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Advisory 2012-01-27

Successful franchise: Not a child's play

Mutual conflict and rifts are a part and parcel of any business, especially franchise businesses. Franchisor and his franchisees aim to generate profits from brand expansion by maintaining cordial relations. Despite this franchisor-franchisee relationship

By Sub Editor
Successful franchise: Not a child's play

Running a successful franchise network is not as easy as it appears. Franchisor has to mould himself as per the requirement of each franchisee. The success of any franchise largely depends on the kind of relationship the franchisor and his franchisees share with each other. Being a successful business does not necessarily make it a perfect franchise fit. Each franchisee is different depending on the region, professional background, personal nature and his financial condition. Franchisor can not treat all his franchisees in a similar manner. Also each franchisee may understand the franchisor differently. Thus conflicts in certain cases are unavoidable. The article discusses few of the misunderstandings that both franchisors and franchisees face at some or the other time with their solutions.

Usual errors from franchisors

Experienced franchisors with a flourishing franchise system always maintain good business relationship with franchisees. However novice franchisors with big expectations from their franchise business may sometimes get into tribulations with their partners over trivial issues. Let us have a look at few of these:

Desire for quick success: First time entrepreneurs with two or more successful outlets, in their over-confidence adopt franchise route for expansion in cities and towns, without realising the need for a strong franchise system and back up to support their partners. Investor who is putting in their hard earned money need all kind of support and hand holding to make their franchisee outlet a success.

Franchisee is not a child: Franchisees are not children. They have made a conscious decision to purchase the franchise and have voluntarily agreed to operate the business according to the rules and boundaries set forth by the franchisor. In many cases franchisors start taking franchisees as kids and do not give them the space to grow up as entrepreneurs. This may lead to the failure of the network at later stages.

Lack of concentration: Few franchisors concentrate more on expansion rather than consolidating on existing franchisees. This leads to communication gap between them and their franchisees. Franchisees also adopt a non-serious attitude which at later stages can disrupt the relations between franchisor and franchisee.

Slip-ups by franchisees

Franchisees are mostly new to business but they usually enter the entrepreneurial field with lot of zeal and dreams. However too much of enthusiasm can also lead them to trouble with the franchisor.

Not following franchise agreement: In certain cases there are franchisees who consider themselves more innovative and better businessmen than franchisors. They start taking initiatives to increase the sales of their outlets by breaking franchise agreement and without informing the franchisor. As a result franchisor gets annoyed and leads to disputes.

Not taking franchisor’s permission: Franchisees sometimes make the blunder of selling products that they brought from local vendors. The product/service might become a success with customers but selling a different product from his franchised outlet without the franchisor’s permission can surely strangle the franchisor-franchisee relation. However in most franchise systems, there is a process for requesting permission to offer new products or services in an outlet. The reason franchisors allow and even encourage their franchisees to recommend new products or services is that it helps the system improve its consumer offering. Going against his franchisor by selling other products is the worst idea for a franchisee.

Involving franchise attorney: Disputes between franchisor and franchisee may occur from time to time. But a franchisee who goes to his attorney every time he has a clash with his franchisor may create bigger problems for himself. The only person who can benefit from such a situation is the attorney. Rather than going to attorney, the franchisee can examine the situation and look for common ground to resolve the problem.

Best way to resolve differences

The franchisor-franchisee relationship is best governed by the franchise agreement that was signed at the time of the deal. The agreement mentions each and every detail that the franchisor wanted his franchisee to follow. Therefore, it is always preferable for franchisees to read, understand and analyse each clause before putting signatures. Violating any clause mentioned in the agreement after signing is sure to antagonize any franchisor.

To conclude it can be said that any successful network is only created with all the partners being happy and cordial. Franchisors and franchisees should always try to overcome their minor issues by being broad minded and understanding. Moreover keeping in mind each and every clause of the franchise agreement would also be helpful to a great extend.

Jacalyn : 19, Oct 2011 at 06:27 AM
Super informative wtriing; keep it up.
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