Finding a support structure

Franchise expert Manzoor Ishani looks at why franchisees and franchisors can fall out and explains how to achieve a healthy relationship

When a franchisor and franchisee are at loggerheads, franchisees give of one or more of the following reasons:

1. The franchisee’s expectations have not been met; the franchisor misrepresented the franchise to them before or at the time of the sale.
2. The franchisor failed to give the level of support expected or deserved by the franchisee.
3. The franchisor has or is dealing with the advertising contributions received from its franchisees in a way or for a purpose of which the franchisee disapproves.
4. Despite claims to the contrary by the franchisor, the concept has not been market proven.

Of the reasons listed, the most common appears to be lack of support from the franchisor.  There are a number of issues here and both franchisor and franchisee should be aware of them.

Most franchisors, particularly at the early stage of the development, are under some pressure to sell franchises. In doing so they may be a little enthusiastic about earnings claims, the strength of the franchisor’s brand and delivering customers to the franchisee, for example. 

Franchisors should, as a matter of policy, when making promises both in the early stages and ongoing, be careful to ensure that they do not promise more than they can deliver. What may seem to them to be a reasonable demand on their resources at the time of their making such a promise may subsequently prove to be a strain on their resources as the number of franchisees grows.

In some cases franchisors have failed to give sufficient support to their franchisees, not because they have consciously decided not to do so, but simply because they have forgotten their contractual obligations to their franchisees. Franchise agreements contain a list of obligations, which franchisors are required to honour. Franchisors should review their franchise agreements on a regular basis, not only to refresh their memory as to what they have promised but also to satisfy themselves that such a list is accurate and if not, make changes (in the light of experience) to contracts to be used in the future.

Apart from strict contractual obligations, there are a number of other matters of which a franchisor should be aware, and actions that a franchisor should take, as they form part and parcel of what is increasingly regarded in ethical franchising as a minimum level of support for franchisees because:

(a) It is deemed to be best practice.
(b) Most franchisees (irrespective of the nature of the franchise) have come to expect them.
(c) Most importantly, because they are concerned with ensuring the future prosperity and wellbeing of the franchised businesses.Keeping in touch with franchisees, either by means of regular visits or electronic communication is important. During this process, franchisors will (if they are receptive) get a steady flow of feedback of what the franchisees’ expectations are and their strengths and weaknesses in running their businesses. 

Keeping in touch with franchisees, either by means of regular visits or electronic communication is important. During this process, franchisors will (if they are receptive) get a steady flow of feedback of what the franchisees’ expectations are and their strengths and weaknesses in running their businesses. Unless and until a franchisor is aware of a franchisee’s expectations, they are not going to be able to manage those expectations, and managing franchisee expectations is an important part of supporting franchisees.

Unless and until a franchisor is aware of a franchisee’s expectations, they are not going to be able to manage those expectations, and managing franchisee expectations is an important part of supporting franchisees.
Where a franchisor sees that a franchisee needs support in a particular area, which the franchisor is unable for whatever reason to provide, the franchisor should not be shy to sub-contract to an external organisation for specialist support, for example in producing copyright, buying advertising space, etc.In terms of performance, both franchisor and franchisee should meet regularly to assess the franchisee’s business performance by reference to criteria previously agreed between them as something to aim for and which is reasonably capable of being achieved, whether it be turnover related or improving productivity, the quality of customers, the service being provided, etc. It gives the franchisee something to aim for and provides a useful yardstick by which to measure improvement and growth in a franchisee’s business.

In terms of performance, both franchisor and franchisee should meet regularly to assess the franchisee’s business performance by reference to criteria previously agreed between them as something to aim for and which is reasonably capable of being achieved, whether it be turnover related or improving productivity, the quality of customers, the service being provided, etc. It gives the franchisee something to aim for and provides a useful yardstick by which to measure improvement and growth in a franchisee’s business.It goes without saying that training is crucial. Franchisors should not expect their obligations in this respect to have been performed by their imparted initial training to the franchisee. Whatever the contract may say, it is recognised good practice within any organisation (and franchisees increasingly expect) for the provision of ongoing training on a regular basis; this should most certainly form a part of any franchisee support package devised by a franchisor.

It goes without saying that training is crucial. Franchisors should not expect their obligations in this respect to have been performed by their imparted initial training to the franchisee. Whatever the contract may say, it is recognised good practice within any organisation (and franchisees increasingly expect) for the provision of ongoing training on a regular basis; this should most certainly form a part of any franchisee support package devised by a franchisor.

Apart from one-to-one communication between franchisor and franchisee, another important part of supporting franchisees is facilitating dialogue amongst franchisees, whether it be by way of regional meetings, franchisee associations, intranet facility or other means. If properly managed, it can produce results. Franchisees can be very supportive of each other given the opportunity, and franchisors (who can be part of the dialogue) will be surprised at how much they can learn from this forum.   

Finally, keeping franchisees abreast of the franchisor’s expectations, and what is being planned for the future of the network and the business concept, and the expectations of the network, are equally important when determining the quality and extent of support given by franchisors to franchisees.

Much is said about franchising being ‘a partnership’ between franchisor and franchisee, and that can only be true if in return for the fees paid by the franchisee to the franchisor on a regular basis. The franchisor is there not only to react to its franchisees but to be proactive to sustain its franchisees in their respective businesses to the extent that each of them legitimately requires.

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