Franchisors: For Cryin’ Out Loud, Your Under-Performers Are Already Hurting Your FDD!

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You said franchisors should get rid of their under-performers as quickly as possible. But won’t that hurt our FDD?”

The question popped up during my hour-long webinar, Getting Franchisees To Pay More Royalties Without Complaining!, which I recently conducted for Franchise Business Review.

To clarify the point that I made during the webinar, I explained that shortly after becoming CEO of the We Buy Ugly Houses® franchise company, I had requested a list of our franchisees, rank-ordered by Best Customer status. A Best Customer (and, of course, a franchisee is a customer) is one who pays the most money in the least time and follows the system.

It’s important to differentiate franchisees

I wanted to see a list that differentiated our “best” customers from our “worst” customers. Every franchisor needs to have such a list, but oddly enough, many (maybe most) do not. On any given day, ask a franchisor: “Can you tell me the names of your top ten franchisees and the names of your worst ten franchisees?” Shamefully, they can’t do it.

Every franchisor knows their “worst” franchisees

It’s more likely, however, that they can tell you the names of their “worst” franchisees because those are the franchisees who scream the loudest and steal the franchisor’s precious resources. I purposely said “steal” — these franchisees are taking something they’re not entitled to. Worse yet, the franchisor is giving it to them freely, and by doing so enabling them to become even worse franchisees!

But back on point.

When I finally saw the rank-ordered list of our franchisees — by this time the company was eight years old and no one had ever requested such a list before! — I looked at the top 25 names and said, “Who are these people? I don’t know them!” I didn’t know them because they were the franchisees who simply worked the business. They made money. They paid their bills. They didn’t complain.

How do I get rid of these franchisees?

Then I looked at the bottom 25 names on the list and I said, “How do I get rid of these people? . . . And quickly?”

Sharing that story during my webinar raised some virtual eyebrows and caused some folks on the call to question my sanity: “Who is this guy? He’s telling us to get rid of franchisees? Doesn’t he realize what that will do to the Franchise Disclosure Document?”

I’ll answer the second question first.

Improve or get out!

I wasn’t exactly saying “get rid of franchisees.” I was saying: Move the worst franchisees off the lower end of the list.” You can do that two ways: Help them improve so they’re no longer worst franchisees . . . or terminate their franchises! Get rid of ‘em!

Now I’ll answer the third question with another question: “Don’t you realize what the under-performers are doing to your FDD?”

Under-performers hurt 3 ways

You’re living in a fairytale franchise if you think under-performing franchisees are doing anything to help your franchise company.

First, they are zapping your time and energy — your precious (especially now) resources. Because they complain more and produce less, they get the majority of your attention. You return their phone calls. You give them field visits. You spend time coaching them. And they don’t get better! They simply complain more.

Second, they tell your prospective franchisees not to buy your franchise opportunity. They say things like, “Well, they’re not everything they pretend to be. . .They don’t deliver on their promises. . .No, I wouldn’t buy the franchise again.”

Third, they’re taking up space for no good return! If you’re limited by the number of franchises you can sell, your under-performers are taking up spaces (franchises) that you could sell to others who could pay more royalties and benefit your entire franchise company!

How long til your head splits?

So there you are, banging your head against the wall because you can’t please these worst customers, you’re giving away money, and they are telling your prospects to look to buy a different business. Meanwhile, when someone asks you: Why you doing all that? you say “I’m protecting the FDD.”

And how’s that working for you?

Sorry, I shouldn’t be so flip. Those kinds of comments tend to get me in trouble! On the other hand, come on now, are you in franchising to help franchisees and your franchise company? Or are you in it just so you can complain about under-performing franchisees and regulations that make it impossible for you to sell more franchises?

