Franchising

Why franchisees struggle with change

Jason Gehrke /

A common gripe among franchisors is the difficulty in getting franchisees to embrace change.

Change in a franchise network can be big (such as a complete rebranding or the introduction of a new IT system) or small (such as minor change to a common procedure to increase time efficiency or customer satisfaction).

Of course change is necessary for the survival of any business, and a franchise is no different.

Yet introducing change into a network is one of the most difficult challenges for franchisors, and often results in networks with surprisingly high levels of operational diversity among franchisees’ businesses where complete uniformity might otherwise be expected.

Surprisingly, some franchise networks are even slower at implementing change than non-franchised chains of similar or even greater size.

So why is change so difficult for franchisors? Here are five reasons to consider:

 

1. The change itself

 

The nature of the change sought by the franchisor might itself be the reason why franchisees are reluctant to embrace it.

If the change is perceived as too radical, or too different from the way that things are already done, the collective capacity of the network to bridge the gap between the “old” versus the “new” just might not be enough to get there.

If the vision for the change is pitched too far above the current reality of the network, then franchisees will fail to see the link or the real need for the proposed change.

In other words, if franchisees can’t understand the vision and accept the rationale for the change, then it’s unlikely they’ll want to implement it.

 

2. Inertia

 

A simple reason for franchisees failing to embrace change is often the resounding lack of willingness to do so.

Change is seen as an optional inconvenience, rather than necessary for long-term survival.

There is one word guaranteed to clear any room in seconds and overcome inertia: “Fire!” Sometimes people need to smell the smoke or see the fire before they respond, and by then it can be too late.

Franchisees resist change because they are comfortable where they’re at and refuse to believe there’s a fire until the flames are practically engulfing them.

Another reason for inertia stems from the franchisee’s acquisition of the franchise in the first place. Very few franchisees have ever owned a franchise before. Their nearest frames of reference to buying a franchise are other big-ticket acquisitions, such as buying a car or buying a house.

Generally when buying a car or a house, the buyer can make whatever improvements or renovations they want with their new acquisition in whatever timeframe it pleases them to do so.

Only in rare circumstances are car or home owners told by an external party (such as an inspector of roadworthiness or a local government authority) that they must make changes to their prized possession, so from their point of view, why should franchisees implement changes to their businesses any quicker than it suits them?

Another reason for franchisee inertia related to their purchase of the franchise is the mental snapshot the franchisee takes of the business at the moment of joining the network. To the franchisee, the business freezes in time as at their commencement date, and changes imposed on them afterwards are somehow seen as eroding that mental photograph.

This sentiment is best expressed in the exasperation of franchisees who oppose change on the basis that “This isn’t what I signed up for”.

 

3. Cost versus benefits

 

Even those franchisees who understand the need for change may still baulk at actually implementing it because the costs are perceived to outweigh the benefits.

Unfortunately this feeling is all too common among franchisees faced with big-ticket costs attached to changes requested or demanded by the franchisor, particularly those to do with rebranding or store refurbishments which will cost franchisees tens or even hundreds of thousands of dollars, with no guarantee that the business will perform any better once the changes are implemented.

Franchisees who are compelled to spend money to implement change are justifiably concerned that the cost will outweigh any benefits. Clause 30 of the new Franchising Code of Conduct deals with capital expenditure relating to change by now requiring franchisors to provide franchisees with a written statement outlining the rationale for the change, the amount of capital required, the outcomes and benefits of the change, and the expected risks associated with making the investment.

This obligation under the Franchising Code has only existed since 1 January this year, so it is possibly still too soon to determine how effective it has been in addressing franchisee concerns over costly changes.

Some franchisors overcome franchisee fears about the costs of change by partially or fully funding the change themselves. Not surprisingly, this overcomes much of the resistance to change because it reduces or eliminates risk to the franchisee, enhances the value proposition of the change among franchisees, and accelerates deployment of the change across the network.

 

4. Operational issues

 

Another barrier to the introduction of change is the perceived disruption to the franchisee’s business caused by implementing the change. The disruption may be perceived as so severe, that the short-term pain to the franchisee and their business outweighs any long-term benefits.

There may also be limited windows of opportunity in which a franchisee can implement the change, such as for businesses with highly seasonal demand.

If, for reasons beyond the franchisee’s control (such as the availability of vendors, etc), the change cannot be introduced during the franchisee’s best window of opportunity, the change may be forced to wait longer than the franchisor anticipates (or is prepared to accept) until the franchisee can next consider its implementation.

 

5. Culture

 

Finally, the culture of the organisation may be one in which change is viewed with fear and suspicion due to past changes that have failed to deliver their promised benefits.

Likewise, franchisees who freezeframe their businesses at the point of joining the network (see Inertia above) are hardly predisposed to change because the topic of change rarely arises during the recruitment process when it arguably needs to be discussed the most.

The recruitment phase is when the expectations of franchisees are most impressionable. If it is communicated clearly and repeatedly to franchise candidates during the recruitment phase that survival and success in business relies on the capacity to change, regardless of the business model or franchise brand, then it is more likely that as franchisees in future these candidates will better understand and adapt to the required change.

Franchise networks that have a culture of embracing change, and which demonstrate progress and change is an evolutionary requirement for profitable businesses to survive, will be more likely to have franchisees who accept change than networks for whom change and innovation is ad hoc and intermittent.

 

Conclusion

 

When franchisors can foster change-friendly cultures, overcome operational and cost issues in relation to change, provide benefits from change that are tangible to franchisees to overcome franchisee inertia, and can successfully demonstrate the path from “old” to “new”, then implementing change programs will become much easier for franchisors, and improve their competitive advantage against company-owned chains.

Jason Gehrke is the director of the Franchise Advisory Centre and has been involved in franchising for more than 20 years at franchisee, franchisor and advisor level.

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Jason Gehrke

Jason Gehrke is the director of the Franchise Advisory Centre and has been involved in franchising for 20 years at franchisee, franchisor and advisor level.

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