International franchising typically revolves around a Franchisor granting a Master Licensee in other countries to grow the brand. Both parties (Franchisor and Master Licensee) enter into a business relationship full of expectations and aspirations for mutual benefit.
However all is not well. In the International Performance Survey conducted by Franchise Mind in 2013, 50% of Master Licensees said they would not acquire the master license again from the same Franchisor. Half the Franchisors said that the performance of their Master Licensees was just ‘average’.
What is the essence of the disconnect in the relationship between the Franchisor and the Master Licensee that causes this dissatisfaction?
Master Licensees priorities
Based on the International Performance Survey, Master Licensees believe their performance would improve if they received the following support in priority from the Franchisor:
- Strategies for operational improvement for franchise outlets
- Coaching for relationship management with franchisees
- Mentoring, coaching and training in how to become a Master Licensee
- Development of new products and services specific to the market
- Strategy and support for franchisee recruitment
- Strategies for operationalizing customer service
While Franchisors prioritized the following five challenges with their Master Licensees:
- Substandard recruitment of franchisees
- Issues with supply chain
- Substandard to average performance of franchisees under the Master Licensee
- Lack of on-going training of franchisees
- Inadequate initial training of franchisees
With the list of differing priorities for the success of the business and the ensuing relationship, it is clear that the Franchisor and Master Licensee are seeing success of their business from two completely different angles, resulting in the big disconnect.
- Disconnect on what it takes to be successful. To franchisors, recruitment is most important for the success of the business, while Master Licensees specify operational improvements as most important. This disconnect sets the tone for their relationship and leads to 50% of Master Licensees saying they would ‘not do this again’. The responsibility to create a shared vision of balancing recruitment with operational support for the brand must be addressed by the Franchisor.
- Disconnect on on-going support. 50% of the Master Licensees say that they are ‘not satisfied’ with ongoing support. Master Licensees want training, mentoring and coaching on the business of being Master Licensees. Franchisors, on the other hand do not see these items as being a priority. As such the entire relationship will be seen through the prism of “I am not receiving the support I require in order to succeed.”
- Disconnect on performance of franchisees. 59% of franchisors say that franchisees operating under their Master Licensees are ‘average’ yet aside from identifying initial and ongoing training of franchisees, no other items are mentioned as challenges that would solve this issue. While further examination is required to understand why training is a challenge, clues for improving the performance of franchisees may be available from what Master Licensees have listed as challenges: Operational improvement strategy, new products appropriate to the market and customer service.
- Disconnect on operational focus to grow brand. Master Licensees believe that if operational issues are addressed first, then the issue of recruiting franchisees will become easier. Franchisors are focused on recruitment of franchisees as an unduly weighted measure of success. Master Licensees are seen simply as a vehicle for recruiting franchisees.
Most Franchisors will agree that the game of franchising is a game of patience, persistence, hard work, a long-term view and doing many small things ‘right’. When this game moves to the international arena, the same elements are magnified multi-fold.
What gets forgotten in this race for increasing outlets is the development of the Master Licensee business which includes training, supporting, coaching and mentoring Master Licensees to their fullest potential.
As such, success in international franchising can only be achieved by addressing the big disconnect between the Franchisor and Master Licensee. It is a problem that can be solved if there is an organizational commitment of time, dedicated resources and resolve on the part of the Franchisor. In essence it is a commitment to build a successful Franchisor-Master Licensee model.