How to Improve Franchisee Relationships

With franchisee numbers reaching into the thousands for large chains, it’s all too easy to develop strained relationships between franchisors and franchisees.

You don’t have to look far to see the signs of tension. Legal disputes, including lawsuits filed by and on behalf of franchisees against franchisors, aren’t uncommon; just last year, for example, Jack in the Box was sued by its franchisee association after months of deteriorating relations between the group and its corporate ownership, with the franchisee association even calling for the chain’s CEO to step down.

It’s important to build up trust in franchisor-franchisee relationships, especially for chains in the process of adding more franchisee-run units. Improving and maintaining those relationships is crucial for a strong brand, and operators looking to bolster the connection and communication with their franchisees can get the ball rolling by following a few guidelines.

Don Fox, CEO of Firehouse Subs, says his company made the mistake of jumping into franchising too early, just one year after the brand was founded in 1994. “We didn’t have any infrastructure or operating systems established,” he says. “No manuals, nothing that you would traditionally have.”

The company wouldn’t truly begin signing franchise agreements again—outside of a select few throughout the late 1990s—until 2001, when the company stepped into the process with a defined strategy. Now, Firehouse has more than 1,100 locations. Only 37 of those stores are company-owned, and the rest are franchised units.

In order to maintain relationships with this wide network of franchisees, Fox says, it’s important to set up a carefully defined communication process. There’s a weekly update about brand changes that is sent out first to area representatives for Firehouse and then down to the franchisees, he says. Corporate leadership also maintains a blog to keep information flowing, and franchisees can meet in person at a two-day conference held by the company each year. Franchisees are also required to do their part. “At the same time, we expect the same discipline from them, with communication flowing up,” Fox says.

The most important step in maintaining good relations, though, was the formation of a franchise association in 2005, Fox says. It’s evolved to become a body with 13 representatives elected from all franchisee regions and one appointee from Fox. The organization spurs on different developments within the company, such as a system-wide marketing fund to which all franchisees contribute.

“They … create whatever subcommittees they want on any topics relating to the business, and we would treat those as consulting bodies on those things—we have an operations subcommittee, marketing, (etc.),” Fox says. “That provides a great source of feedback.”

Fox says that good communication, when balanced with fairness, makes a good recipe for franchisor-franchisee relations. He says that’s one of the reasons why, to date, Firehouse has not been sued by any of its franchisees.

“If they’re not happy … we need them to raise their hands. Call us, call your franchise business leaders, email us, send us a carrier pigeon.” — Tropical Smoothie CEO Charles Watson.

Bonchon, a Korean fried chicken concept with 94 locations in the U.S., has grown its collection of franchisee-run stores quickly in recent years. Despite this growth, Bonchon does not have a lot of company-wide systems in place that typically help foster expansion, CEO Flynn Dekker says.

“The business has grown to the size it is without … supply chain roll-outs to the majority of the chain, no technology for online ordering, no training department, no QA department,” he says.

He attributes part of Bonchon’s franchising success to the flexibility that corporate leadership allows franchisees with running their stores, and also to open lines of communication.

The brand is looking to build 500 restaurants domestically in the next five to seven years. To do this, Dekker says Bonchon will continue to create more infrastructure to take as much guesswork out of it as possible for franchisees. That’s going to mean putting in a supply chain for consistent products from restaurant to restaurant, building a new technology backbone that makes room for efficient online ordering, overhauling the company’s branding strategy, and providing more training for new franchisees, Dekker says.

It’s nothing new and innovative, considering these are things that most major quick-service brands with large numbers of franchisees do, but Dekker says Bonchon needs to catch up organizationally after years of organic growth.

On the other side of the spectrum, another growing fast casual, Tropical Smoothie Cafe, has solidified many of those systems to prep for new franchised units and provide a uniform experience from store to store. CEO Charles Watson says the focus for the cafe—which has 800 units, with 799 franchised—is ensuring profitability of the brand’s franchisees and communicating clearly about changes coming down the pipeline. To that end, corporate leadership holds a biweekly webinar to discuss new systems or products, and also keeps up a website where franchisees can get information 24/7. The website also includes a “Chat with Charles,” where franchisees can ask questions to Watson directly. “I get multiple emails a week to that email address that I handle personally,” he says.

Similar to Firehouse, there’s a Tropical Smoothie Cafe franchisee council that assembles a mixed group of single-unit franchisees, multiunit franchisees, and area developers. “It allows them to help us guide the direction of how we’re supporting them,” Watson says.

One commonality unites Firehouse, Tropical Smoothie Cafe, and Bonchon: a desire for open lines of communication with franchisees. “If they’re not happy … we need them to raise their hands,” Watson says. “Call us, call your franchise business leaders, email us, send us a carrier pigeon.”