Frequently Asked Questions about Franchisor-Franchisee Relations
A franchisee-franchisor relationship is like a marriage, and should be treated as such. That’s according to leading Australian franchisees*. Just like marriages, franchise relationships sometimes deteriorate. Here’s how to Resolve Franchise Conflict…
What are the major sources of conflict between franchisors and franchisees?
According to the Franchising Australia Survey conducted by Australia’s Griffith University**, common sources of franchise conflict are:
- Lack of franchisor support – not surprisingly, franchisors think they give more than enough support to their franchisees, whereas franchisees think they don’t get enough
- Compliance with the franchise system – while franchisors require strict compliance with their franchise systems, franchisees often perceive this approach as rigid and stifling
- Franchise fees – many franchisees begin to begrudge the payment of franchise fees, voicing concerns over the lack of support received in relation to the fees paid. Franchisors, on the other hand, regard under-payment or non-payment of royalties as a major breach of the franchise agreement.
- Communication problems – as in any relationship, a lack of communication can become a bone of contention between parties.
- Misrepresentation – From the franchisor’s perspective, misrepresentation by the franchisee usually relates to royalty fees, for example, a franchisee claiming to have had fewer sales than they actually did and under-paying. Franchisees often complain that franchisors offer less support and training, and there is less earning potential, than that which was represented to them when they signed up.
- Marketing issues – there is often disagreement over the way in which marketing funds are spent.
- Profitability – who is responsible for the profitability of a particular franchise can blow up into an argument; franchisors fingering a lack of initiative on the part of the franchisee, and franchisees citing the franchisor’s lack of support.
How can I best address franchise conflict?
Says the Franchising Australia Survey, franchisors and franchisees usually deal with franchise conflict and disagreements via their attorneys, quickly moving on to mediation and litigation. While there are times when it’s best to let your lawyer do the talking, you should always try to address franchise conflict in a constructive manner before breaking out the legal eagles. Here’s how:
- Meet with the other party in person and kick off the conversation by pointing out the common ground between you
- Give the other party your full attention and listen to their grievances, without interruption
- Ask the other party for their suggestions to remedy the situation, and seriously consider their proposals
How can franchisors and franchisees promote good relationships with one another?
You should both:
- Keep communication channels open
- Know the franchise agreement inside out
- Be passionate about growing the franchise
- Act with honesty and integrity at all times
- Deliver on your promises.
*Garry Richards (Franchisee – Worldwide Online Print) and Nader Seifer (Franchisee – La Porchetta), speaking at the Franchise Council of Australia’s Franchise Forum at the National Franchise Conference, Sydney, 2008 **From ‘Franchising Australia Survey 2010’ and ‘Towards Conflict Resolution Australian Survey 2009’, published by the Asia-Pacific Centre for Franchising Excellence, in partnership with Griffith University.