By Robin Gagnon, Chair of the IFA Franchisor Forum

An interview with Greg Nathan, psychologist and author of “Profitable Partnerships” and “The Franchise E-Factor.”

Franchising is often discussed in the language of growth: unit economics, development pipelines, marketing calendars, operational playbooks. Yet when systems wobble, stall, or fracture, the root cause is rarely a missing checklist. More often, it is a relationship breakdown that quietly grew into conflict, mistrust, and misalignment.

That reality is exactly why Greg Nathan’s work continues to resonate decades after he first developed the E-Factor model in 1992. Nathan, a psychologist who has spent his career studying the franchisor-franchisee relationship, led a workshop on franchise relationships at the International Franchise Association Convention that drew strong feedback from franchisor leaders.

What happened next is worth highlighting: the Franchisor Forum built a year-long curriculum around it. Through every-other-month webinars, the Forum guided franchisor leaders through the stages of the franchise relationship, from early optimism to mature partnership. That content now lives on as an ongoing resource for IFA members.

How the E-Factor Began: Conflict as a Signal

Nathan traces the origins of the E-Factor model to the early 1990s. Corporate restructuring had pushed many talented middle managers into franchise ownership. At the same time, founder-led franchise networks were eager to grow fast and, in many cases, over-promised and under-delivered.

The Franchise Association of Australia began receiving complaints from franchisees who felt misled and unsupported. The organization asked Nathan to help educate both sides on what the franchise relationship requires. That work became his first publication, “Managing the Franchisor-Franchisee Relationship,” followed by “Profitable Partnerships” in the late 1990s, and eventually “The Franchise E-Factor.”

A consistent theme ran through all of it: the franchise relationship is not a simple transaction. It is an ecosystem that includes commercial goals, legal obligations, and human psychology.

The Three-Legged Stool

Nathan offered a simple image that immediately clarifies why many systems struggle. He calls it the “three-legged stool” of the franchise relationship.

The first leg is legal. The contract exists to bring clarity about who is responsible for what. In theory, that prevents confusion and reduces conflict. In practice, contracts can become so complex that they create confusion instead.

The second leg is commercial. Both franchisor and franchisee enter the relationship to achieve goals: return on investment, risk reduction, stability, growth, and profit.

But even a strong legal framework and a strong commercial model are not enough. That leads to the third leg, the one many leadership teams overlook because it is invisible.

“The third leg is the psychological leg,” Nathan said. “It’s all about trust and commitment.”

Trust and Commitment: What Franchisors Cannot Mandate

Nathan defines trust as psychological safety, the belief that the other party is truthful, genuine, and not looking to cause harm. In a franchise system, trust is built through consistent follow-through, transparency, and evidence that the franchisor is committed to franchisee success.

Commitment is different. Commitment is the willingness to take action, to invest time, energy, or resources in response to a request. A franchisee can trust the franchisor and still resist action if they do not see the priority, the fairness, or the rationale.

This distinction explains why some systems have good relationships but struggle to execute initiatives. Trust alone does not create alignment. Commitment turns trust into movement.

Nathan also points out something every experienced franchisor has seen: once you start saying “the franchise agreement says,” you may win the argument, but you often lose the relationship.

Why Stages Matter: Two Journeys Are Happening at Once

One of the most useful insights from the interview was Nathan’s reminder that two journeys are happening simultaneously.

The first is the business journey: franchisees move from low competence to high competence as they build a location, hire staff, reach break-even, and mature over five to seven years.

At the same time, the franchisee is on a relationship journey with the franchisor. Over the course of the year, the Franchisor Forum explored the five relationship stages Nathan identified: Glee, Fee, Me, See, and We (see sidebar). Each stage represents a predictable shift in how franchisees perceive the relationship and what they need from their franchisor.

Early on, franchisees can be optimistic, grateful, and highly satisfied. Over time, as real-world challenges emerge and competence grows, expectations collide with reality. If the early expectations were inflated or misaligned, the system pays for it later.

Respect, Fairness, and Communication

Nathan returned repeatedly to two psychological needs that show up in every franchise network: respect and fairness.

Franchisees want to be treated with status and dignity. When new executives enter a system focused only on objectives, they can unintentionally come across as patronizing.

Fairness is just as powerful. Nathan noted that fairness is processed in the brain alongside disgust, which is why perceived unfairness can trigger visceral reactions. The solution is not simply “be fair,” but also “be seen to be fair.” That requires clear communication about the why, the evidence, and the intended outcome of initiatives.

Empathy: The Skill That Prevents Escalation

Nathan was direct about what stress does to human interpretation. When franchisees are in distress, the brain shifts into fight-flight mode. People stop thinking clearly and begin to assume the worst.

That is why Nathan believes empathy should be treated as a core leadership skill in franchising, not a personality trait.

“Empathy is the superpower of franchisors,” he said.

He defines empathy as making a genuine effort to understand another person’s perspective in a helpful way. Without understanding, help can become clumsy and patronizing. Without a helpful intent, understanding becomes manipulation.

Empathy also requires caring detachment. Leaders can be compassionate without absorbing the emotional weight of every crisis.

A Resource That Lives Beyond the Webinar

The Franchisor Forum’s year-long curriculum matters beyond last year’s calendar. These are leadership fundamentals that must be revisited, reinforced, and operationalized.

Nathan suggested a simple rhythm: return to the three-legged stool regularly and ask, as a team, how you are doing on each leg. Legal clarity. Commercial performance. Psychological health.

The Forum’s webinar series gives IFA members a ready-to-use framework and shared language they can bring back to their executive teams, field teams, and franchise advisory structures. When leaders can name what is happening, they can manage it.

The goal is not to soften standards. The goal is to strengthen the psychological leg so standards can be implemented with alignment instead of friction.

In a system built on long-term partnership, that may be the most strategic discipline of all.

The Five Stages of the Franchisor–Franchisee Relationship

Glee
The honeymoon stage. Franchisees are excited, optimistic, and highly trusting. Energy is high and expectations are being formed, which makes this stage powerful and risky at the same time.

Fee
Reality arrives. The financial and emotional weight of ownership becomes clear. Franchisees are investing heavily and pressure increases. Communication and transparency are critical here to protect trust.

Me
Independence grows. Franchisees see themselves as true business owners and want autonomy, influence, and respect. This is often where conflict appears if leadership relies too heavily on control instead of collaboration.

See
Perspective broadens. Franchisees begin to understand the system beyond their individual unit and can see how decisions support the brand as a whole. Alignment becomes easier when fairness and communication are strong.

We
Mature partnership. Trust and commitment are high. Franchisor and franchisees operate as true partners with shared goals, shared responsibility, and a strong sense of mutual respect.

Robin Gagnon is the co-founder of We Sell Restaurants and chair of the IFA Franchisor Forum. For more information about IFA franchisor member We Sell Restaurants, please visit franchise.org/franchise-opportunities/we-sell-restaurants/.