How Franchisors Should – And Shouldn’t – Respond to Internet Criticism by Sean Kelly, UnhappyFranchisee.Com
No company offering franchise opportunities enjoys having to publicly defend the image that they’ve carefully crafted through their marketing and public relations efforts.
No franchise company wants to air or discuss its dirty laundry in plain sight of customers, employees, shareholders, franchisees and prospective franchisees.
But now, thanks to the Internet, blogs like UnhappyFranchisee.Com and BlueMauMau.com, and social media sites like Facebook and Twitter, public discussion and scrutiny of franchise opportunities is a fact of life… and it’s not going away.
Here’s the story of two franchisors of fast-casual cafes that reacted very differently to similar complaints against them.
The first company reacted with anger, threats and legal action.
The second company reacted by taking the complaints seriously, by publicly addressing factual errors, and by acknowledging and taking steps to correct its shortcomings.
In the end, the way the franchisors chose to react to criticism will have a greater impact on their public images and ability to grow than either the original criticism or their well-crafted marketing/PR personas.
Guess which company is posting steady improvements and growth, and which is stalled out and attracting increasingly bad press?
Camille’s Sidewalk Café: Old School Bullying Backfires
In July, 2012 UnhappyFranchisee.Com posted that, according to a Small Business Administration report, Beautiful Brands International (BBI)’s Camille’s Sidewalk Café had a 58% SBA franchise loan default rate.
In the post CAMILLE’S SIDEWALK CAFE Franchise Complaints, we also published that, according to the company’s own disclosure document, the Camille’s U.S. franchise network has shrunk 60% since 2008.
The post attracted an outpouring of comments from a number of former Camille’s franchisees, who claimed that Camille’s and BBI CEO David Rutkauskas had misrepresented the opportunity, had failed to provide the necessary franchisee support, and was indifferent to whether they succeeded or failed once the initial check cleared.
Camille’s franchisees reported having lost as much as a million dollars, and many recounted the personal financial struggles, including bankruptcy, they endured as a result of investing in the Camille’s franchise.
UnhappyFranchisee.Com contacted David Rutkauskas, CEO of Beautiful Brands International, and offered to publish his response, clarification, or rebuttal to the allegations. We told Mr. Rutkauskas that if there were merit to some of criticism, that we would be happy to report what steps he and Beautiful Brands have taken or were taking to address and correct these problems.
Instead of responding to numerous offers to join the conversation, David Rutkauskas had his attorney send threatening letters to the former franchisees who had shared their experiences and posted comments under their real names.
UnhappyFranchisee.Com did not take down the comments. We once again offered Mr. Rutkauskas a chance to address the criticism.
Beautiful Brands then filed a lawsuit against me (then later dismissed it) for expressing my opinion on another website.
In subsequent interviews, David Rutkauskas tried to maintain the success-story façade he had created for his chain, and, when confronted with the unavoidable facts, he blamed the franchisees themselves, he blamed the economy, he blamed partners for backing out of deals, he blamed misrepresentations on writers printing “off-the-record” comments, and he blamed UnhappyFranchisee.Com for focusing on the 70+ Camille’s franchisees that failed instead of the 28 or so that have survived.
In frustration at not being able to control the story, David Rutkauskas posted dozens of fiery personal Twitter attacks on me that included vulgarities, profanity, threats, homophobic (though I’m not gay) and anti-semitic (though I’m not Jewish) insults and invitations to come to Tulsa to fight him (“settle this like men”).
Instead of expressing concern for the plight of the franchisees who failed, instead of taking some responsibility or at least addressing the concerns that were raised, Beautiful Brands and David Rutkauskas’ responded in such a way that reinforced the franchisees’ claims that BBI is indifferent to their struggles, and will use bullying, threats and intimidation to hide their shortcomings.
Tropical Smoothie Café: Transparency, Concern & Action
In the post TROPICAL SMOOTHIE CAFE Franchise Complaints, we also that the 300+ unit chain appeared to have a termination/reaquisition rate of about 18%.
