NO-FAIL FRANCHISING WHAT YOU SHOULD KNOW BEFORE CLOSING THE DEAL

We have all heard stories about unhappy franchisees who are dissatisfied with operating their restaurant in a franchisor’s system. Many people are reluctant to even consider the possibility of franchising their restaurant concept, for fear of getting sued by disgruntled franchisees. Certainly a strong relationship between a franchisor and franchisee is something all parties would prefer; however, in many cases, this relationship gets derailed along the way, causing angst and lost opportunities for both parties. It would seem, at first glance, that both parties have similar goals. The franchisee generates more revenue (and potentially more profit) and the franchisor receives increased royalties. Yet, when you drill down a bit further, it becomes clear that both parties’ interests are not completely aligned; the franchisor is focused on the entire system of restaurants and therefore making decisions based upon what is best for the majority of units. The franchisee is strictly focused on the single unit or units he or she is operating. What is good for the many is not always good for the few. So, how can a franchisor maintain a positive working relationship with franchisees and how can a franchisee be better prepared to thrive in a franchise system?

The first step to creating a smoother relationship simply starts at the beginning. Franchisors have a responsibility to screen and qualify franchisee candidates so that those who are invited to join the franchised system are a compatible fit with the operational culture of the franchise. When the opposite occurs, and the franchisee is not suitable, the relationship will inevitably become ‘off track’. Despite several screening methods, it is still necessary for the franchisor to stay disciplined, so that idea of earning a promised franchise fee, does not result in the lowering of qualifying standards. When a franchisor uses good screening and qualifying tools, and stays disciplined to those tools, the chances of having a long-term positive relationship increases dramatically.

Good franchisors do an exceptional job of educating franchise candidates about a franchise arrangement. There is a huge misconception that franchisees “buy” a franchise, and franchisors “sell” franchises. As a result, in the eyes of an uneducated franchisee, once a franchised deal has been closed, the franchisee considers that it now “owns” the franchise and problems with the franchisor’s need to guide and protect the restaurant brand can arise.

managing partner of PROTOCOL hospitality management consultancy, provides the five pillars of a balanced franchisor/franchisee relationship

For instance, when a franchisor tells the franchisee what he/she can or cannot do in operating the restaurant, rolling out a menu, using certain marketing materials or buying certain products from certain vendors, the franchisee may object, as it is “his” or “her” restaurant. How dare the franchisor dictate how he or she should run it.

When a franchisor makes it very clear that the franchisee is not buying the franchise, but instead is being “granted” the franchise, things can go more smoothly. Under this more accurate explanation of a franchise arrangement, the franchisor helps the franchisee understand that he or she is receiving a temporary and conditional license to “use” the trademarks and operational systems that have been created and are owned by the franchisor. The franchisee comes to further