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Franchisor vs Franchisee?

by Editor ISSUE 42 — SEP/OCT 2010

Telco in a Box managing director Damian Kay says there are several steps to producing successful – and less stressful – business relationships within franchises

I am constantly reading articles about conflict between franchisees and franchisors, but conflict is not conducive to growth of the franchise system or to the franchisees business. Like most things, it is better to prevent conflict before it happens by following some of these key guidelines.

 Cash is not always king

Do not sign a potential franchisee just because they have the money – this is a recipe for disaster. If the prospective franchisee does not suit the system and they do not achieve their goals then conflict is sure to follow. The franchisee will look to blame the franchisor even though they may have done their due diligence by calling other franchisee in the system before they signed. Other factors are paramount in the total equation such as the support of friends and family and cultural fit within the franchised system. Some systems are more suited to prospects looking for a job and some are more suited to more entrepreneurial types. Choosing the right type for your system plays a key role in reducing conflict in the future. The prospective franchisee also bears responsibility for this and relying on a franchisor to be a member of the Franchise Council of Australia (FCA) is not going to help in the slightest. The FCA needs to take a greater role in educating both prospective franchisees and franchisors in identifying the suitability of the respective party.

Telcoinabox has taken a very strong stance on this and it puts their prospective franchisees through quite an arduous process including online questionnaires and profiling to ensure a good fit. The questions are weighted to ensure that we get a result that means the greatest chance of success and therefore reduced conflict. After the profiling process, potential franchisees are subjected to a three-hour interview with senior management that gives an objective decision as sales are excluded from this part of the process. We reject more than 50% of people that get to the interview stage.

 

The secret is no secrets

Franchisors should take an open, consultative approach when dealing with their franchisees. I have come across a number of systems that are very guarded about what happens at head office and do not take a consultative role with their franchisees. Again this creates conflict through suspicion and a lack of trust. Annual conferences are a great opportunity to have a open communication policy such as reserving time to have the senior management take any question from the group – with no subject taboo. This generates an environment of mutual trust. Most franchisees are business people and know that nothing is perfect and thus in most cases just want to understand that management is dealing diligently with any issues. Honesty and openness is the key in this session.

Telcoinabox has conducted these open forums very successfully since the first annual conference in 2004. We have yet to get a question where we thought “ooh how do I answer that one?”.

 

Act on facts

Survey your franchisees annually and act on the findings. By extensively surveying your franchisees anonymously each year  – I recommend once only – by an independent organisation, a franchisor shows that it cares about the thoughts and satisfaction of the franchise group about the issues affecting the system. By sharing the results of the survey and the actions that the franchisor is going to take, It goes a long way to reducing the conflicts as the issues are expressed and are not “bottled up”. It also illustrates to the group that the franchisor is willing to listen and take action.

 

Common sense

While these three suggestions are not a finite list that will stop conflict escalating out of control, they are a few key steps that are designed to increase the overall satisfaction of a franchised group, which leads to reduced conflict. It is not meant to outline how to deal with a conflict but more so prevent major conflicts within the group. Conflict is inevitable as in many cases the stakes are high. The franchisee has no doubt invested considerable financial and “sweat” equity into the opportunity and will be passionate. Letting franchisees express their passion to let them get it off their chest is one of the keys to success.

There are many organisations in the industry that provide great advice and training on these issues as well as the tools to implement the solution. We use the Franchise Relationship Institute which we have worked with recently to re-write our account management and field management job description/role to create KPIs and linking bonus structures to the annual survey. It drives the business to ensure that we are well aligned with our franchisees and in turn reduces conflict.

In more than six years of operation we have enjoyed little to no conflict with our franchisees and we are keen to ensure that it stays that way. In most cases common sense should prevail.

 

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