Bad Apple Syndrome When one franchisee goes bad, what should a franchisor do to protect a brand's reputation?

A strong reputation is one of the major reasons to buy into a franchise system. When customers go to McDonald's, for example, they have a pretty good idea of what the fries are supposed to taste like and how clean the restaurant should be. That's what keeps customers coming back to a store, not to mention visiting units coast to coast.

If one franchisee in that chain isn't living up to customer expectations, problems arise. Though customers understand your franchise has a national presence, they may not realize each unit is individually owned and operated and could forsake the entire system because of issues with one location. In other words, one bad apple could spoil the bunch.

Mike Bidwell understands this. For nearly 20 years, Bidwell has been part of The Dwyer Group Inc., first as a franchisee for the Rainbow Int'l. and today as president for Mr. Rooter and Mr. Appliance, and COO of Dwyer Group. Franchise Zone spoke with Bidwell about the importance of protecting and maintaining a franchise's reputation throughout the system.

Within your system, what do you do to ensure consistency?
We position ourselves as a premium provider of plumbing services to the marketplace. In fact, our current theme is "No ordinary plumber." We know customers want a different experience and they're willing to pay a little more for that. We ensure customers get premium service on the first day of the franchisee's basic training, with our Front Line program. We indoctrinate franchisees on our customer service concepts, about all the emotional baggage the customer has and what it takes to differentiate themselves in the marketplace.

We believe the job is about how the customer feels when we're finished. It's not fixing the leak, because we know every one of our competitors can fix the leak. We've got to do more to really stand out in the customer's mind and, most important, earn the right to come back and take care of them again in the future. That's really what our Front Line concepts are about, and we build our system around that--from having a live person answer the phone 24 hours a day to properly communicating with the customer.

Within your own company, have you had issues with some franchisees damaging the brand name?
Yes. Like many franchise companies, everything is very structured and systematized. But despite all the things we might do to ensure a proper customer experience, when you're sending technicians into people's homes unsupervised, that's a huge variable. Our training systems become very important--we've come up with programs to help our franchisees properly train our technicians.

One of the most effective things we do is end user surveys. As simple as it is, it's probably one of the most significant initiatives we've launched in the last several years. It ensures what we're delivering in the marketplace is what we intend to deliver. Basically, every week, our franchisees report back to us on their business and attach a copy of every invoice they completed that week. We have a group that randomly pulls some of the invoices and sends them to our telemarketing department, which does quality surveys, asking customers, "Would you say you were satisfied, more than satisfied or was the service less than expected?" We ask them how they heard about us, whether they intend to use us again in the future, if they're repeat customers.

Every week, this group puts each franchisees' name into a spreadsheet along with the questions, and we look at the results. Those get e-mailed to me and our VP of operations every week. If there's a negative comment, the invoice number is recorded at the bottom along with the comment. That information is then forwarded by the VP of operations to our regional director for the franchisees, and they share the results with the franchisee. If he's got negative comments, he can actually pull that invoice and see if it's tied back to a specific tech. They can see if it's a recurring problem or just a random complaint.

If it does end up to be a problem with a tech, what procedures do you go through to correct that problem or address that issue?
The regional director would have a discussion with the franchisee and say, "You've got some issues here--can you get back to me and let me know what you found out?" It's actually an easier problem if it's a given tech, because then you can coach the tech or turn them loose. If the problem isn't tied to the tech, that's more of a problem, because that means there's some kind of systemic problem throughout that particular location. Incidentally, the franchisees are supposed to be doing a very similar survey, our 24-Hour Call Back. Within 24 hours of completing the service, the franchisee is supposed to have somebody call the customer to say, "We had somebody over there yesterday performing the service. How was it?"

Dealing with Problem Franchisees

Have you ever had a problem that required action?
Yes. From time to time, we'll see a franchisee with about 20 percent customers less than satisfied. That's a lot, in our mind. So when that happens, we specifically target that particular franchisee to see if this was an anomaly. We ask the survey department to pull surveys every week from that franchise, and if the results continue to be poor, then I've gone so far as to write a letter to the franchisee stating, "Here's what we've observed. We've been tracking it, and we want to let you know that we consider this a serious issue. We must see your service improve in this area or your franchise may be in jeopardy."

In fact, we had an incident about two or three years ago with one of our largest franchisees. I put him on notice, and, to his credit, he worked very hard in his business to rectify the situation. Recently we were commenting on how high his feedback is for "Exceeds Expectations"--it's one of the highest we've seen.

If you come across a problem franchisee, what are the steps they have to go through? Are they mentored?
Typically what happens is they're not following the system. We have various training programs they can use to indoctrinate their people, and we have to keep this stuff in front of people to remind them. Each franchisee is assigned a regional director, so it may take a trip by the regional director to that franchise location to see what they're doing--are they having weekly meetings with their technicians, what is their agenda in the training sessions, are they doing the customer satisfaction calls? Sending out the regional director is probably one of the most direct and strongest ways we can provide them with support on these issues.

