Franchise governance: The best plan is to have one
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Some of the challenges franchisors have to deal with are ones that receive plenty of scrutiny—such as how to select franchisees, how to structure a franchise, ways to manage the relationship, branding issues, or finance. There are other concerns, though, that franchise organizations are left to discover and navigate on their own.
You could categorize many of these issues under the broad heading of franchise system governance. How do all the measurements generated by a franchise relationship influence the decisions that shape that relationship? While a franchisor is busy monitoring its franchisees’ compliance, how is it holding itself to its own compliance and accountability obligations—the ones it owes to the franchisees as well as to stakeholders and regulators? And what sources of data may be falling through the cracks?
In one view, franchise system governance is just a circle you draw around other well-known subtopics, such as site selection, recruitment, service agreements, and so forth. But it is also a thing unto itself—a higher-order requirement to pay attention to the rhythm of the relationship and make sure all the parts of a franchise organization are working in balance.
Calling attention to the big-picture aspects of running a franchise may seem obvious, but it can be a useful reminder in an environment that provides such a rich stream of details and distractions. When one operator group is falling short of numbers, another is involved in a lawsuit, and revenue and expense fluctuations are throwing off the calculus of business success, it can be easy to lose sight of foundational questions: How are we driving profitable growth for the franchisor organization and making it possible for the franchisees to do the same? Why did we configure the franchise system the way we did, and is it delivering the benefits we set out to achieve? And what plot twists will come around the corner tomorrow?
To help keep the big picture in line while you chase all the smaller ones, it pays to aggregate data. You have so many metrics and indicators, each of them designed to tell a small story in sharp detail. But they often remain separate. When you stand back and look at the whole, does your organization look the way you thought it would? Can you see it leaning—or growing—or slipping—one direction or another?
The broad view also extends beyond your own organization. Peer organizations are dealing with the same issues; and with the right tools, you can benchmark your risk profile and risk management outcomes against theirs. That intelligence can help guide the decisions that shape and adjust your franchise system governance model.
There are two important things to remember when it comes to data, intelligence, and how you apply them. One is that demanding and using a lot of reported information is not an exercise in mistrust. Rather, the transparency data brings may help enhance the franchisor/franchisee relationship. Just as good fences make good neighbors, a detailed view of reality can make good business partners.
The other is that you can almost never run out of ways to learn more. Data sources are all around you, and the means to listen in are growing stronger every day. Every customer at every counter is a health inspector. Every person who visits a location is a customer experience champion. They aren’t bashful, and if you know how to sort through the outliers at either end of the bell curve, the great mass of them are offering you free market intelligence.
One way you reap that intelligence, of course, is online. That’s where people share their impressions of your brand—which means the online environment is where your brand is defined as much as it is in one of your locations.
Governing a franchise system is a more strategic activity than managing it. If you don’t step back and survey the whole field, there’s a lot you can miss. It may sound cliché to talk about a “big-picture view,” but in the franchise world, it’s a necessity, not a luxury.
Kevin Lane - Principal, Franchise Advisory Services Leader
Deloitte & Touche LLP
With over 20 years of professional experience in advisory services, Kevin has served in a variety of leadership and technical roles over the course of his career. In recent years, he completed an overseas assignment in South America, repatriating to the United States in 2013 to the Dallas/Fort Worth area. Kevin now serves a variety of Consumer & Industrial Products (C&IP) clients throughout the U.S. in meeting their risk and compliance objectives. His areas of focus include compliance, third-party risk, and operations. In addition to leading advisory teams for select C&IP accounts, Kevin serves as Deloitte Advisory’s leader for its Franchisor Advisory Services initiative. Learn more about Kevin and connect with him here