Your 3 point answer

Here’s the game plan I developed for the “Ugly” under-performers:

Tell them where they stand. Every franchisee wants to know how she/he compares to other franchisees in the network. Number 1 wants to know (and enjoy the fact that) she’s number 1, and number 2 wants to know how he can get more productive (i.e., pay you more royalties) and become number 1! Meanwhile, the bottom feeders need to know where they stand. Some of them, in fact, will be embarrassed enough to get themselves off the lower rung and at least into mid-tier range of your customer list. Others will remain at the bottom of the list, sometimes on purpose and sometimes because they simply can’t do any better!
Tell them what you’ll do for them. Nothing more than what’s promised in the FDD! “We want you to improve your productivity, and we’ll help you. However, you’ll have to help yourself first. We can’t help you if you won’t follow our system,” you tell them. If they want a field visit and you are not obligated to give them one, tell them they can get one for a fee! Coach them, but for a fee. Do what you’re obligated to do, nothing more. Once they start paying for your services and support, some of them will improve. Others are going to remain at the bottom even if you stand on your head and pile BBs on your nose!
Tell them what they can do for themselves. And they have some choices! One, do nothing and you’ll leave them alone (until it’s time to renew them). If they’re happy at the bottom of the stack, you’re happy, too. After all, someone will always be at the bottom of the stack. . . . Not happy at the bottom of the stack? Then: “Here’s what you can do, Ms. Franchisee.” List support and training opportunities that you make available, some of which may be expressly for under-performers — for example, rather than spending money for field visits, you’ll conduct a training webinar for multiple franchisees. The point you make is that you want to help them and that it’s possible for every franchisee to improve in your network, if they want to. “Show us what you’re willing to do for yourself, and we’re here to help you.” It’s called tough love. . . . And, by the way, when renewal comes along, emphasize the tough love. Unless you don’t mind keeping under-performers, don’t renew them. Help them transfer their franchise.

“But won’t that hurt our FDD?”

It was at about this time that someone on the webinar raised a virtual hand to ask, “But won’t that hurt our FDD?”

Oh for cryin’ out loud!

I don’t know who asked the question, but since the webinar attracted mostly operations folks, I’m guessing it was someone from a franchisor’s ops department. Someone who had heard from the franchise development team that it’s important to cater to the franchisees to keep a “clean” FDD — in other words, “We don’t want to have any more terminations in our FDD.”

Even if it means the franchisor goes broke? Or the franchisor becomes an under-performer?

Terminations are part of franchising

Color me ignorant, but I don’t agree. I’ve worked with some of the best franchise development folks in the industry and they don’t have problems overcoming FDD issues that make sense. Terminations are going to happen regardless of what you do. And some terminations are necessary. In fact, a pro-active franchisor will use terminations as a means of protecting the viability and value of the franchise network. (I guarantee you your top tier franchisees do not want you to cater to or keep under-performers).

Who wants under-performers?

As a franchisor, I didn’t. And no client of mine ever does. We all realize that franchisees are not created equal: Some will perform better than others. We also realize that the franchisor can impact the performance by recognizing the franchisee’s values-based behaviors and offering appropriate training and support. (In this regard I’ll quickly add: All franchisors are not created equal, either: Some will perform better than others).

Bottom line? Do what’s expected of you as a franchisor. Cultivate productive, profitable, satisfied franchisees. Face the facts: Not everyone in your network is cut out to be a productive, profitable, satisfied franchisee. Protect your network. Raise the bar by improving the performance of your under-performers. Terminations serve a purpose. And the FDD exists because it’s the law; smart franchisors know how to use it as a selling tool.

Coming Soon

How To Capture & Keep The Right Franchisees! A webinar for franchisors and franchise developers. It’s more important than ever to cultivate your franchise network, but many franchisors are struggling, and will continue to struggle, because they captured the wrong franchisees. The sooner you know what makes a right franchisee, and then capture only those kinds of franchisees, the sooner you can put your franchise company on the road to recovery and into the franchise limelight. Want to know how you can register for this webinar? Click here and ask via email!

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