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Advisory 2012-12-13

Trust holds key to profitable franchise biz

A successful franchise business stands on the pillars of trust between the company and its franchise partners. The franchisor entrusts a franchisee to grow and protect his brand while a franchisee hands over his livelihood to the brand owner. Read on...

By Rita G Chauhan Sub-Editor

The success of a franchise depends upon franchisor-franchisee relationship. One of the most important factors for maintaining a successful relationship between them is ‘mutual trust’. A franchisor offers his brand’s reputation and business model that took years of hard work for him to establish. Similarly, the franchisee invests capital and infrastructural resources in the same believing that the brand’s promises will be delivered and he will own a profitable venture. A healthy franchise partnership requires that both the brand and its partner understand each other completely and maintain the mutual trust between them. Most franchise professionals are of the view that mutual trust between the brand and its franchisees is the back bone of the success of franchising business model.

Bond between franchisor & franchisee

As franchising is related to faith, generosity, openness and interdependence between both parties, building all a strong foundation on these values immensely contributes to the brand’s over all development and success. From the very beginning, plenty of effort should be made for developing a sound business relationship. Honesty, truthfulness and clarity are vital for forming a strong franchisor-franchisee bond.

The process of trust development

When both parties meet first time, they should create an environment where they can analyse each others’ character as well as capabilities. Healthy discussion about the business objectives and developmental plan should be discussed in detail. Franchisor extends his brand name and reputation to his partners. Therefore, he must check the franchisee’s potential and ability to operate his business model efficiently and successfully. Likewise, the prospective investor should also make sure that is he is able to fit in existing business structure.

Once the franchise agreement has been signed, both parties work as partners to grow the business further. Furthermore, ongoing effective communication is essential in every association for better results. Franchisees must adhere to the company’s reporting system as it helps to improve the franchise system. On the other hand, franchisor should welcome franchisee’s suggestions on potential marketing opportunities. This helps in building mutual respect and reliance between them.

Impact of lack of trust

Trust as a quality does not come naturally to most people and it must be earned. Initial phase of business development is critical for a new franchisee as he has a number of challenges to face. Effective communication and collaboration helps creating trust between the two. Sometimes franchisee and franchisor may disagree on certain issues which creates conflict. Besides, lack of trust may hamper communication and this can impact the business adversely. Franchise agreement includes terms and conditions that bind both franchisor and franchisee but they have to work closely to build up reciprocal trust.

Build trust to grow and succeed

The long term objective of any franchise system is profitability and personal satisfaction of all partners. The process of trust building in the franchise business model can be initiated by the franchisor. He should communicate the business goals and growth plan to the franchisee. He should try to create a culture in which the franchisees feel themselves as a part of the business. Franchisees should also feel free to speak their mind and share their opinions with the franchisor. The brand owner should deploy an effective complaint mechanism to identify franchisee’s genuine grievances try to readdress the complaints satisfactorily.  For this, ongoing communication, meetings and training sessions will definitely help to build up the trust among franchisor and franchisee.

It is noteworthy that the franchisee also has an important role to play in trust building exercise. He needs to follow the rules and regulations of a franchise system and perform the tasks as expected by the franchisor. In case of failure, he is liable to breach of trust and this can severely damage the relationship. In case, the franchisee wants to give any suggestion that would contribute to the brand's growth, he should contact the company headquaters directly. 

Conclusion

To conclude, franchisee/franchisor relationship is centered on trust, that increases ability to work together and the desire to achieve common goals. However, the franchisor needs to pay particular attention to develop trust in the franchisor-franchisee relationship from the very start of business.

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