Franchisor – Franchisee Relationships Tell Everything About a Franchise System
In order to understand franchisor franchisee relationships one must first accept that franchising is not a marriage. Instead, franchising is a system in which the participants must understand and play their part to achieve balance and mutual profitability. Achieving those objectives is vital to good franchisor-franchise relationships.
(Part One of this article describes all of the franchise participants. Here, in Part Two, the focus is on the mindset of better relationships.)
Whereas monogamy and equality are norms in western marriages, franchising simply will never fit that model. Franchisors must have many franchisees to grow the network and be profitable. Monogamy doesn’t exist. Franchisors own and control the brand. There is no equality, but there must be balance. So, where is it?
First, there has to be fairness and an expectation of reward for both parties. Second, franchisees must enjoy certain legal and operational rights, but of course. must conform to maintain them. Franchisors are the policymakers, but their performance must meet expectations or the result will be unhappy franchisees and fewer franchise sales. Franchising works best when participants understand and fulfill their respective roles.
The real similarity between franchisors and franchisees is they are both in the business of repetition. Franchisors repeat the sale and installation of their system and franchisees repeat its use. Franchising, like every other business, is a production machine reacting to supply, demand and technology. When that machine is working as it should the result is good franchisor-franchisee relationships. The fairest and equitable relationships exist when franchisors install their system as promised and franchisees execute it as promised. It’s no more complicated than that.
The Quality of Franchisor – Franchisee Relationships Determines Franchise Success or Failure
When a quality franchise system receives a capable, conscientious franchisee, the relationship can succeed. It’s the rush to enter the relationship by either party that leads to difficulty. Rushing into anything is probably a bad beginning, but rushing into franchise relationships is almost always a bad beginning. Due diligence on both sides is critical, but it’s the most overlooked part of the franchising process. Lack of it will almost guarantee bad franchisor-franchisee relationships down the road. The rush to enter a franchise agreement by either party represents bad business and a lack of common sense.
The Franchisor – Franchisee Selection Process is Critical
Lets state another franchise fact of life. Franchise sales are critical and therefore, salespeople are measured by success in selling. However, what too many franchisors refuse to accept is that only good sales should be considered. Unfortunately, that standard will never be accepted in franchising, so bad recycling is the norm. Future franchisor-franchisee relationships hinge on making better sales.
Both franchisor and franchisee must conduct due diligence. And because the franchisor is the more experienced of the two, the franchisor should insist that it be done. But once again, quantity not quality usually wins. (See ‘Buying a Franchise’.) Proper due diligence takes time, but that time is nothing compared to the results of a bad decision. Quality franchisor-franchisee relationships are built on quality decision making.
Want Real World Solutions for Resolving Poor Franchise Relationships?
If you’re a franchisor dealing with poor franchise relationships we can help. We believe in a logical process of examining the root causes of failure and finding both common ground and practical solutions. But first, there must be an environment for stress-free discussion. That’s part of the process. Our goal is to first stop the bleeding and start a recovery. Don’t give up the ship where logic and a good plan might wright the ship.
On the other hand, if you’re an unhappy franchisee or group of franchisees, there’s hope. Litigation is always an option, and you’ve probably thought about that. However, litigation is also an expensive option that, if pursued, will most likely break franchisor-franchisee relationships completely. There are options for mending fences and possibly reviving your investment. Think about what you’ve just read. If you could build a communications bridge to your franchisor, would that make more sense than jumping into litigation?
Franchise Best Practices are Designed to Mend Relationships
Read more about our approach to Franchise Best Practices and see if this service might improve the entire system.
Part One of this article.