Bob Gappa defines the nature of the relationship between the franchisor and the franchisee. Having worked with hundreds of franchisors, Bob really shines as he is deep within his element touching on topics such as the history of franchising, the purpose of a Brand, and of course, Peter Drucker.
Q: What is the purpose of a franchise company?
The purpose of a franchise company is ultimately the same as the purpose of any successful business. It is to create customers, retain customers, and build loyalty among those customers.
Many people think the purpose of a franchise company is to sell franchises, grow locations, or generate revenue. Those things may be important, but they are not the purpose. They are the result of doing the right things well.
If a franchise company consistently creates value for customers, builds loyalty, and earns recommendations, growth often follows naturally.
Q: Has the purpose of franchising changed over time?
The way people think about franchising has certainly changed.
In the past, franchising was often viewed primarily as a way to provide business opportunities to individuals seeking financial success or business ownership. Much of the focus was placed on helping franchisees achieve financial goals.
Today, successful franchising is increasingly viewed as a way to build a brand.
That may sound like a small shift, but it changes the way franchisors think about almost everything. When the focus is building a strong brand, decisions become less about individual interests and more about creating a consistent experience that customers recognize and trust.
Q: Why is brand building so important?
Because customers develop loyalty to brands, not franchise agreements.
Customers do not typically know or care who owns a particular location. What they care about is the experience they receive. They care about consistency, quality, service, and trust.
When customers have a positive experience, they remember the brand. When they recommend a business to friends and family, they recommend the brand.
The stronger the brand becomes, the more value it creates for every franchisee operating within the system.
Q: Who is the customer of a franchise company?
The end user is the customer.
Some franchisors make the mistake of believing that franchisees are their customers. Others focus primarily on supporting franchisees while losing sight of the people actually purchasing the products and services.
The reality is that the customer of the brand is the person buying from the brand.
Both the franchisor and the franchisee should be focused on creating value for that customer. When everyone shares that focus, it becomes much easier to make decisions that strengthen the brand.
Q: How does that perspective change the relationship between franchisor and franchisee?
It creates alignment.
Instead of viewing themselves as separate entities pursuing separate goals, the franchisor and franchisee begin working toward a common objective. Both are trying to create an experience that keeps customers coming back and encourages them to recommend the brand to others.
That common purpose helps reduce conflict and improve cooperation.
When difficult decisions arise, both parties can ask the same question: “What will best serve the customer and strengthen the brand?”
Q: What role does customer retention play in franchise success?
A tremendous one.
Creating a customer is important, but retaining that customer is where long-term success begins to take shape. Loyal customers return more often, spend more over time, and become advocates for the brand.
The goal is not simply to make a sale. The goal is to create an experience that makes the customer want to come back again and again.
When that happens consistently across a franchise system, the value of the brand grows significantly.
Q: Why is customer loyalty more important than simply focusing on profits?
Because customer loyalty drives profitability.
Many businesses focus heavily on cutting costs, increasing margins, or finding ways to improve short-term financial performance. While financial discipline is important, sustainable growth comes from building a loyal customer base.
When customers return frequently and recommend the brand to others, revenues increase. Fixed costs remain relatively stable while sales grow, creating stronger financial performance over time.
The most successful franchise systems understand that customer loyalty is not separate from profitability. It is one of the primary drivers of profitability.
Q: What should franchisors take away from this discussion?
Never lose sight of the reason the franchise system exists.
Growth matters. Franchise sales matter. Operations matter. But none of those things are the ultimate purpose.
The purpose is to build a brand that attracts customers, retains customers, and earns their loyalty.
When franchisors and franchisees unite around that objective, they create the foundation for long-term growth and success.
Key Takeaway
The strongest franchise systems understand that growth is not the goal. Growth is the result. The real purpose of a franchise company is to build a brand that creates loyal customers who return often and recommend the brand to others. When everyone in the system shares that focus, the brand becomes stronger, and growth becomes more sustainable.
This blog series is based on Episode 2 of The Franchise Manual Podcast, where Kit Vinson interviews Bob Gappa, founder of Management 2000 and advisor to more than 1,200 franchise brands. In this episode, they discuss Gappa’s paper, Understanding Franchising, and the principles that help franchisors build stronger brands and healthier franchise relationships.
You may listen to episode 2 of The Franchise Manual Podcast in its entirety here, or visit our website at www.franman.net.
