Investigating a Franchise's Culture
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Q: I'm trying to choose between a few franchisors, and while each seems to be a great opportunity, I want to find a system that not only treats its franchisees fairly, but also has a great community and corporate culture. What information can the franchisor provide me that might indicate what their company's culture is like? How else can I get this information?
A: What a great idea. Not only are you looking for a franchise system in which you can make money--you want a franchise system you can fit well with, one that has a great relationship with its franchisees and that supports your social and charitable views.
Some companies, like Ben & Jerry's, wear their political, charitable and social viewpoints not only on their sleeves, but also on every part of their public face. A portion of their profits or marketing muscle is targeted to support and advance their pet causes. Often they ask their customers, their suppliers and their franchisees to support them in these worthwhile ventures. The hope is that like-minded people will flock to the company; they'll have a heightened camaraderie because of a similar focus and can ultimately make a bigger difference. The reality is that sometimes the strategy works, and sometimes the risk of alienating a significant portion of their potential customers has unintended consequences.
Other companies are just as passionate about doing good things but, for a variety of reasons, don't place those causes or issues front and center. They still commit significant resources to those good deeds. So how do you find out if a franchisor has not only a great relationship with its franchisees, but a culture that matches your political, charitable and social views as well?
Fortunately, the information is available and usually plentiful. Even before you began to look at any brand as a potential investment opportunity, you likely have shopped at their locations, seen their ads or read local news stories about events they and their franchisees supported. Franchise systems routinely enlist their franchisees in putting their locations on the frontline of supporting causes. Similarly, franchisees bring their franchisors and other franchisees to help them support charities. You'll see point-of-sale materials such as posters, coupons and cross promotions announcing the system's support and seeking contributions and help from customers.
If franchise systems are involved in such causes, they've invested some PR effort to get the message out to the public. Doing an Internet search for news stories about the franchisor is an important component of your due diligence. If you're interested in their social views, expand your search to include not only the company but its senior executives as well. See what the news tells you about where their hearts lie.
For the more routine but just as important issue of what the relationship is between the franchisor and its franchisees, a search of the news also lets you know what's going on. Certainly, many people outside of franchising might have been surprised to learn even systems with universally great franchisor-franchisee relationships, like McDonald's, occasionally have small groups of franchisees who are unhappy about a particular issue. But most times, when the issues are systemic, the best starting point to seek news is in the franchisor's Uniform Franchise Offering Circular.
In that rather lengthy disclosure document, you'll find out how many lawsuits the franchisor is involved in with its current and former franchisees. While claims in litigation aren't necessarily a definitive statement of fact, they shouldn't be ignored. It's important to seek additional information about those matters that raise your interest. Not only can you ask the franchisor for further information, you usually can contact the franchisees involved in the lawsuit. If they're current franchisees or if they've recently left the system, their contact information is contained in the UFOC.
You should also look into the document to determine what cooperative programs the franchisor provides to its franchisees. See if the system has a franchisee advisory council that's active in helping the franchisor seek the advice of its franchisees. Ask to speak to the leaders and members of the advisory council--ask them about the franchise system's culture and problems. If there's an outside franchisee association, ask for a list of its leaders and give them a call. Always call the list of current and former franchisees contained in the UFOC. They can provide you with a host of great information to help you make your franchise decision and, if you're interested in the franchisor's social programs, they can talk to you about whether these issues are really part of the franchisor's corporate culture.
See whether the franchisor has an intranet for communications between the franchisor and the franchisees and among the franchisees. Ask to see the latest postings so you can get a sense of what the franchisees are talking about today. Ask whether the franchisor monitors the franchisee intranet or pulls comments off the board. Most franchisors don't routinely limit the free flow of comments between the franchisees by censoring their communications. If they did, the franchisees would find other ways to share thoughts. Besides, in most systems, the free flow of ideas enables those franchisees to publicly support their franchisor's actions. This is a much more practical and effective way to avoid conflicts in a franchise system.
Go to work in a franchisee's location. It's a great source of real-time information about the franchisor and a great way to find out if you like the business and system anyway.
Finally, just ask the franchisor. If they're passionate about a particular cause, they'll let you know it. They're as interested in finding franchisees who support their social and charitable causes as you are in finding a franchisor that supports yours.
A franchise investment isn't passive like the stock market. You'll probably be actively involved in your business and the franchise system in general. The public is going to view your business through the lens of the franchisor's brand. If that brand doesn't stand for the same things you support, or is tainted by news reports of conflicts in the franchise system--or if the relationship between the franchisor and its franchisees or among the franchisees is negative--no matter how much money you make, you can never feel like you truly "fit" in that system. Find a franchise system that makes money and can also make you proud.
Michael H. Seid is managing director of Michael H. Seid & Associates, a West Hartford, Connecticut- and Troy, Michigan-based management consulting firm specializing in the franchise industry. Seid co-wrote Franchising for Dummies (IDG Books) with Dave Thomas, the late founder of Wendy's, and serves on the International Franchise Association's Board of Directors.
Kay Marie Ainsley, managing director of Michael H. Seid & Associates, consults with companies on the appropriateness of franchising; assists franchisors with systems, manuals and training programs; and is a frequent speaker and author of numerous articles on franchising.