Angry franchisees

The one-year anniversary of annus horribilis, brought on by COVID-19, seems like a good time to reflect on the upheaval in franchisee-franchisor relationships. From a year’s worth of reporting, here are four common disputes franchisees had with their franchisors, along with ways to avoid them.

1. Say the phrase, “We’re all in this together.” The ubiquitous phrase started out as a well-meaning sentiment, uttered by nearly every franchise executive we interviewed in those first few months of lockdowns last year. The problem came when it just wasn’t true. 

As franchise execs took to their home offices and Zoom calls, for the most part maintaining their livelihoods, franchisees had to tough it out in their stores or restaurants or gyms in a grim battle for survival. 

"I think franchisees out there are generally unsatisfied with what they're getting," said Kristy Miamen, an attorney with Dady & Gardner, in an interview last April, adding it depends on the industry, and it depends upon the resources of the franchisor.

"Franchisees are most disappointed with franchisors that have more resources to give relief, and they're not. The big, big systems might be giving royalty deferrals vs. relief," for example, with the only difference between packages being the time franchisees have to pay the deferrals back. "Overall, franchisees are feeling that more can be done in certain systems."

She said Restaurant Brands International, the parent of Burger King, Popeyes and Tim Hortons, was an exception to the sea of sameness she has seen in relief offers from large systems. "They're doing some really creative stuff," she said, citing an announcement March 30, 2020, that RBI was advancing cash payments and rebates totaling $70 million to North American restaurant owners.

A few other standout franchisors, according to my interviews: Batteries Plus Bulbs for the CEO’s daily “war rooms,” sharing real time information about what was selling and where and getting those goods to the right place. Tune Up-The Manly Salon’s CEO for filing a lawsuit challenging the constitutionality of shutdown rules in Texas. Authority Brands CEO for daily conference calls including how to apply for Paycheck Protection Program loans. “A lot of our franchisees actually got the money before it ran out,” said an American Swimming Pool Co. franchisee about the latter.

Bold, direct, practical and cash-focused actions won praise. Cookie-cutter sentiments and meaningless actions (such as deferring royalty payments when the stores were closed, hence not generating sales on which royalties are based) did not. 

2. Ignore the K.I.S.S. rule. Keep It Simple Stupid was never more important than during the worst year ever. Yet some franchisors rolled out elaborate cleaning protocols that they never changed even as more was learned about COVID-19 (such as its relatively low risk of transmitting via surfaces.) 

Operators complained about McDonald’s 59-page guide to the pandemic as too expensive and overly strict, for one example. The Wynn hotel in Las Vegas had a protocol more than 100 pages long, for another, and there were many others. As Subway franchisee Keith Miller inelegantly put it this March about the franchisor’s complicated protocols: “Somebody gets a pimple on their ass and five people have to quarantine.”

Other franchisors junked up their offerings during COVID-19, such as Edible Brands and its rollout of nine total sub-categories in the last year, including an in-store BakeShop, FruitFlowers, an edible ink line called Printible, and even an Edible Music platform. Edible told Franchise Times those offerings were winners for top-line revenue and necessary for transforming the brand; franchisees complained about the complexity they added in the stores.

Burgerim franchisee Joey McCullough, for another example, said when the brand started, “they had a simple menu that was sustainable, one, two or three small burgers,” and then they added more than a dozen proteins and endless toppings. “One of the things that hurts the brand is the execution, because when you get all these one-offs, you end up with 20-, 30-minute waits.” Burgerim has bigger problems, of course, with its franchise system in collapse, but the menu creep was an early item that vexed franchisees.

On the other hand, franchisors that slimmed down their space requirements, edited their menus, added drive-thru only models and the like scored points with franchisees, with Guthrie’s chicken-fingers-only restaurant standing as one example. “We’re able to move those drive-thrus so quickly,” because of the limited menu, said Randy Washburn, franchisee of two Guthrie’s stores in Memphis. “That’s one of the reasons why we’ve been so successful.” 

Up next: How to Anger Franchisees (Or Not) In a Pandemic—Part 2. Hide in Your Office; Focus on Sales Not Profits.

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