KM for franchisers

Is knowledge management applicable to an atomised business such as franchising? Not just applicable, but essential.

By Jerry Ash

You’ve cooked a long time in someone else’s commercial kitchen and you know you’re good. Your employers have told you so. Customers too. Or, you’ve been working for a healthcare provider as a home-health nurse and you know you’re good. Employers know it. So do the patients.

For years you’ve wanted to go it on your own, but you’re afraid. You don’t know how to go about it and you have very little real business experience. Someone mentions franchising. You look into it.

The franchisee’s point of view You find out that many franchisers have already done what you want to do. They’ve built their own businesses from the ground up, established a brand and provided their own management and support systems.

Now they are selling franchises to others who want to get into business but lack certain knowledge, skills and self-confidence.

You read the results of a survey that reports 95 per cent of franchises are profitable after five years, compared to only 45 per cent of other small businesses. You’re convinced.

The franchiser owns one of these ‘best practices’ and it’s for sale. It’s not risk free, but it is less risky than going it completely alone. At mid-life, you decide to invest your retirement savings in a franchise venture. Buying a franchise is one hurdle, but you find out that the franchiser doesn’t just accept anyone. The franchisees are a community that share risk. All the franchisees are responsible for living up to the reputation of the brand, and a few bad apples can spoil the barrel. But you pass the initiation, pay the fee and soon you are in business.

Things go well, and you learn a lot. So much, in fact, that you begin to chafe at the rules you have been following. After all, it’s your business. You have your rights and you think you know better.

The franchiser, however, disagrees – says you contracted with him to get the benefit of his experience and know-how, his brand reputation, his management support systems and his quality standards. You must follow them. Suddenly the relationship is going south.

The franchiser’s point of view Originally the franchiser was motivated in the same way his eventual franchisee now is – tired of being an employee; wanting to be his own boss. He had considerable experience in the field and, indeed, just completed a later-in-life MBA. He was looking beyond a single business by becoming a franchiser.

All the franchising literature tells you the same thing – create The model, offer franchises and control them through licensure. The franchisee is buying into a going concern and getting support from a bigger business.

So what’s the problem? Noncompliance. It’s the industry’s biggest problem. Lately, enforcement has turned to compliance audits, driving the relationship further south.

I have a long-time friend who is a coast-to-coast senior-care franchiser in the US. We were having dinner recently and he was telling me that after ten years he wasn’t having the fun he once had. The constant conflict with some of his franchisees was wearing him down.

I listened with keen interest as he gave me details.

Then he said: “But, enough about me, how about you? How’s the KM thing going?”

He has always shown a genuine interest in the concepts of knowledge management (KM) and I filled him in on the latest. Then he asked, “How can a small company like mine – with seven employees – use KM?”

I realised I had been talking entirely about global mega-companies and that made it seem like KM wasn’t for small companies.

“Well,” I said, “it’s the big companies doing it, but KM can be for any size company down to a company of one.”

I realised that wasn’t a very helpful answer. “Okay,” I admitted, “I haven’t been able to find a small company actually practicing formal KM.

“But wait a minute. You aren’t small! You have franchises, including your own, all over the country. You are a very complex organisation with ‘business units’ spread across the country, just like Fortune 500 companies have units spread across nations. And your problems of discontent between you and the franchisees have everything to do with the need for collaborative knowledge sharing, not just command and control.”

That, of course, is a radical idea in the franchising world. The assumption is still that franchisees don’t know enough about how to run their own companies and so it’s up to the franchiser to run it for them. It has been the model for more than a century.

From the KMer’s point of view, a franchising company is a disconnected group of providers with the franchiser as the hub. The franchisees are, in practice, in multiple markets and learning lessons all the time, not just those contained in the franchiser’s formula.

Yes, many of them probably have bad ideas, but some of them may have good ideas, too. However, if there is a dialogue, it is with ‘central command’. Since the idea is probably contrary to the franchise formula, it gets a bad review.

I’ll suggest to my friend a double-sided solution that addresses his enforcement problem and opens the door to knowledge even greater than the franchiser’s. He should develop a network of his franchisees by opening an online discussion group. Bad ideas will out themselves there. Good ideas will be worth his consideration as the final decision-maker. The annual meeting of the future will be less about ‘teaching’ and more about ‘learning’ in a collaborative environment. Most importantly, my friend’s franchising business will keep pace and even lead the field. Franchising has always been about creating knowledge-driven companies.

With KM, my friend’s company will change the driver by using the power of collaborative thinking. And everyone will be happier.

Jerry Ash is KM coach, founder of the Association of Knowledgework (www.kwork.org) and special correspondent to Inside Knowledge. He is author of the Ark Group’s latest major reports, Next Generation Knowledge Management I & II. To order either of these, contact Adam Scrimshire at publishing@marketing. ark-group.com. Jerry Ash can be reached at jash@kwork.org.