While the Tropical Smoothie Café numbers were not nearly as disturbing as those of Camille’s Sidewalk Café, and while their post did not attract negative comments from franchisees, TSC did not attack us, sue us, or insult us on Twitter.
In contrast to Rutkauskas and BBI, Tropical Smoothie Cafe, LLC VP, Franchise Development Charles L. Watson sent us a report that indicated that they were aware of the problems, and had taken serious steps to reduce their franchise failures.
TSC had already hired franchise research firm FranData to do an analysis of their SBA loan default rate, and to assess the effectiveness of measures they had previously taken to reduce their franchise failure rates.
FranData reported that the SBA had overstated the TSC default rate, which is actually 15.54% (not 23.58%, as previously reported).
Furthermore, FranData reported that measures taken by Tropical Smoothie Café, including the raising of franchisee net worth requirements and adjustments in site selection criteria, had resulted in a reduction of franchise failures every year since 2007.
Even though the SBA loan failure rate of Tropical Smoothie Café is lower than the average for similar franchises (according to FranData), Watson told us they consider it still too high, and that the company “is working hard to bring it down through continued focus on franchisee profitability and business practices.”
Additionally, Mr. Watson reported a number of systemwide improvements, including:
- The addition of protected territories for franchisees,
- A positive ownership change and improving financials,
- The hiring of additional experienced franchise professionals to help support franchisees and build the TSC brand,
- Steadily increasing Average Unit Volume (AUV) which is now over $500,000.
Rather than threatening us with lawsuits and insults, Tropical Smoothie’s Charles Watson wrote to UnhappyFranchisee.Com: “I thank you for your efforts on behalf of prospective franchisees, we use your site to help guide us on what we need to fix / alter / do better with our system – you are providing some great free consulting, for prospective franchisees and franchisors!”
Why Internet Criticism is Good for Good Franchisors… And Franchising
Here’s the difference between good franchisors and bad franchisors when it comes to franchise marketing and franchisee recruitment:
Bad franchisors are on a hunt for the naïve, the trusting, and the inexperienced.
Bad franchisors want prospective franchisees who believe that franchising will give them unlimited freedom and the chance to be their own boss, to call their own shots, to control their destiny.
Bad franchisors want prospective franchisees who believe the bogus statistics that 95% of all franchises are successful, and that the few who failed did so because they didn’t follow the system, or they killed the Success Fairy by asking too many questions and thinking negative thoughts.
Good franchisors want smarter franchisees who have done their homework and have realistic expectations.
Good franchisors want franchisees who understand that every new business venture comes with risk, whether its franchised or independent.
Good franchisors want franchisees who understand that their franchise is not a magic, guaranteed money-machine, and that they will provide the tools but the franchisee must build the business, that the franchisee’s success will depend not only on the brand, the system, and the franchisee’s hard work, but also external factors, such as location, market and competition, that may be out of their control.
Most of all, good franchisors want franchisees who aren’t looking for some mythical perfect franchise system or “hot new concept,” but are looking for an organization that is dedicated to supporting its franchisees, and growing through mutual success with their franchisees.
The truth is there ARE no perfect, complaint-free franchise companies and there ARE no magical short-cuts to small-business success.
Good franchise companies shouldn’t fear online criticism.
As long as they are earnestly working to improve their franchise system and support their franchisees, they should be transparent about the challenges they are facing, and share the steps they are taking to overcome them.
They might lose some franchise prospects who are searching for the magic carpet to guaranteed, effortless success, but they will gain those who have realistic expectations, who know what they are getting into and who are up for the fight.
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TAGS: Beautiful Brands, Camille’s Sidewalk Cafe, Tropical Smoothie Cafe, David Rutkauskas, Internet criticism, online criticism, online attacks, franchise public relations, franchise criticism, franchise marketing