Overcoming conflict in the franchisor-franchisee relationship

Successful franchise businesses are characterised by strong relationships between franchisees and franchisors. There are times, however, when unresolved conflict between the two can jeopardise the business and, in some instances, even lead to the shutdown of a franchise operation, writes Sandwich Baron CEO, Sally J’Arlette-Joy.

Every franchisor and franchisee relationship incorporates rules and standards that are put into place to outline and protect the quality of the service or products the franchisee provides to the customer. This is to minimise risk and for the benefit of all parties.

A franchisee who does not adhere to the regulations and standards that have been established by the franchisor can affect not only his or her own operation, but the entire franchisee chain.

This is why it is so important to ensure the lines of communication are always kept open. The franchisor needs to be easily accessible to franchisees and ready with advice or assistance on every aspect of the business.

Some of the major causes of conflict include:
  • Money – franchisees are not always keen to pay the fees that were agreed on up-front. For the franchisor, the timeous payment of fees is not negotiable – whether the contract is for one year, five years or perpetuity.
  • Marketing – franchisors may feel like they know what marketing methodologies will work best as they are the brains behind the brand. Franchisees may feel they know the best marketing tools for the specific communities they serve. The best thing to do is to find a balance between marketing tools that can serve both the national and the local brand.
  • Product use – to save costs, some franchisees may decide to use products that are not approved by the franchisor. This does not only cause major conflict, but could also harm the brand, which guarantees adherence to certain standards for its customers.
Notably, the business owned by the franchisee needs to be operated according to the terms of the contract they have agreed to with the franchisor. This does not mean the franchisor should not be open to healthy debate and innovation that will enhance the business.

Often, the best ideas in marketing, product or service innovations can come from the franchisees, who are at the coal face every day and understand their customer base intimately. It is also important to celebrate and acknowledge the contributions of franchisees, which is why manage franchise businesses have introduced annual awards ceremonies.

Ultimately, the best relationships – whether personal or commercial – are typified by mutual respect and trust. Communication is key to keeping all parties informed about changes, potential issues and success factors. And the earlier these are raised, the better, for the individuals and businesses involved.