Before getting into franchising, you may have had an image of what would happen if you were to catch someone committing fraud within your business. Picture a Law & Order episode, where the person committing fraud is on the stand, peppered with questions until they confess in a dramatic fashion.
But, after spending some time in franchising, you likely have realized that this is not how things go – because relationships are everything. After our popular articles on 4 ways franchisees commit fraud and how to detect fraudulent acts, we decided to add some insights on how franchisors are handling fraud once it is found.
A Family Dispute
Most franchise systems operate as families. The annual convention can feel like a family reunion. Longstanding friendships are formed beyond business, and there can be relationships, and even marriages between franchisees. As a result, franchisors and franchisees know each other’s strengths and weaknesses. They also know how to push each other’s buttons.
A fraud can then seem like a family dispute. And, far from being a “bad guy” franchisees who are committing fraud can simply be in a difficult financial situation based on a spouse’s job loss or unexpected medical bills, for example. On top of this, franchisees, especially those that commit fraud, can be highly leveraged.
A View from the Outside
Customers often have a fuzzy understanding of the relationship between franchisor and franchisee. After all, they may simply enjoy your food, and don’t need to understand the inner workings of your business. As a result, a loud and public dispute could have a negative impact on the local business, and others in the region or nation, not to mention the brand as a whole – potentially creating a self-inflicted wound. Suppliers can also get a negative perception of an internal dispute.
The Risk of Not Acting
As a result of the “family” issue, and the customer issue, sometimes fraud when discovered, goes unmentioned. In fact, a known fraud can justify poor treatment of a franchisee, or other franchisees can take notice, creating an erosion of respect and even loyalty.
Often, the best resolution is to work together. According to law firm Nixon Peabody,
“In most instances, brand value can be preserved by quickly channeling a dispute through mediation – with all the major constituents present at the table. This type of intervention often leads to results-oriented solutions without suppliers or customers ever becoming aware of the dispute. A successful mediation can result in a successful business transaction, such as the sale of the franchisee’s locations, that can further bolster the brand’s strength. The earlier the third party is brought in to expedite the negotiated business resolution, the better it will be for the brand and the bottom lines for all concerned. “
Information is Power
While managing this situation, having a paper trail through a series of audits and corrective actions, for example, can strengthen the process. Additionally, having a record of good faith, such as a franchise coach taking an active role in helping the franchisee, can make a big difference. FranchiseBlast’s Brand Consistency software can help create that digital record.
Often forgotten but more important than ever is the Marketing section of the franchisee audit. Based on our research, the franchisee success on the Marketing audit, especially the section on planning, can actually predict growth. Based on popular demand, we did an extensive review of over 50 audit questionnaires from a half-dozen industries and came up with the best Marketing questions for you to add to your annual audit checklist.
Exterior signage, clean, illuminated and in “like new” condition.
Menu panels, clean and and in “like new” condition.
Store decorated appropriately for the season.
Television clean, in good working order, and playing approved images and footage only.
All national campaign elements are present and in-store POP follows brand standards, placement guidelines and is clean with no damage.
Uniforms are to standard – managers and associates.
Name tags clean and professionally presented.
Approved music playing.
Franchisee provided completed quarterly marketing plan to coach by submission deadline.
Competitive analysis completed in the last 12 months, using the proper form.
Franchisee has used the approved forecasting tool for their marketing plan during high season.
Franchisee submitted up-to-date crisis communication plan.
Franchisee has the marketing collatoral required to execute on their marketing plan (coupons, signage, giveaways)
Franchisee doing a live event during high season.
Franchisee taking part in community events during high season.
Franchisee has visited 5-10 local businesses to connect with the community.
Marketing plan identifies a budget each month.
Current national promotions leveraged in marketing plans.
Current national platforms leveraged in marketing plans.
Staff meetings are scheduled to review upcoming promotions.
Franchisee and/or marketing staff attended any required training.
Print and Signage
All marketing material complies with brand standard and is posted in the appropriate location.
Current marketing materials being used.
Hours of operation posted on doors and accurate.
Promotional tents available at each table.
Branded vans using approved graphics and PMS colors.
Branded napkins being used.
Branded trays are made available.
No hand-written or typed signs in guest view.
Posted media stories up to brand standards.
Online ordering “call-out” available.
Every off-premise bag contains marketing materials.
Off-premise packaging quality standards being used.
Gift card program in place.
Only current and approved merchandising elements available.
Franchise operator decal displayed at front entrance.
Loyalty program materials have prominent placement.
Social and Online
Franchisee posted a minimum of 3x/week to Facebook.
Franchisee had one positive online review/month.
Franchisee used on-brand content and held to on-brand Facebook strategy.
Franchisee maintained updated hours and pricing on local website.
Franchisee has 2 posts regarding seasonal marketing campaign on Social Media.
Franchisee is familiar with Social Media posting tool and knows where to find additional resources.
Franchisee boosted a minimum of 1x/week on Facebook.
Social media channels monitored and comments were responded to in a timely manner.
Franchisee participated in the National Marketing campaign.
Campaign details printed and posted.
Prize awarded to customer.
Approved display rack has current POP.
Monthly POP clearly advertised on the menu board.
Franchisee reads all head office communications.
Franchisee only used approved offers.
Franchisee requested approval before marketing additional offers.
Franchisee maintained a positive, respectful relationship with franchise marketing team (no incidents reported since last reporting period).
Marketing material purchased through approved vendors.
Franchisee spends $x/month in the community, above AdFund spend, as per the agreement.
Franchisee is familiar with most recent campaign.
Product knowledge questionnaire – all associates and managers have completed it.
If you are as enthusiastic about Marketing Audits as we are, feel free to connect with us at firstname.lastname@example.org!