Buy And Sell A Business

The Franchise Buyer’s Guide: Reputation

Nothing you have in business is worth as much as your word. Integrity is the basic building block of your reputation, and your reputation is both a marker and a determinant of your success.

When you buy a franchise, you become linked to its reputation. You are both subject to it (if the franchisor wins/suffers, so do you) and also someone who shapes it. Which is precisely why it is so important to think long and hard about whether you and that franchise are a solid fit before you front any money.

So, what exactly does a “solid fit” look like? Here are a few things to think about when trying to evaluate a franchise’s reputation. In this third part of the series, the questions you need to ask yourself are going to be especially important.

The elements of reputation

The Finn Agency boiled down reputation to the following three concepts:

  • Awareness: How well do people know you?
  • Sentiment: How do others feel about you?
  • Attributes: What concepts and words come to mind when people think about you?

Traditionally, there are a few elements that factor into how people answer these questions, among them: quality or value of the product or service; the company’s image; financial performance; inventiveness; practices as an employer; and ESG (environmental, social and corporate governance). All franchises with a solid reputation must maintain each of these things. But reputations are all unique in the sense that different factors will come into play to greater or lesser degrees.

For instance, the franchise Pizzaville has opted to differentiate itself with the quality of their product (stone-baked, quality ingredients, etc.), while Dominos—without necessarily neglecting the quality of their product—has opted to differentiate itself by innovating the delivery process. They’ve done that by investing heavily in new technology and processes. Same market, different priorities, different choices, different reputations.

The key caveat is that businesses are not in complete control of what shapes their reputation. This is important because a hit to a company’s reputation tends to have far greater staying power than years of consistent efforts. Consider Chipotle Mexican Grill, a fast-casual food franchise which had several food-borne illness outbreaks in 2015. In 2016, they closed all of their restaurants across the U.S. for a short period, faced massive fines, and had to make a huge investment to lure customers back. Smaller companies wouldn’t have survived and, indeed, many franchisees suffered as a result.

The less obvious elements of reputation

To maximize your chances of success as a prospective franchisee, you need to be aligned with how the company sees itself—its values, its goals, etc. And not just its public image. Franchisors will have developed processes and priorities behind the scenes for which they may have developed a reputation. These can be good or bad, or neutral. What is most important is that it works well for you.

Writing for Entrepreneur, business columnist Cliff Ennico referred to something he called “Ennico’s Rule”: “When buying a franchise, gossip, hearsay and innuendo are more important than hard data.”

Look up everything you can about the franchisor online. Glassdoor is a website that allows current and former employees to review their company anonymously. It may also be worth putting in a call to the Better Business Bureau to get a sense of the local reputation if you’re interested in a pre-existing franchise location. Most importantly, however, ask the franchisor for a list of ex-franchisees (in some jurisdictions they are required by law to disclose this). Talk to as many as you can. Visit current franchises and spend some time finding out how everything works.

“In my experience, it’s hard for people to hide it when they’re really unhappy,” Ennico writes of his conversations with existing franchisees. “Be sure to watch their facial expressions and listen to the ‘music’ in their voices as well as what they tell you.”

Age before beauty

There is a common misconception that a company’s image and its reputation are the same thing. They are not. A company’s image can be a product of hype or creative branding. These are aspects of one’s reputation but not necessarily the sum total. Reputation is more robust. Reputation has an impact on your bottom line.

As Raf Weverbergh of the Finn Agency writes, consumers don’t always know exactly how good your product or service is. “Instead of doing homework, they just rely on reputation.” Reputation is, ultimately, about the consumers’ decision to buy or not.

So, while reputations can be damaged in relatively short time frames, they often take time to build. Consistency matters most. That doesn’t mean you as a franchisee needs to do everything right all the time, but it does mean that you need to understand what is most important to the company and the stakeholders to whom it is most important.

As an example, Weverbergh points to IndiGo, India’s largest airline. They have an excellent reputation for almost exclusively one reason: In an industry where customers are constantly irritated by delays, IndiGo is on time, and it has been for a very long time.

Case Studies

Tim Hortons

There is perhaps no company or franchise that is more closely associated with Canada as a country. When non-Canadians hear Canada, the clichéd things they think of are hockey, how polite we are, and the famous coffee franchise. Tim Hortons, which is named after the Canadian hockey player when it was founded in 1964, has managed to maintain its reputation as a kindly neighbourhood shop for all Canadians; this despite the fact that there are now well over 4,800 locations, some as remote as Saudi Arabia and the Philippines.

That’s not to say they are bulletproof. A Leger national poll of Canadians in 2017 found that Tim Hortons’ reputation took a serious hit over franchisee decisions to claw back some employee benefits. Head office had failed to provide assistance to offset the national minimum wage hike.

Globally Local

Globally Local is relatively new on the scene but that’s to be expected of the country’s first vegan fast food drive-thru. Founded in London in 2016, the chain has begun to build its reputation by providing plant-based alternatives to several fast food favourites (their “famous burger” is a play on the Big Mac, and several other menu items take their cues from others like the Whopper). Reading online reviews, the two other aspects of their business that tend to get mentioned is their tech-based ordering system and the friendliness of their staff.

Firehouse Subs

The motto of Firehouse Subs is “Enjoy More Subs. Save More Lives.” Not only is the decor of every location reminiscent of a firehouse—often featuring gear, memorabilia, and murals of various heroic acts—but much of the company’s reputation is built on supporting first responders.

The Firehouse Subs Publicly Safety Foundation was launched in 2005 in the wake of Hurricane Katrina, a disaster in which Firehouse Subs’ founders went down to assist personally. Since then, the foundation has raised well over $50 million to improve the capabilities of local first responders. This, in combination with their product, has made them one of the most highly awarded fast sandwich franchises in the U.S. and with dozens of locations in Canada, they plan to continue expanding.

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Opinions expressed here by Contributors are their own.

The Franchise Buyer’s Guide: Reputation
7 mins (1648 words)