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The perils of the comfort zone for both franchisors and franchisees

Updated: May 16, 2023

The comfort zone is one the most widespread and misunderstood franchise problems. It can

make franchise dispute resolution very difficult. It can affect any size of network. It is most

prevalent in those where branches have a relatively low sales turnover, particularly where

new start-ups commence trading as a single person. Man-in-a-van franchises are an obvious

example.


The problem will not become evident until a branch has reached a level of profitability that

satisfies the aspirations of the franchisee. At that point the drive for further growth and

greater financial reward can begin to be replaced by a desire for a better work/life balance

and time to enjoy the fruits of the effort already expended. This situation may be fine for the

franchisee but it is highly unsatisfactory for the franchisor who sees the income growth from

the branch flatlining and demand for the products or services outstripping supply. This will

also damage the brand.


In this situation an ethical and responsible franchisor will provide guidance, support and

incentives to motivate the franchisee to expand the capacity of the branch. Generally, a

franchisee who is firmly established in a comfort zone will be unreceptive and want to

continue the status quo. Friction grows and becomes a dispute and the second phase of the

phenomena kicks in.


A franchisor in that situation would only have a limited number of options, some of which

would probably be stated in the franchise agreement. Unfortunately, remedies such as the

issuing of breach notices and the ultimate termination of the franchisee would bring as many

negatives as they would solutions. A dispute invariably causes disquiet in a network, further

disrupts branch performance and negatively impacts customers. A termination would send

even worse messages to the other franchisees and would hamper the appointment of a

replacement. It would also make franchisee recruitment in virgin territories more difficult

because an ethical franchisor should always disclose the number of branch failures to

prospective franchisees.


Solutions to the problem will vary, depending on the nature of the franchise and the industry

in which it operates. However, one thing is common; it is easier to eliminate or at least

minimise at the initial planning stage, before the franchise commences any recruitment.

Areas involved are the mapping of territories, the operations manual and the franchise

agreement. Careful consideration should be given in each of these. As is often the case,

anticipating and avoiding a problem is much easier than solving it.


Regretably, few if any, franchise consultants offer advice to franchisors about the comfort zone when that are at the planning stage of a new business. Few solicitors pay sufficient attention to it when drafting franchise agreements.

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