The Guide to Understanding Franchise Partnerships

Modified on 09/04/2021 18:10:07 - Published on 12/04/2018 17:30:00

Starting a franchise unit with a business partner isn’t for everyone. But those who do choose this route to entrepreneurship can share the investment cost, stresses and celebrations with someone else as they build their business. Here’s our guide to franchise partnerships.

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Before we get into the details of franchise partnership, let’s explore the definition of the term… 

What is a franchise partnership?

While many people opt to invest in a business as an individual, others prefer to join forces with one or more entrepreneurs, forming a franchise partnership. You might choose to launch a unit with a friend or family member, or someone you’ve come to know through business networking events. 

When you establish a franchise partnership, you may have to appoint a designated decision-maker. Franchisors are often reluctant to risk coming up against disputes and time-consuming communication processes, so they refer to an individual representative for the partnership. 

How to form a franchise partnership 

The people you choose to go into business with will have a significant impact on the success of your venture. Some people work alongside a close friend or family member, but this arrangement can put unnecessary pressure on your relationship and limit the level of professionalism within the business. 

Alternatively, you could look for a trustworthy business partner who has skills and experiences to complement your own. 

Once you’ve chosen one or more people, you can apply for a franchise investment opportunity. The franchisor has the ultimate say in who represents their business, so they’ll need to approve everyone in the franchise partnership before you can launch a unit. 

The problem with any business partnership really comes down to what happens when a decision needs to be made and the partners don't agree on what the decision should be. You absolutely must decide how to handle this situation before the problem arises, or you're in for a world of pain when you get to that point.
—Jeff Elgin, CEO of FranChoice Inc.

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How to make a franchise partnership work 

1. Develop a relationship based on effective collaboration and trust 

Like any business, a franchise unit can only succeed with strong leadership behind it. Make sure you team up with someone you can collaborate with effectively, and who can fill in any gaps in your knowledge or skillset. 

Also, you must be able to support and trust each other. Open communication is vital when it comes to developing a business, particularly if you need to report back to the franchisor. 

2. Choose partners who share your goals and values

When you buy a franchise unit, you probably have an idea of your long-term goals and aspirations - but it’s important your business partner shares them. If you’re working towards entirely separate targets, you’re bound to come unstuck sooner or later. 

Having the same core values is equally important. Running a franchise unit can be tough at times, but passion for your business will get you through. Of course, you may have differing opinions once in a while, but your shared values and key mission will help you continue pushing forward to reach your end goal. 

3. Clarify the terms of your partnership before signing

Like any relationship, the connection you have with your franchise partner will evolve. For this reason, it’s crucial you clarify details such as financial contributions, roles, responsibilities and exit strategies right at the beginning. 

If you can’t agree on these issues before you go into business together, you might end up jeopardising the success of your unit in the long run.

4. Leave your ego at the door

Usually, you need an entrepreneurial spirit and a big dose of courage to enter into a franchise agreement, so you and your partner may have strong and determined personalities. While these traits can help you succeed in business, they can also put strain on a franchise partnership. 

The only way for the partnership to work is for both parties to act with understanding and humility. Rather than focussing on your own agenda, you and your partner should do whatever it takes to help your business develop and grow. Always keep the collective, and not the individual, in mind. 

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How to end your franchise partnership

• You could transfer the business to your partner (or let them transfer it to you) - If you or your partner decide to leave the franchise, you’ll need to officially transfer your business into the future owner’s hands. Usually, the franchisor has to approve the new arrangement, so you should inform them as soon as you make your decision. 

• You could sell the business and both move on - If no one wants to continue running the business, you could sell it on to a new owner. Again, you’ll need to get consent from the franchisor, but they can’t withhold it unless they have a good reason. Normally, they also have the first right of refusal to buy your franchise unit, but if they waive it, it’s down to you to find a suitable owner. The franchisor may have an interested party who wants to buy your business, but it’s likely they’ll charge a fee for finding your replacement. Either way, the prospective franchisee will have to go through the same recruitment process as you and your partner did.

Find your purpose by running your own business

Here at Point Franchise, we empower budding entrepreneurs to take control of their career and join a franchise. With the backing of a tried and tested model, and plenty of expert support, you have the chance to develop a profitable and fulfilling business. 

Ready to get started? Find your perfect investment opportunity today by taking a look at our current openings. You can use the main menu to filter the selection by location, cost or sector. 

Alternatively, keep broadening your knowledge with our ever-growing selection of franchise guides.

Alice Tuffery, Point Franchise ©