Franchise advisory councils: who needs one?

A breakdown on the pros and cons of forming a franchisee council from Goldstein Legal.

Opinions on the merits – or otherwise – of franchise advisory councils are famously divided.

For some franchisors, their franchise advisory council is an integral part of their operational structure, easing decision making and maintaining co-operative relationships with their franchisees. But there are franchisors who regret ever having set one up, seeing their franchisee council as a militant agent of resistance in their network.

So how did franchisee councils come to be such a contentious subject? Roz Goldstein, founder and managing director of Goldstein Legal, a franchise specialist law firm, says:

“The answer lies in how franchisors have used them. Franchisee councils can be a superb means of engaging with your franchisee network. But if the council is not managed carefully, franchisors can end up feeling like the tail is wagging the dog.”

“Franchisee councils can give franchisees a real sense of involvement with the system, because they feel that their voice is being heard”

How do you go about setting up a franchisee council?

There is no statutory structure for a franchisee council and they are not obligatory. Put simply, a franchisee advisory council is a group of franchisees, established by the franchisor, that meets on a regular basis with members of the franchisor’s management to exchange information and ideas about the franchisor’s system and the network as a whole.

The franchisor needs to create a framework for the council and lay it out in a set of bylaws, or constitution. There is considerable flexibility as to what the bylaws should contain, but the following are important issues to cover:

• The specific objectives and remit of the council
• Who is eligible to be a member of the council
• How members are elected by franchisees
• For what term are members elected, when they retire and how they can be removed
• How officers (e.g. chair, deputy chair, secretary) are appointed
• How often meetings take place and where
• Who funds the cost of the meetings

The bylaws (or constitution) do not need to take the form of a long, complex document. Two or three pages of plain language will suffice.

The International Franchise Association (IFA) published an excellent paper, Advisory Councils: Effective Two-Way Communications for Franchise Systems (1995). It is freely available online. It sets out the things to think about when setting up a franchisee council, and provides some useful template documents.