How a new Philly CEO made peace with unhappy franchisees

Matthew Murphy, 50, was born on Halloween, but nothing was as scary as his first week as chief executive of Griswold Home Care, a home-health-aide franchise staffing business in Plymouth Meeting.

Murphy started on Tuesday, June 24, 2014.

Three days later, on Friday, he was served with a lawsuit from 14 disgruntled franchisees in California. More lawsuits followed, along with many tough conversations with unhappy franchise holders. It's safe to say that more than 10 percent of the company's franchisees were fighting Griswold, in court and out.

Fast-forward three years to May 2, 2017, and the Renaissance Indian Wells Resort and Spa in California, where Murphy received the American Association of Franchisees and Dealers award for Franchisor of the Year, based on Griswold's productive relationship with franchise owners, including a new agreement that changed how they paid their royalty fees.

My wife said, "What did you do? At [your last] job, things were going great." I said, "Well, if it were easy, the other guy would still have the job."  I knew it had challenges, but I didn't know it was going to be this bad. Personally, in some ways it was probably easier to take over a situation like that than to take over where everything is going great and the old CEO is beloved.  It was a great opportunity for me to establish credibility with the franchisees.

Jean Griswold's story is fantastic. Her husband, Lincoln, was a pastor at [the Presbyterian Church of Chestnut Hill].  She noticed folks in the congregation who needed care, but there was nobody to serve them.  So she created a business just to help her parishioners. Jean and the family grew the business until 2009.

An investor group bought it and grew it until 2012, when they then sold to the current private-equity group.  So there's a pretty substantial cultural shift. In a five-year period, I was the fourth CEO.

Instability. And it was a choppy time in the business. This industry had not had a lot of regulation over the years.  There was regulation coming in on a large scale in 2014. Historically, employers didn't need to pay caregivers minimum wages or overtime, but that changed. Our model had always been that caregivers were independent contractors.

In light of the regulatory changes, many of our [franchisees] would be required to change their model to one where they employed caregivers. That resulted in a lot of our franchisees suing us because we weren't preparing them adequately for the changes: "Hey, you sold me this [independent contractor] business, but now I can't run the business I bought."

One of the first things I did was to stop selling franchises. One, we're buying litigation, but two, we couldn't sit in front of somebody and say, "Hey, why don't you drain your 401(k) account? Why don't you leave your good job and come on in?  The water's fine."  I couldn't say that, because the water was definitely not fine. We didn't have it figured out. Now, it is fine, and I'd sell one to my sister.

It took a little convincing, but they trusted me. It was a good credential-builder with the franchisees. There was a gentleman from Alabama who was a relatively new franchisee. He had this great, sort of, Southern, folksy way. He flew up here to see me.  He said, "Look, I know you've got a lot of litigation going on. We can fight it out, or we can talk it out.  I'd prefer to talk it out."  I said, "Yeah, I'd prefer to talk it out, too." That became my model going forward.

Tensions were high. So we agreed that we'd disagree without being disagreeable. We'd listen first to understand the other's perspectives. If things got too heated, we'd take a break. And let's try to make sure we come to business terms before we over-lawyer. We wanted both sides to get an early win, to have a bedrock of an agreement. If we could agree on the ground rules, that would give us some momentum for some of the more difficult issues.

MATTHEW MURPHY:

Home: Phoenixville

Family: Wife, Kim; children Katie, 15; Colin, 13.

Diplomas: Rochester Institute of Technology, applied science and engineering; University of Buffalo, law.

In his desk drawer: Meatball-sized rubber balls. "I like to bounce balls as I walk around. It's a nervous way to expend my anxiety. The team hates it. But they can click out of Facebook or whatever because they can hear me coming."

GRISWOLD HOME CARE:

Headquarters: Plymouth Meeting.

Business: Franchise-based home health care with $25 million in revenues, owned by the New York private-equity firm  Pouschine Cook Capital Management.

Franchises: 200, including 20 company-owned. Investors need $174,900 to $204,400 and net worth of $375,000-plus.

Employees: 60 corporate staff and about 5,000 caregivers system-wide.