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Unlocking the Mystery of the Franchise E-Factor

By Greg Nathan
The 6 Stages of the Franchise E-Factor
1. Glee
Nervousness
Excitement
Optimism
2. Fee
Questioning
Commercially minded
Skeptical
3. Me
Self-centered
Proud
Frustrated
4. Free
Cynicism
Constrained
Combative
5. See
Inquisitive
Open minded
Empathic
6. We
Cooperative
Assertive
Forward thinking
If you want to become a better manager of the people issues in
business, and in life, you will find it useful to have a framework for
understanding why people do the things they do.
Having a framework enables you to be more objective in how you
respond to common interpersonal challenges such as heated
disagreements or managing people who are disengaged.
The Franchise E-Factor is a model I developed to help franchisees and
franchisors better understand the psychology of their relationship. In
particular, the model explains why their dealings become strained and
how both parties might reduce this tension to a manageable level. It is
also a useful reminder for franchisor executives about how franchisee
needs and attitudes change over time and that the franchise
relationship is always a work in progress needing constant
maintenance.

Our research at the Franchise Relationships Institute has empirically


shown that franchisee satisfaction drops dramatically during the first
three years of the franchise relationship and then gradually increases,
but never to the original level.
Here is a chart of what this trend looks like, based on franchisee
satisfaction surveys with 7,400 franchisees.
The Six Stages
This satisfaction curve can be roughly divided into the following six
stages.
Glee
Satisfaction is high in the initial stages of the relationship. While the
franchisee is somewhat nervous about their new venture they are also
excited and optimistic about the future.
Fee
Satisfaction starts to drop as the franchisee becomes sensitive and
concerned about the value of the fees being paid to their franchisor or
the costs of services or products received.
Me
The franchisee concludes that their success is due mainly to their own
effort and plays down the contribution of the franchise system. Or, if
they are struggling, they play down their own deficiencies.
Free
This is where the relationship hits its lowest ebb. It is characterized by
the franchisees need to demonstrate his or her competence and
assert their independence, thus testing the franchise systems
boundaries.
See
If the relationship is well managed, a breakthrough occurs. Through
frank and open discussion the franchisee and franchisor better
understand and respect each others points of view. Satisfaction starts
to rise again.
We
This stage is where the franchisee recognizes that success and
satisfaction come more easily from working with, rather than against,
their franchisor. The goal of all franchisors should be to facilitate their
franchisees through to this more collaborative stage.
The Zone of Tolerance
Franchisors can also prevent their franchisees from becoming too
dissatisfied by feeding what I call the zone of tolerance. This is like a
buffer zone that enables franchisees to absorb a certain amount of
disappointment and frustration in their relationship with their
franchisor.

The zone of tolerance is strengthened by franchisor behaviours that


build trust and commitment such as active listening, reliability,
transparency and consultation.
Where there is a healthy franchising culture, a franchisee will generally
be able to work their way through the Franchise E-Factor stages. But
not all franchisees are able to manage this. Sometimes they are
unwilling or unable to come to a resolution regarding how they feel
about their franchisor or their business. In this case, they may decide
to sell the business or leave the relationship.
If an unhappy franchisee decides to stay in the business, they will
inevitably become emotionally disengaged from the franchise
relationship. Their attitude is typically just leave me alone. In such a
case, they may stop attending meetings and not return phone calls.
Franchisors need a lot of patience and empathy in dealing with
someone stuck in this frame of mind. It may be helpful to have a third
party facilitate a discussion to help open up communication and move
the person out of their frustrations.
Franchisors behaving badly
Franchisors can also create difficulties for their franchisees and, in
effect, hold them prisoner in the Me and Free stages. While this
may be through an innocent misunderstanding or a breakdown in
communication, franchisors can also behave badly through a lack of
ethics, competence or empathy. For instance they may show a lack of
integrity in their dealings, consistently fail to deliver on their
commitments, or show a lack of respect or care in their dealings.
These sorts of behaviours can lead to a serious breakdown in trust and
commitment and leave a franchisee feeling manipulated and betrayed.
We all have an inbuilt sense of justice and can experience a sense of
outrage if we believe someone has acted unfairly toward us. Interviews
with many franchisees over the years who have been in disputes with
their franchisors highlight how their hostile feelings are driven by deep
a sense of unfairness and betrayal. Here are some typical comments:
I was a fool to think they care about me all they care about is
meeting their own profit targets.
I thought they knew what they were doing but it turns out they are a
bunch of idiots!