Beyond that, we do have a formal mentor program. It's a select group of franchisees who are qualified not only as mentors, but for a particular strength. Mentors are tagged as being good at customer service or team building, so we can match a franchisee in need with the right person.

How long would it take before you ask a problem franchisee to leave the system?
There's no set time. Attitude is a big thing with us. One of the things we value is their desire to fix the problem. Some people are better leaders and managers than others, and some people take longer to catch on than others.

We want to know whether they are actively working on the problem. Do they seem genuinely concerned about rectifying the situation? Do they want to be a premium provider of services? Do they want to fit in with the image we want to create? If they do, then we work with somebody like that much longer than we do with somebody who seems to be indifferent and delivering poor results. Regardless of attitude, at some point we've got to see reasonable progress in reasonable time. We've got to see movement in the right direction.

Do you ever hear complaints or concerns from other franchisees that maybe somebody near them is not performing well?
We do, and that certainly is something we pay attention to. For example, we may schedule that franchisee for a field visit quicker just so we can get a look at what's going on. What neighboring franchisees say is important--sometimes it's accurate, sometimes it's not, but we do pay attention to that.

Over the last several years, we've been steadily cranking up our criteria for what we think a good franchisee is and how strict we are on compliance in our system. You'd think franchisees would be upset about that, but it's actually just the opposite--they seem to really appreciate when we become stricter in enforcing what our system needs to be.

When you were a franchisee, what were your expectations in these types of situations, if you felt other franchisees were not living up to the brand name?
It's frustrating. Franchisees can complain to the franchisor, and I may have well done that. I can recall not feeling good about franchisees who were delivering a customer experience of a lesser quality than I was, because that diminishes your equity in the brand. If they're delivering poor service in the marketplace, the customer doesn't necessarily differentiate their franchise from my franchise--they just see the franchise brand. [A bad franchisee] is going to tarnish my franchise and make my organization less valuable. The better our image is and the better job we do in the marketplace, the more valuable franchisees' business will be when they get ready to sell it some day. Ultimately, you want a sought-after brand that's regarded as kind of top notch. One of the reasons people buy a franchise is to create equity, to have something of value, so it does frustrate them when somebody is tarnishing the brand.

Preventing the Problem

What kinds of questions should prospective franchisees ask to find out how franchisors prevent other franchisees from hurting the reputation of the system?
They should ask what the franchisor does to inspect whether the franchisee is conveying the brand's promise. Every brand has something they hang their hat on, their value proposition for the customer. Find out what that is and how the franchisors ensure that's happening. Then the next question is, what if it's not happening?

What should a franchisee expect to hear about the franchisor's inspection procedures and follow-up?
That there's some kind of mechanism in place to make sure what [the franchisor] intends to deliver in the marketplace is actually happening. Without this, any number of problems can occur. People have different opinions about how things should be delivered or how business should be conducted, yet it all has to be done within the framework of whatever the brand promise is. It's OK to have a certain degree of independence--that's what franchising is about; that's why people own their own businesses--but, again, it all has to be within [certain] boundaries. If not, it's really not a franchise; it's a collection of independent businesses.

What should the franchisee expect from the franchisor in regards to maintaining consistency and the brand reputation?
The franchisee should expect systems to deliver their brand promise in a consistent manner, whether that's through national advertising, templates on how to perform business or methods for training. They should expect an outline, a framework on how business should be done to get results. And again, you have to have the feedback loop in place--if you don't, there's a disconnect somewhere and things are going to get off track.

If somebody is not willing to participate and work in the framework of the brand, will [the franchisor] take action to get them out of the system?
Sometimes it's a matter of helping that franchisee move on to something else. This may not be for them, so we help them resell. If their attitude isn't right, then sometimes you have to have the courage to terminate someone--that should always be a last resort. Sometimes that's tough to do when it's one of your top franchisees.

So sometimes you can have a relatively successful business not follow the system?
Absolutely. We've terminated some of our top volume-producing franchisees. That's a tough decision and, again, should be a last resort, but you've got to have the courage to do that. There are franchise companies out there that don't because it's a matter of economics.

What should franchisees themselves do to ensure the consistency?
We have a term that we call being "plugged in." The franchisee has to be connected, has to be plugged into the franchise system, which is the franchisor and also all the other franchisees. They have to participate in the meetings we have--the annual reunion, the regional and the national conferences. Do they network with other franchisees? If there's a mentor program, do they take advantage of it? Do they read the mailings? If there's an extranet or some other type of Internet support the franchisor provides, do they participate in that? You've got a certain responsibility to be engaged in knowing what is going on in the franchise system, because at the end of the day, the franchisor can't do it for you.