top of page

How to avoid a franchise dispute.

Updated: May 16, 2023


discussing a franchise dispute

The relationship between a franchisee and a franchisor is inherently unstable because although the franchisor isn’t the boss and the franchisee isn’t the employee it can sometimes feel that way.


The perception is that the franchisor calls the shots and the franchisee must comply with the franchise agreement and follow the methods stated in the operations manual.

That is because in order to have a successful business the franchisee must comply with the manual. But emotionally, for the franchisee who has decided to be their own boss, this doesn’t always feel right because they didn’t sign up to be dictated to.


To make matters worse, the franchisee has to operate in the customer facing area of the business where customers can be demanding; and sometimes unreasonable. Supplies of product don’t always arrive on time, vehicles break down, staff get sick. The day to day effort needed to be successful can be a strain. All this while the franchisor appears to have a much easier life, sitting in an air-conditioned office, raking in the management service fees each month. It’s not hard to see how this can lead to resentment.


The franchisor's side of the relationship is always overshadowed by the knowledge that it is impossible to satisfy all of the franchisees, all of the time. There is always a possibility that a disgruntled franchisee will set up a WhatsApp group or use social media to air a grievance. The franchisor may be informed about this but they have no right of reply. The resulting sense of injustice can lead to resentment. Conversely, as a franchised business grows, the senior management may become detached from the franchisees. The same thing can happen if a franchised business is sold, especially to an arms-length investor or to venture capitalists who don’t share any affinity with the franchisees.


So; how can this toxic state of affairs be avoided. The simple answer is by the franchisor being fair, consistent, transparent and continually communicating and engaging with the franchisees. Here are some ideas and examples.


Regional meetings.

Meetings to avoid franchise disputes

· Make them geographically accessible and conveniently timed.

· They should be as intimate as possible. If franchisee numbers permit, the optimum number should be between 10 and 20 franchisees but in addition also invite spouses and partners.

· Make attendance mandatory, give plenty of notice, make reminder calls.

· Make the meeting structured, interesting and fun. Start with a meeting agenda and a company progress report since the last meeting.

· Include a head office departmental debrief; marketing, finance, operations.

· If appropriate, incorporate training; possibly in breakout sessions.

· Have a secret ‘awkward questions’ box. Answers by the CEO or other key managers. This is the ideal, and probably the only, opportunity to counter fake news.

· Consider having a guest speaker. This could be a supplier or a key customer .

· Make regional awards for best first year progress by a new franchisee, best customer service, best overall growth. The award should be tangible such as an engraved trophy plus a bottle of wine or champagne.

· Have a meal together afterwards, obviously at no cost to the franchisees.



Annual conference (depending on the size of the franchise)


Company annual conference

· Much the same format as the regional meetings but on a larger scale.

· Involve as many head office staff as possible to unify the entire business.

· Incorporate some socialising and fun events such as golf, clay shooting or a session in a health spa.

· Have a gala dinner. Ideally make it black tie.

· Present a variety of awards that are applicable in one way or another to all the franchisees.


Regular business review at head office for each franchisee.

.

Publish a regular newsletter.

· Include league tables. Welcome new branches.

· Notify staff changes and new starters at head office.

· Best examples of customer praise.


Random positive comments on the telephone from the CEO.


Regular updates to the operations manual.


Set up regional franchisee advertising steering groups.


Encourage buddying and mentoring between franchisees.


franchisee and mentor relationship

The franchisor should appreciate that franchisees are not in a position to take responsibility for developing a harmonious business environment for the whole network.


Few will speak out and denounce a fellow franchisee who spreads fake news or negativity on social media. It is therefore incumbent on the franchisor to take the initiative and continuously work on maintaining the goodwill of the franchisees.


Above all, the franchisor should promptly deal with complaints as they arise. Even small issues are important. It is all too easy for a relatively trivial matter to escalate into a major dispute if it isn’t resolved.

 


17 views0 comments

Comments


bottom of page