Life is not perfect – there are franchise breakdowns.
Anyone who knows me or has read my books on franchising or indeed the numerous articles, blogs etc on franchising will know that I am a staunch proponent of franchising, a great supporter of the whole franchise concept and generally a positive bloke!
However, I am not naïve and recognise that sometimes the relationship breaks down.
SO, I thought I would write ONE article that examines the consequences of a franchise divorce and the questions / options we need to consider.
I will start off by saying that in my 30 years in franchising I have been fortunate to have had very few ‘bad’ experiences with franchisees. We’ve had a couple of occasions where the franchisee has broken the Franchise Agreement and we have had to clean up a messy situation – but these have been very few and far between.
The worst experience is not when a franchisee goes ‘rogue’ – that is rare.
No, it is when a franchisee decides that they will not follow the system or turns out that they are simply lazy – both instances sap your resources and your energy.
Scenarios:
The following are the three most common scenarios a franchisor faces from a non-compliant franchisee.
- Can’t be bothered.
There is little that you can do if the franchisee is just not prepared to put the effort, energy and hard work into making the business work and so we would look to meet with the franchisee and encourage them down an ‘exit planning’ route.
- Won’t work the system.
If the franchisee has gone ‘off piste’ then out first course of action is to meet up and discuss the situation, go through a review of the business, work with them to prepare a Business Plan going forward and then show how working within the system can help to achieve the Business Plan objectives.
- Breach of the Franchise Agreement.
- There are different types of breach.
If the breach is minor and is remedial then we would meet up and point out the breach to the franchisee and work with them to remedy such.
If the breach is continuous or is of such a serious nature that it cannot be remedied, then you have a choice of going down an ‘exit planning’ route or simply cancelling the Franchise Agreement.
Cancelling the Franchise Agreement is a final resort.
A question often asked is ‘would you ever sue the franchisee for breach of contract’?
A good friend of mine who also happens to be a foremost franchise lawyer once advised me to litigate only as a final and desperate measure.
Any time you go ‘legal’ in any situation the ONLY winners are the lawyers and frankly that is bad for the franchisor and bad for the franchisee.
No matter what the breach I would always take the option of meeting up first and if that doesn’t work I would try mediation or arbitration before I go to court.
I have gone to court on a couple of occasions (and won) but frankly it is not one of life’s most uplifting experiences. Plus, it’s expensive.
Preventing a divorce:
If there is a strong relationship between franchisor and franchisee AND the franchisee can see value in the franchise and values the input from the franchisor then there will be no divorce.
To this end, I don’t look at what a franchisee should NEVER do. I am more concerned about what the franchisee SHOULD DO if they want a robust, successful and long-lasting business.
IF that is their objective then the best way of achieving this is to work closely with the franchisor, be passionate about the brand, follow the system that’s been developed, meet regularly with the franchisor to review the business plan and attend all opportunities to meet with other franchisees and share best practice.
Providing wiggle room for a franchisee:
It does depend on the franchise of course, and in some cases, there is absolutely NO wriggle room and the franchise is effective a licence to do exactly what it says in the franchisors’ Operations Manual.
However, I have been involved in business-to-business franchising for the last 30 years and certainly in the case of many business-to-business franchises there is room for ‘self -expression’.
A core component of B2B is building relationships with customers and whilst you can systemise the process and the methodology you MUST allow (in fact we encourage it) a franchisee to present their own character and their own passion.
After all it is they who are forming the relationship NOT the franchisor.
Conclusion:
I have come across very few instances of ‘franchisee misconduct’ or franchisees going rogue and I regard all my franchisees as my spouses and so always aim to nip any ‘misconduct’ in the bud long before it festers.
The franchisor needs to build a close relationship with franchisees – to meet personally with them on a regular basis – to encourage all franchisees to come to corporate networking events and to share best practice with their peers.
It is true that NOT ALL franchisees will want a personal relationship with the franchisor themselves, so you need to encourage others in the organisation to have that relationship.
In a couple of instances, I’ve had franchisees who prefer to work in their own bubble and be isolated.
I’ve never had a problem with that BUT I have always maintained the same level of communication to them and given them the same access to the system, tools and meetings as all other franchisees.
Remember, there is no such thing as a ‘bad franchisee’ – there are only people who are either in the wrong franchise or people who should not be working for themselves.
It is very difficult to spot the characteristics, because if people really do want this franchise and they have convinced themselves that this is the right opportunity then they are probably going to convince the franchisor.
We have a practice where we do a telephone interview, followed by a 1-2-1 meeting at our offices and then we insist that they speak or visit our franchisees and we ask existing franchisees for their input.
BUT even with such a protracted process we have still occasionally ended up with the wrong franchisees and when that happens you need to move quickly to help them through the ‘exit process’.
Do franchisees sometimes leave the system – either on their own volition or through encouragement – YES.
BUT is divorce avoidable? In 99% of cases YES.