For many people who consider opening a franchise business, the relationship and intentions of a franchisor are often a serious concern. I believe that this is due to the large number of legal issues that have received much attention in the media where relationships between franchisees and franchisors end up in the courtroom.
An example in relatively recent history is the lawsuit against Dunkin Donuts by franchisors whereby franchisees claimed that Dunkin Donuts took insufficient action against competition from Tim Hortons which caused the complete demise of the Dunkin Donuts brand in Quebec. The franchisees were awarded $16.4 million.
The relationship between franchisors and franchisees has had a turbulent history. But does it have to? Franchisors and Franchisees really do have one common goal - to grow a business that generates sustainable profits year after year. If a franchisee is successful, a franchisor will invariably benefit.
It is important not to oversimplify this issue. Sometimes litigation is necessary. However, if franchisees and franchisors do their due diligence up front and maintain a strong relationship, they will quickly realize that they have more in common than they do differences.
As I suggested in my last blog post, a franchise is a partnership. There are mutual responsibilities of both franchisors and franchisees in the partnership. I realize that this is contrary to what many franchise owners believe; a good relationship between franchisee and franchisor requires both parties to work on the relationship.
How Franchisors Can Help
Franchisees often complain about a lack of resources to run a successful business. People often do not realize the amount of work behind the scenes that go into running a franchise business.
Franchisees will have varying levels of business knowledge. Some will have years of experience in similar businesses while others will have very little. Small businesses face an overwhelming number of problems outside of serving customers.
From a backoffice standpoint, bookkeeping can be an additional headache that small business owners have little experience with. Bookkeeping can keep your franchisees from serving customers and growing their business. So it may be a good idea to provide a solution to this common backoffice problem. You do not have to offer this service yourself, but you can partner with a service provider on this. This will also help you get access to better quality, timely information from your franchisees.
In addition, it will be a good idea to consider fostering a culture of idea sharing between your franchisees. Too often, franchisees become hostile to one and view each other as competition. Facilitating forum discussions for franchisees to collaborate will help to achieve this. However, it is a good idea for you, the franchisor to stay out of these discussions to create a culture of openness amongst franchisees.
What Franchisees Can Do
Franchisees should realize that a strong relationship with head office is beneficial in the long run. Some may see this section as common sense, but I find it surprising how hostile franchisees can be towards their franchisor. Franchisors will naturally prefer to work with franchisees with whom they have a good relationship.
Actively participate in discussions with your franchisor about the health of your business and be transparent about your challenges. At the same time, do not be the franchisor that complains incessantly about new locations and a lack of business.
While your franchisor can control brand perception and higher-level brand issues, you have a direct impact on the profitability of your location through a direct relationship with customers. Focus on customers and your business will thrive.
Remember that consumers are generally lazy. As long as you do not give them a reason to travel to other franchisees, they likely will not if your location is more convenient. You need to accept that if the brand is strong that other locations will open. Make sure you are comfortable with this before you get into business and know your territorial rights. Then, it is best to embrace the idea that as the pie grows, so will the brand, and in turn, so will your business.
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