Greg Nathan, founder of the Franchise Relationships Institute, diagnoses the symptoms of a rewarding franchise relationship.
Interview by Kieran McLoone, deputy editor for Global Franchise
Psychology isn’t just related to franchising – it is franchising. This is why we wanted to speak with Greg Nathan, founder of the Franchise Relationships Institute (FRI) and a franchise relations strategist, about exactly why successful and mutually understood franchise relationships can lead to immeasurable returns.
How is psychology linked to franchising?
GN: The reason why I decided to open a business specializing in the franchise relationship, is because of the amount of psychology involved to succeed as a franchisor. In fact, at psychology conferences, my colleagues are amazed when I explain to them how much of my psychology training I draw on in my work with our clients.
For instance, we have conducted psychometric tests to measure the suitability of franchisees to run a business in a franchising culture; we have developed instruments to measure franchisee satisfaction in the areas that matter; we facilitate group meetings where there has been tension in the relationships, or to improve the level of collaboration within franchise networks.
There is also a lot of psychology in running a successful franchise, as you need to keep yourself mentally resilient, build a supportive network around you, and maintain a growth mindset. I can honestly say I love the work we do, particularly the research projects that we are regularly initiating to understand what drives success and satisfaction from both the franchisee and franchisor perspective.
How has your role as a franchise relations strategist evolved since you founded FRI 30 years ago?
GN: When I started the Franchise Relationships Institute, I was mainly focusing on improving communication within franchise networks. I also wanted to understand the cause of the tension that seems to be inherent within the franchise relationship.
It was from my initial research into this that I developed the model known as the Franchise E-Factor, which predicts that franchisees initially start out extremely happy with their franchisor but this soon gives way to a sense of frustration and resentment over the fees they are paying and the nature of the support they are receiving.
If the franchisor is able to sit with the franchisee at this point and have a respectful, empathetic conversation where there is an acknowledgment of any areas needing improvement, we find the relationship improves to where there is a level of mutual respect and tolerance. This is very similar to what happens in most marriages or committed personal relationships.
Our research then moved into looking into the attributes that predict success in franchisees and from this we were able to identify 24 specific areas that impact significantly on a franchisees’ future success and satisfaction.
Some of these relate to personal qualities such as vitality, proactivity, optimism, and personal health. Other attributes are more related to business acumen, financial literacy, and comfort with technology, and other attributes relate more to relationship competence and the ability to create a positive culture where teams consistently deliver a fantastic customer experience.
What are some common misconceptions that franchisors or franchisees have about the relationship?
GN: Franchisor executives who are keen to grow their network often treat a franchise like it is a product to be sold. This mindset is very damaging to a franchise network as it fails to recognize that you are entering into a long- term business relationship, which lasts on average for seven years – longer than most marriages.
It’s not a matter of signing someone up and moving onto the next prospect. You now have this person as part of your business family for the next seven years. Any exaggerations or expectations you have set that can’t be met are going to create issues down the track.
From the franchisee perspective, people often think the business system and the brand is going to do all the work and create a successful business for them. This is a naïve and dangerous belief.
All successful franchisees work hard and take full responsibility for looking after their customers and driving the growth of their businesses. The franchisor can’t do that for them. What the franchisor can do is provide great tools and systems to improve efficiency, a great brand to give you a competitive advantage, and a culture where you can collaborate and benefit from sharing ideas with others.
What possibly overlooked aspects of the relationship need to be prioritized for growth?
GN: Franchisor teams need to put a lot more effort into listening to franchisees and consulting with them before new initiatives are released. This will not only produce better buy-in, but it will also provide valuable information to make sure the initiative is relevant and can be implemented effectively.
Franchisors need to also put more effort into educating their franchisees on their desired brand reputation. Franchisees often confuse the brand with the logo and don’t understand that it is the customer experience they deliver that creates brand value and that this needs to be consistent so that everyone’s reputation is protected.
Finally, I would say that the franchisor always needs to adjust their support to suit the needs of franchisees as they travel through their business journey. A franchisee three months in needs very different things from the franchisor than a franchisee that is seven years in.
Does the relationship differ across markets, or are certain psychology truths universal?
GN: While different industries and different markets of course have their idiosyncrasies, people are people the world over, and the causes of stress in the franchise relationship seem to be universal.
There are also fundamental psychological needs that all humans have, such as the need for respect, the need for belonging and connection, the need for fairness, the need for certainty and the need to have meaningful goals to work towards. The franchising model, when implemented professionally and ethically, is a highly effective way for people to collaborate and succeed together.