I am so angry that they never consulted us they just dont seem to


respect the fact that this is our money they are forcing us to spend.
And here is my favourite quote taken from a franchisee three years
into the franchise relationship:
When I started out in this business I was treated like royalty now I
am treated like royalties.
A franchisee in this state of mind will seek out sympathetic people who
will listen to their complaints. This may be a fellow franchisee, a family
member or an attorney. Chances are they will not take the initiative to
talk with the franchisor as they may feel this will be a waste of time or
that it is the franchisors job to come and talk to them.
At this point the relationship can be mended but it will usually take
some serious listening, perhaps with an apology if this is warranted. A
facilitated discussion or formal mediation may be needed.
Of course a franchisor may feel they have not done anything wrong
and be reluctant to engage in this type of dialogue. Or their attorney
may advise them to take a hard line position against the franchisee.
We have seldom found this approach to be productive in the long run
as it just breeds further resentment on both sides who are forced to
mentally justify their respective positions. In psychological terms, this
is called the self-serving bias.
The power of listening
The answer to most relationship tensions in life, no matter how
complex the issues may seem, is often as simple as people really
listening to each other with a genuine sense of respect. We have found
that this is the key to getting real breakthroughs, such as when a
franchisee moves from the Free to the See stage.
The key lesson from the Franchise E-Factor is this relationships are
always works-in-progress. While you may feel you have a great, or a
terrible, relationship with your franchisees at a particular point in time,
this is likely to change. Even at the We stage, relationships will from
time to time become strained.
The following story is a reminder that, whether we find ourselves riding
high on success and the approbation of others, or in the midst of
criticism, chaos and confusion, all things change.
The King and the Ring
A long time ago there was a King who suffered wild swings of mood.
One day he would be deep in despair while at other times he would
experience great exhilaration. These moods were having a

destabilizing effect on his kingdom and causing great concern to his


court officials. Despite the search for doctors and healers who might
help the King, no one could come up with a solution.One day an old
sage was passing through the city and was told of the kings condition.
The old man sat down with the King and presented him with a ring.
When you next feel the world is a miserable, sorry place, said the
old sage, look carefully at this ring. When you feel that things are
wonderful and nothing can go wrong, also look carefully at the ring.
From that day the King became much more balanced, managing to
prevent himself from slipping back again into his highs and lows.
And the secret to the Kings improved condition? On the ring was an
inscription which read This too will pass.
10 Tips for Managing the Franchise E-Factor
Manage ___________________ during franchise sales process. Overpromising
and under-delivering is a sure way to create unhappy franchisees.
Ensure your
franchise sales people do not unintentionally promise what you cannot
deliver.
Dont assume ________________ in relationship. The franchise
relationship is
dynamic. Just because a franchisee is or is not satisfied today, does not
mean
they wont feel differently in the future.
Dont get _________________ to feedback. Listen to questions with an
open
mind. Treat franchisees with respect, listen to their views and deal with
differences maturely.
Dont _______________ to franchisee demands. Do not mindlessly throw
extra
services if franchisees become more demanding about the support
they want.
Remain clear on ______________________________. Keep the relationship
at
a professional level and avoid forming friendships with franchisees.
Keep people ____________________. Take time to understand what
franchisees do well and offer them new challenges.
Accept some _______________ as inevitable. The dynamics of the
franchise
relationship mean that people are going to get frustrated and
disappointed from
time to time.
Provide constructive outlets for ______________________. Respond to

questions, comments or accusations in an open and direct manner.


Where
possible give facts and specifics. List issues and discuss these
systematically.
Show commitment to franchisee ______________________. Remind
franchisees at every opportunity of your companys commitment to
their longterm
profitability. Ensure support services focus on this goal.
Learn how to manage difficult ________________________. Be willing to
state
whats really happening in the relationship. Show empathy and have
the
commitment to work toward a resolution.
About the writer
Greg Nathan is a psychologist and Founder of the Franchise
Relationships Institute, a research company committed to helping
franchisors and franchisees create profitable partnerships. He is also
author of several best selling books such as The Franchise E-Factor and
The Franchisors Guide to Effective Field Visits, available at
www.franchiserelationships.com. Greg can be reached at
gregnathan@franchiserelationships.com

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