How to Save a Faltering Franchisee

After five years of consistent growth, Kathleen Kuhn knew one of her franchisees was in trouble when his numbers started going down. Kuhn, CEO of HouseMaster, a home inspection services operator and franchisor, reached out to the franchisee hoping to find out what sparked the decline.

“We asked the franchisee, ‘how open are you to getting help and to changing how you operate?’” said Kuhn.

The franchisee didn’t want to throw in the towel, so the team at HouseMaster strategized an operations turnaround. “We reviewed the business, from phone handling to follow-up marketing, quality of service delivery, uniform inspections, even how the franchisee was spending his free time,” recalled Kuhn. “We found out he wasn’t doing some of the basics, for example his wife was handling the office phone and he did not have strong field marketing presence. We pulled him back and started from scratch. ”

Keeping franchisees healthy not only ensures a consistent revenue stream for a franchisor, but it prevents the company from gaining a black eye in the community.

“The last thing I want my clients to do is close down or terminate a franchise,” said franchise attorney Harold Kestenbaum."Franchisors have to disclose when a franchise fails. They send out default notices and then they are stuck with a dark location.”

This unfortunate situation can be prevented with proper monitoring and quick action. Edward Kushell, founder of The Franchise Consulting Group, recommends franchisors require franchisees submit monthly profit and loss statements.

“Just because a franchisee is achieving certain revenue levels, it doesn’t mean that the process is right. When you get to look at P&L statements, you find out what they are doing right and what they are doing wrong. An operations person will know right away if labor costs or food costs are too high or if the franchisee is not spending enough on marketing,” said Kushell.

Containing the problem before it is too late can also be achieved by setting up the right communication strategy. Rick Bisio, author of The Educated Franchisee, encourages franchisees to reach out to the home office for help. “You need to look in the mirror and eat humble pie. You have to be willing to ask for help and be willing to get advice,” said Bisio.

However, it should not be solely up to the franchisee to ask for help.

“It’s a bad philosophy to institute a ‘if you have a problem, call us’ policy,” advised Kushell. He recommended franchisors be proactive by having field managers visit franchisees and schedule conference call on a regular basis. “The relationship is an ongoing process,” said Kushell, “You don’t train someone in five visits.”

At HouseMaster, Kuhn instituted weekly reports that gives a quick snapshot of how veteran franchisees are doing in comparison to newer franchisees. “If a franchisee is starting out and they are not hitting average performance levels, we have them fill out a marketing workbook that highlights what they have and haven’t done and reviews the franchisees’ skill sets,” said Kuhn.

The franchisor also needs to do his or her homework when a franchisee starts to falter. “Do comparison work of other franchisees in similar locations and at quarterly meetings hear what other franchisees have to say” advised Kushell. “It’s important for the franchisor to evaluate what he or she may be doing wrong because it’s not always the fault of the franchisee.”