remind franchisees how
    much has been invested in building the reputation of the brand and how
    quickly this can be undermined to everyone’s detriment, including theirs.
8. Keep discussions constructive by asking solution focused questions.
    For instance, “What would be a good outcome? What can I do to help?”
9. Finish on a positive note. The tone of your next visit will start from where this
    visit ended. If the visit has been challenging, acknowledge this and restate
    your commitment to the franchisee’s success.
10. Look after yourself and your energy. The positive energy you give out will have
    more bearing on the effectiveness of your visits than any other single factor.
11. Finally, always ask the magic question. This is “What could I do to make my
    next visit more useful for you?” This demonstrates you care and creates a
    learning opportunity on how to continually improve your performance.

The franchisor who
    missed the point

T   he new Head of Franchise Operations walked confidently onto the stage.
    He had spent weeks locked away in his office working on a new financial
management tool that could help franchisees improve their performance and
he was convinced they would lap it up. But he was about to miss something
important.
“Obviously” he declared with a smirk, “no one runs a business because they enjoy
it!” While he expected a laugh he instead received stony-faced stares.
He continued, a little less sure of himself. “The only reason we are all here is to
make money, right?” Again no response. I sensed mild bewilderment from the
audience. I was watching the franchisees from the sidelines and was pretty sure I
knew the reason for the disconnect.
His statement was not entirely true, and saying it with such certainty had
damaged his credibility. It was as if the franchisees were thinking “Hang on a
minute, I actually enjoy running my business. Does he think we’re all just a bunch
of money grubbers?”
The session continued with him pushing on with his presentation.

What really motivates franchisees
There is good research to suggest that self-employed people are significantly
more satisfied with their work than corporate employees. In our recent
Franchisee Success Study of over 2,500 franchisees from 75 franchise systems,
87% agreed that running their business was enjoyable and satisfying. Don’t be
fooled into thinking this is because they are all making a lot of money or having
it easy. The majority of small business people face higher levels of financial stress
and work longer hours for less money than employed executives.
Of course franchisees want to make money and, indeed, building greater
personal wealth is the most popular response when they are asked to rank their
reasons for buying their franchise. But most are also strongly motivated by other
psychological factors, such as the following.

Flexibility Nearly as many franchisees who rank building wealth as their number
one priority, say they bought their business primarily to be able to have greater
flexibility in how they run their lives.
Independence A significant number of franchisees say they bought their business
to escape the politics, rigidity and frustration of working for a boss.
Achievement For many people, their business is a vehicle for them to express
their creativity and prove to themselves they can achieve success through their
own hard work.
Contribution Franchisees often see their staff and even their customers as an
extension of their own families. Many talk passionately about the satisfaction they
gain from developing young people, improving the lives of their customers and
making a contribution to their local community.
Respect We all have a need to feel respected and many franchisees use their
business to build a sense of status and respect in the eyes of their family, friends
and colleagues. The importance of respect often only emerges when it is not
shown.
Back to our story. How did the franchisees respond to the franchisor’s new
financial tool? It bombed. Barely anyone adopted it. While there had been
past issues that undermined franchisee trust, I am sure a major reason was the
franchisees didn’t trust his judgment because he had misjudged them.

                 While franchisees want to make money,
                   most are also strongly motivated by
                             other psychological factors.

“
    Some of the wisest advice               Greg Nathan is a psychologist,
    about franchising I have ever       author of four popular franchising
    encountered is from Greg
                                        books and an international expert
    Nathan’s thought provoking tips.
                                              on the franchise relationship.
    Bob Beaumont, Executive
                                            In recent years Greg has been
    Chairman and CEO,
    Beaumont Tiles                      sharing his insights on franchising
                                       and life through a regular series of

“
    I’ve been in franchising for          tips that remind us how positive
    over 30 years and Greg Nathan’s        leadership values can be found
    tips are the only thing I read
                                             in all aspects of daily life. This
    every time – they always remind
    me of something important.          compilation contains 79 of Greg’s
                                             most popular tips, with many
    John O’Brien, CEO, PoolWerx
                                         enhanced in light of his ongoing

“
    We love reading Greg Nathan’s             work and research. They are
    sharp, punchy tips as they           designed to stimulate fresh ways
    really make us think about             of thinking and to inspire those
    how we can operate as a            who work in the franchising sector
    world class franchisor.
                                          to lead with clarity and integrity.
    Debb Meyer, FCA Franchise
    Woman of the Year and
    Director, Narellan Pools

“
    Australian franchising has been
    blessed to have had someone
    with Greg Nathan’s professional
    skills and wisdom. I am an
    avid reader of his tips and
    am delighted he has chosen
    to put them into a book.
    Stephen Giles, Partner,
    Norton Rose Fulbright

    Published by

       ISBN 978-0-9924003-0-9

     9 780992 400309 >