Franchisor vs. Franchisee – Should it really be a this way?

All fresh franchisors start with optimism and faith. They believe the relationships they are going to establish with their franchisees will be perfect. They are confident that whatever troubles will arise, will be quickly addressed and resolved in the best possible manner. I doubt there is a franchise business owner who pictures poor communication between franchisees and franchise management and units closed after court fights.

On daylight things start to look different. Many franchisors soon realize they are unable to serve their franchisees the way they have originally planned. When the franchisee number starts to grow, things just take a turn into the worst. Now franchisors need to work with much more people, solve much more problems and be more flexible. And let’s face it – not everyone is up to this challenge. Many find themselves stuck into a vicious cycle of problems; they cannot stop their growing business and they cannot solve the issues that are piling.
Luckily there are several easy steps that every franchisor can take to reduce the chance of finding themselves into the above scenario.

How to solve problems before they have occurred?

• Be firm but fair. Once you set the basic foundations of your franchise business, stick to them. You will be exited when the first potential franchisee knocks on your doom and you may be tempted to do some tweaks on the operational manual or to adjust your fees just to make sure you will land the sale. Ask yourself – could you do so if you had 100 franchisees? Could you reduce your fees or royalty payments every time you want to land a sale? The answer is no, you cannot, because your business will fail. You must take into consideration the specifics of each sale but your decisions must be economically and not emotionally driven.
• Communicate. Every successful relationship between a franchisor and their franchisee is based on good communication. You may find it difficult to keep up with this once your franchisee number increase, and this is why you can set some standard procedures that anyone working for you can follow. Other times you may not want to communicate as the relationship with one of your franchisees has started on the wrong foot. Whatever the case you must try to make things work and you are the one who should initiate the communication process.
• Be patient. Sometimes it may seem that a franchise unit you have just sold is not performing according to your expectations. Instead of reaching out to call your attorney, stop and check if your impressions are really true. Review the franchisee balance sheets and meet the owner. May be you will really find a reason to worry or maybe you are just being impatient and unrealistic. Set a system (if you do not have it in place already) that will automatically alarm your financial department if the things are not going according to plan with any of your franchisees.

Keeping Franchisees Happy – the Secret for a Successful Franchise Business

Every successful franchise business stands on a successful relation between the franchisor and the franchisees. This relationship is largely dependant on the way the franchisor has set their business but it is also relies on the communication between the parties involved.

Positive and constructive communication is one of the fundamentals for any business partnership. Unfortunately in many occasions franchisors and franchisees alike fail to keep a nice and fruitful communication channels. After this happens it is a matter of time when problems will start to arise. Strangely enough, a large amount of arguments and difficulties may be easily predicted and overcomes before they have even happened. All thanks to communication.

How to overcome this, at a first glance, easy challenge? The best way to overcome them is by seeking the roots of the problems. Here are some tips that may help you.

Franchise – franchisee relationship communication.

• Do not let yourself down the slippery road. Many franchise owners fail to notice problems until it is too late. And even than, they fail to recognize the real reason for the troubles they are experiencing with a certain franchisee. The first call to action is to get in touch with their legal advisor and look at the franchise agreement about ways to terminate the contract. And let’s face it – this is not a positive turn around for neither of the sides involved in the process.

• Step into your franchisees shoes. Many of the misunderstandings arising between franchisors and franchisees are actually “provoked” by franchisors themselves. A common reasons for conflicts is when the franchisee thinks the franchisor should do something but the franchisor doesn’t The actual “doing” may be just about anything – from increasing advertising to reducing the royalties on some products. Whatever the case you, as a franchisor should be proactive. Keep the communication line open, detect problems early note and real. It doesn’t mean you need to agree with everything your franchisees want, but at least you will be able to address the issues early enough and settle one way or another.

• Money troubles. Definitely the most frequent arguments between franchisees and franchisors are related to money. When a franchisee doesn’t seem to take off to start making money or when a franchisee stops to be profitable, franchisors simply pick up the phone and call their layers. Of course it would be quite unpopular decision to keep an unprofitable franchisee however you may want to look for the reasons why this is happening. Better yet, you may want to be able to detect that money problems are raising on the horizon for any of your franchisees. Saving a franchise unit, after all, means more profits for you.

• The flat line. There are cases when, whatever you do, no matter how proactive you were or how good the communication was between your franchisee and you, the business relationship has to come to an end. Make sure you are able to recognize these cases and close the unit down with minimum drama.

Challenge Your Franchisor Problems

Every day thousands of franchise owners experience the same problems and worries. Some of these challenges are pretty easy to overcome while other require a serious approach and hard work.

Detecting a problem is always the first step required to successful solution. Many franchisors fail here – they are either unable to detect the real cause for the problem or don’t address it in an appropriate way. Here is a selection of some of the most notorious franchisor problems along with the most appropriate solution for each one.

A list if franchisor problems and how to challenge them.

• Royalties payments. Many franchise business owners find it really difficult to control their royalty payments. Usually they need to way until the end of time, see the sales information of each store, calculate the royalties and than wait for payments to be made. If there is a large number of units, checking them all may really become problematic. A good way out of this is to try systemizing and unifying things as much as you can. Start to use software that will help you compile sales data and track payments.

• Communication. Often franchise owners feel their franchisees are reluctant to communicate effectively. Even if they can sense the problem, it is somehow impossible to open a good line of communication with the franchise unit owners. This problem can quickly lead to a business disaster. The solution is quite simple. You should train all your personnel to be able to detect some of the most common problems a franchisee may experience and approach them for a discussion and advice. If this doesn’t work you should be able to step in and open a conversation with any of your unit owners. Another approach is to use the services of a franchise counsel. These services have becoming very popular and they can really help when communication issues appear.

• Poor sales. If you detect that the sales of any of your franchisee have dropped, you need to step in and take action right away. There may be several reasons why this particular unit is not performing. The reason may be connected with competition, with poor customer management, poor product quality and so on. While the competition factor is somehow hard to tackle, the other two reasons actually point to incompliance with the franchisor operations manual and your business practices. Don’t jump to any conclusions before you reach the root of the problem. For example if your franchisee has lowered customer service, you need to try to understand what led to this situation rather than just shut the unit down.

There are much more potential problems a franchise owner could face. Rather than seeking ready made solutions, franchisors should learn how to prevent problems from occurring and how to tackle the issue in the best possible way. The strongest weapons in battling problems are the ability to detect problems early on, to teach your team to take action as soon as the problem arise, help all franchisee unit to perform as best as they can.