Hotline: 1800 102 2007
Hotline: 1800 102 2007
Search Business Opportunities
franchising aspects 2009-12-18

The key to franchise relationships

Having the honour of addressing the aspiring franchisors and master franchisees at Franchise India 2009 Knowledge Series conference, I was asked to share my views on the importance of building and maintaining franchise relationship.

By Consultant Partner with Thomas Eggar LLP
The key to franchise relationships

Over the years, I have witnessed disputes and issues between franchisors and franchisees caused due to misunderstanding or failure of support which could have been avoided or lessened with mutual understandings. We tend to think that the most important aspect to protect in franchising is the Intellectual Property Rights (IPR) or 'know-how' of the System. It is indeed essential to take advice on how to structure IPR ownership and how best to protect it. But, at the same time protecting the business relationship between franchisee and franchisor is of equal importance.

In order to build a strong relationship, a franchisor while selecting the franchisee must be careful about the selection criteria,  and make sure that the franchisee really understands the franchise proposition, his role and responsibilities, the return on investment, timescales and the extent of the franchisor's obligations / assistance. Franchisees are equal to revenue. They are the key to revenue generation and profitability. An effective franchise system should result in profitability for all concerned matters. It is a long term relationship where the franchisor's success is dependent on the attitude, business acumen and actions of its franchisees. Before selecting franchisee to expand your franchise network make thorough research about the franchisee’s background. If your answer to any of these queries is 'no' or 'not sure', please do not consider granting franchise to this person.

Franchisors, who realise the importance of their franchisees and provide them support and guidance often have more successful franchise networks. In turbulent economic times, investing in your people (i.e. the franchisees) is key to your brand popularity and reducing trading risks.
Also, the franchisee expects support and guidance from the franchisor. How much they expect is emotive and differs between the franchisees. So be clear on what you will do as a franchisor and set out any conditions or requirements accordingly. A franchisor should be prepared to invest in the franchisees who take the decision to invest in the franchise.

I have seen franchise systems fail due to franchisors not investing enough or providing sufficient support. Instead of chasing initial franchise fees and royalty / marketing contributions, one loses sight of the contribution of the franchisee to make the franchise business run efficiently.

I believe that 'Silence is deadly'. 'Vagueness and uncertainty unravels relationships'...
Another building block of such relationship is the consistency of franchise agreement.
A franchise agreement that does not capture how the franchise relationship is to be developed or managed will not serve you well. Please take time to explain your business model and the franchisee relationship to your lawyer so that an appropriate legal binding document can be drawn. As your system develops and grows in size, maintaining effective business documentation in place is vital.
Most franchise agreements include an 'entire agreement clause'. This is the clause which confirms that no communications prior to the franchise agreement being executed are considered part of the legal contract between the parties. I would recommend that prior to signing the agreement, the franchisees must understand the franchise agreement.

The franchise agreement is there to polish performance and business
activities of the franchisee during the term of the franchise. It is not really designed to extract a franchisee from the system. If you are a franchisee and are concerned that the franchise agreement is silent of matters you consider important or are unclear, please make this aware to the franchisor. Changes and updates of the franchise agreement to accommodate day-to-day customs and practices are necessary from time to time. Consistency of approach protects the system and preserves franchise relations.

star franchise india
Qadeer : 20, Nov 2009 at 07:23 AM
i need a economical lawer experienced to prepare an agreement for me as i intend to Franchise my business.
Alan : 05, Mar 2015 at 10:27 PM
Such an impressive answer! You\'ve beaten us all with that!
huba suba : 27, Nov 2016 at 05:10 AM
This blog was how do I say it? Relevant!! Finally I have found something that helped me. Thanks a lot!
Related opportunities
  • About Us: Kharya’s Brijwasi sweetshop cum restaurant chain started with an..
    Locations looking for expansion Delhi
    Establishment year 2014
    Franchising Launch Date 2019
    Investment size Rs. 50lac - 1 Cr.
    Space required 750
    Franchise Outlets -NA-
    Franchise Type Unit
    Headquater New delhi Delhi
  • Others Food Service
    About Us: Mighty Bites , a place where fried fun resides,..
    Locations looking for expansion Karnataka
    Establishment year 2011
    Franchising Launch Date 2017
    Investment size Rs. 10lac - 20lac
    Space required 100
    Franchise Outlets -NA-
    Franchise Type Unit
    Headquater Bangalore Karnataka
  • Aviation & Hospitality Training Institute
    About Us: NFCI was founded in 1990, and began its journey..
    Locations looking for expansion Punjab
    Establishment year 1990
    Franchising Launch Date 2013
    Investment size Rs. 30lac - 50lac
    Space required 3200
    Franchise Outlets -NA-
    Franchise Type Unit, Multiunit
    Headquater Jalandhar Punjab
  • Laundry & Dry Cleaning
    About Us: German Laundry stands firm as the trusted brand in Dry..
    Locations looking for expansion Maharashtra
    Establishment year 2015
    Franchising Launch Date 2019
    Investment size Rs. 10lac - 20lac
    Space required 200
    Franchise Outlets -NA-
    Franchise Type Unit
    Headquater Mumbai Maharashtra
Insta-Subscribe to
The Franchising World
For hassle free instant subscription, just give your number and email id and our customer care agent will get in touch with you
OR Click here to Subscribe Online
Daily Updates
Submit your email address to receive the latest updates on news & host of opportunities
More Stories

Free Advice - Ask Our Experts

ads ads ads ads