The relationship between franchisor and franchisee is often fraught with misunderstanding. BRIAN DUCKETT of The Franchising Centre offers a clear view of what each party can expect from the other
Anyone working in franchising knows that the relationship between the franchisor and its franchisees is unique in business.
Whilst the franchisor may sell goods and services to its franchisees, the latter are not just customers; whilst the franchisee works to standards and procedures dictated by the franchisor, they are not employees; whilst the two parties are sometimes referred to as partners in developing a brand and system, they are two separate legal entities and are certainly not business partners in any legal sense.
Some people refer to franchisees as ‘franchise owners’ but they are not. There is only one franchise owner and that is the franchisor. Everyone else is a franchisee. They may be a country or area master franchisee, they may be a multi-unit franchisee, they may be a unit franchisee but they are all franchisees.
Franchisees own their own business but they do not own the franchise. Their business owns the right to operate the franchisor’s system and to use the franchisor’s brand. In effect they lease the business system for a period of time in a particular territory or location.
However if they breach the terms of that lease, i.e. if they stop operating the business in accordance with the system, that lease can be terminated and the franchisee ends up owning nothing.
Over time franchisees often forget that they may have known nothing about operating such a business before they were allowed access to the franchisor’s know-how, knowledge, experience and training. As their business grows they find themselves paying more and more in management services fees whilst appearing to receive or need less and less support from the franchisor.
Failing to be aware of the implications of all of the above, and lack of sensitivity to each other’s perceptions, can lead to tensions in the relationship.
Both franchisor and franchisee, and each of their teams of employees, need to be educated at the start and continuously throughout the relationship. A clear statement of each party’s role and responsibilities needs to be presented, regularly monitored and reinforced.
The franchisor’s job is to continually refine all aspects of the business system which it leases to its franchisees so that each franchisee, and the network as a whole, can get the best results from it. The franchisee’s job is to operate that system to the best of its ability. The franchisor is there to show the franchisee what to do and how to do it. They are not there to do it for them.
Let’s look at what happens when a support team member visits a franchisee and compare that to what happens in a corporate, company-owned store visit.
In the corporate example, an area manager goes into the company-owned store. In line with the objectives of that visit they tell the employed manager to jump and the manager asks “How high?”
In the franchising example, the franchisee support person visits the franchisee, maybe with similar objectives, but can only ask the franchisee to jump, whereupon the franchisee asks “Why?”
For all practical purposes, in the end, the franchisee will have to jump but the skills required to get them to want to do it are very different. Franchisee support is a uniquely-skilled job and it needs uniquely-skilled and properly-trained people to carry it out. It’s truly a valuable profession.
Many franchised networks have both company-owned and franchisee-operated outlets and it’s often been said that if they were to involve their managers the same way they involve their franchisees they would have a phenomenal business. However if they treat their franchisees the same way they treat their managers then there’s a disaster waiting to happen.
How can franchisors and franchisees work together in such a way to nurture an effective, if not legally-defined, partnership to achieve mutual success in growing and developing a brand and a network of successful businesses?
However big the master, or however small the unit, the franchisee has joined the franchisor’s system because they were sold and they believed the big picture and were promised continual support to achieve their dreams.
They would be provided with a proven system which, if properly operated, would provide them with an adequate income and an attractive return on the investment of financial and human resources which they in turn promised to provide.
As in any other relationship, things start to go wrong when one or other of the parties starts to break their promises.
It may start with something relatively small but if the situation is not addressed then misunderstandings arise, resentments set in, retaliations escalate, and so it goes on, leading to an almighty bust-up and potential eventual divorce. Not what anyone wanted when they set out together on this exciting journey!
To avoid this happening it is the franchisor’s job to clearly and honestly explain the opportunity, warts and all, to the franchisee during the recruitment and induction processes and throughout the ongoing relationship.
They must also make it clear who is responsible for doing what, how often, how well it should be done and to whom. Much of this will of course be formalised in the franchise agreement and the operations manual but hardly anybody ever reads either of them so it all needs to be regularly repeated through personal and group communications and meetings.
The franchisor must monitor a franchisee’s progress, have regular performance reviews and planning sessions, and actively listen to and agree to act upon all feedback from franchisees whether it’s positive or negative.
Hopefully both parties started out on this relationship with an open, honest and transparent attitude; they owe it to each other to maintain this throughout the relationship but ultimately it’s down to the franchisor. It’s their business and their job to make the relationship work or decide to engineer a parting of the ways.