Part 2: What does (or should) a franchisee expect from the franchisor?
When entering into a franchise relationship, both parties – the franchisor and franchisee – have expectations of the other. It is only fair for each party to assume that the other will conduct the relationship in a fair and ethical manner, but what does this actually mean?
The franchise relationship is governed by prevailing and relevant legislation as well as the franchise agreement, and from the outset, each party hopefully understands their roles and responsibilities.
It can be said that because the franchise agreement is drafted and initiated by the franchisor, an unequal distribution of power often exists which can result in opportunistic or unscrupulous behavior by the franchisor. In other instances, dubious or unethical behaviour by franchisees can result in tension and dispute.
But it goes beyond all this as common sense also comes into play. It is not always about what is in the agreement as the expectations of each party should also be considered. The expectations of both parties should be established and discussed from the outset, i.e., before either party signs the agreement and any unrealistic or untenable expectations addressed. From there it is important that the parties manage the expectations to avoid disappointment.
1. Full disclosure and transparency prior to entering into the relationship
In the same vein as the franchisor expecting the prospective franchisee to do his / her homework, the prospect should expect full disclosure and transparency from the franchisor prior to signing of any legally binding agreement. The prospect should not find him / herself in a position where the agreement has been signed and monies have been paid over, and now there are other commitments – especially of a financial or contractual nature – that he / she was not made aware of.
Information pertaining to dealing with the franchisor’s approved / preferred suppliers, entering into third party contracts such as computer software support, details addressing what the franchisee can and cannot do with the brand and how he / she may market the business are all important issues that must be communicated upfront. A franchisee does not want any surprises later on as then he / she is quite within his / her right to say, “I did not know” or “I was not told”.
2. Ongoing training and support that adds value to the business
Gone are the days where the franchisor’s quality controller would just drop into the franchisee’s business for a quick visit and a cup of tea. Franchisees expect that the franchisor and its team add value to the business.
Support visits should be agreed and diarised ahead of time and a clear agenda established so that the meeting is structured and not a waste of everyone’s time. Specific concerns of both parties must be addressed, and the details of the meeting should be recorded with action timelines and responsible parties noted so that effective follow up can take place. This must then happen.
Training requirements should be addressed on an ongoing basis and should in fact be included on the agenda for every formal visit. Training provided by the franchisor should be specific to the needs of the business and address the main areas where franchisees or their employees are not achieving key performance areas or franchisor / customer expectations. Training should not be done for the sake of training.
3. Professionalism and respect
Franchisees understand that they may be a small cog in a bigger wheel but as an independent business owner – someone who has invested a lot of money, time, and effort into the franchised business – they want to be treated with professionalism and respect. In fact this is the mutual expectation of both parties and if each party always tries to assess the situation from the other’s viewpoint, you will achieve a win-win outcome.
Professionalism and respect extend to the people employed in the franchisor’s and franchisee’s businesses. Although the franchisor support staff may address operational issues when “in-store” it is not their role to reprimand or discipline the franchisee’s employees. Doing things like this correctly and respecting the boundaries go a long way to building respect and being professional.
4. Ethical and fair dealings
Although we often state that franchising is not a democracy, franchisees want to know that all decisions, rules, and obligations implemented in the business are fair and beneficial to the franchisees.
From the franchise agreement – which should be fair and equitable – to other arrangements and decisions that the franchisor makes for the business, franchisees want to feel that the franchisor has considered the impact of its decisions on all of them.
For example, the franchisor identifies a supplier for the business and negotiates terms and pricing on behalf of the franchisees. Franchisees want to be assured that the best possible terms and prices have been negotiated on their behalf. Taking this one step further, if the franchisor negotiates a rebate to be paid, it should be upfront with the franchisee in this regard too.
5. That policies and rules are applied fairly and consistently
It is the franchisor’s remit to establish policies and procedures for the business and to ensure that they are enforced. An ethical business practice is not tolerating unacceptable behavior from any franchisee within the network, while at the same time, showing the consequences of not following the policies and procedures. Franchisees expect that all policies and rules are applied consistently, and that no favouritism is shown to certain franchisees.
It is expected that the franchisor holds employees, and itself, accountable for improper conduct as only then can the franchisee be penalised for non-conformance or non-compliance.
The term leading by example may be a cliché but this does not make it any less true. It is vital that the franchisor, its management team, and its staff always exhibit ethical behavior and in all dealings with the franchisees and other parties involved in the business. Ethical business practices from franchisors and franchisees help maintain a positive business and public image.