Round Down to Improve Results

by Eric Stites, Franchise Business Review

Want to improve franchisee satisfaction, engagement, and overall performance? Start by setting realistic expectations from the very beginning. It sounds so simple, but very few franchise companies actually do it. And here's why...

Recently, I was reviewing a franchise company's recruitment materials and something caught my eye. It was a BIG something... Average unit sales north of $1 million! Wow! That number popped off the page like a hot bagel from a toaster. Almost immediately, I started thinking about how I could keep my day job at Franchise Business Review and invest in this franchise opportunity at the same time.

"No problem," I had easily convinced myself. All I needed to do is find a reliable manager to run the store for me and I'd be all set. 15 minutes of daydreaming and I had everything planned out. Initial investment... check. Financing... check. Time off to attend franchise training... check. I even started thinking about how I could spend ALL the money I'd soon be making. New house... new boat... life would be good!

Then, suddenly, my bubble burst. I started reading the fine print and discovered that this financial performance representation (otherwise known as an Item 19 or "earnings claim") was based solely on the 25% top performing locations. Further reading disclosed that only 36% of the top 25% attained or exceeded this level of sales—a mere 9% of the system.

So with a 91% chance of NOT reaching this level of financial performance, one might ask why a franchise company would publish such an unrealistic statistic? Isn't this setting a franchisee up for failure—or at least setting very unrealistic expectations that won't happen in nine out of 10 cases?

Franchise Business Review has researched franchisee satisfaction, engagement and performance for over six years. The data clearly shows that satisfaction is the primary driver of both engagement and performance. Bottom line: Satisfied and engaged franchisees work harder, promote the brand to customers and other franchisee candidates, and ultimately make more money for their franchisor and themselves.

That said, the biggest driver of dissatisfaction among franchise operators is a business opportunity that does NOT live up to the franchisee's original expectations. Maybe training and support is not quite up to snuff. Maybe the company culture is not quite as transparent and open as once thought. Or maybe the business model is just not quite as lucrative and profitable originally advertised.

So, I'll ask again: Why would any franchise company publish (or otherwise disclose) unrealistic and misleading financial data to a franchisee candidate when all it does is set the franchisee (and the franchisor) up for long-term underperformance or even failure?

The simple answer is pressure. Pressure put on franchise development staff to "close more deals." Pressure from the senior management team to hit quarterly budget projections. Pressure from competitive concepts vying for the same franchisee candidates. Pressure from investors, bankers and private equity groups to grow faster. Pressure to constantly do better… do more... no matter how unrealistic that may be.

There is constant pressure all around us... as franchisors, franchisees, business people and simply humans. Imagine the power in setting realistic expectations with your customers, your franchisee candidates, and your team—expectations that you have at least a 50% shot at meeting or exceeding. This is what the very best franchise companies do. Sure, they have all the same pressures. They're just smart enough not to succumb to those pressures and keep pushing themselves to set realistic goals and expectations.

Eric Stites
President & CEO
Franchise Business Review

Want to learn more about what the top franchises are doing and how you compare? Email us or call (866)397-6680 to learn more about our FREE survey!

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