What Happens When the Franchisor-Franchisee Relationship Goes Sour?

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Franchise relationships - when it goes wrong

Franchisors and franchisees work closely together to build a connection based on trust and mutual respect; the success of the business relies on it. So, when disagreements occur, it can feel like a huge setback. Here’s how to maintain a strong franchisor-franchisee relationship when you reach a stumbling block. 

There are many reasons why a franchisor and franchisee may not see eye-to-eye, from a perceived lack of business support to dissatisfaction at a unit’s performance figures. 

Thanks to the strength of the franchise model, there are only a small number of disputes across the UK every year, and few of them result in a serious communication breakdown. In reality, most disagreements are resolved relatively quickly, as the franchisor-franchisee relationship is based on a shared interest in the success of the business.

How to avoid future disagreements before the contract is signed

The best way to avoid disputes is to be highly proactive. By taking the time to do due diligence before signing on the dotted line, both franchisor and franchisee can enter an agreement knowing they’ve selected a suitable business partner. 

It’s not enough to invest in a franchise opportunity after getting on well with the other party during an initial meeting or discovery day. You’ll be committing to working alongside them for years, so you should take your time in making a final decision. 

Prospective investors should speak to existing franchisees to find out what it’s really like to work as part of the business. The franchisor should design their marketing process, interview questions and candidate checking policies around their investor requirements and develop a detailed scheme if they need to recruit specialist franchisees

While it’s important to review the other individual’s credentials, the final decision should also be based on personal preference and gut feeling. If you don’t think you’ll be able to work well together for years to come, you should consider walking away. 

First steps for protecting the franchisor-franchisee relationship 

If you’ve already signed the franchise agreement and you encounter an issue, your first response should be to try to protect the franchisor-franchisee relationship. Never start discussions with aggressive accusations or demands to terminate the contract.

Firstly, it’s important to revisit the terms of the agreement and find out more about the options available to you. 

As you work to reach a resolution with the other party, evaluate your own actions and try your best to be unbiased, rather than pointing the finger. If you’re a franchisee, have you adhered to the business model? Have you asked the franchisor for more support? If you’re the franchise owner, did you provide adequate training? Or have you been too quick to judge poor performance?

Try looking at The British Franchise Association’s Code of Ethical Conduct, which encourages both franchisors and franchisees to act in good faith and deliver on promises. It highlights some of the ethical practices your counterpart should understand and follow. 

At this point, it may also be a good idea to get advice from a specialist franchise solicitor. They’ll be able to review your contract with you and offer support as you exhaust any potential avenues before considering contract termination. And if you do decide to end the agreement, they’ll help you avoid incurring fees or penalties. 

Help for franchisees - what to do when you don't get along with your franchisor

Due to the nature of the franchise model, most agreements are fairly one-sided when it comes to obligations, and favour the franchisor. They must protect their brand, but contractual clauses often lead franchisees to feel frustrated when problems arise. 

Unfortunately, when you commit to running a franchise business, there isn’t really an easy way out until you reach the end of your contract term. The franchise agreement lasts for a fixed amount of time, so, if things don’t work out as you expected, you can’t simply walk away without being in breach of contract.

If your problem could be resolved with further support and training, it’s worth discussing the issue with the franchisor - after all, you pay royalties for their expert guidance. In fact, most franchisors would be grateful if you opened up to them. It’s in their best interests to give you as much support as you need to be successful, as your profitability will ultimately put more money in their pockets too. 

On the other hand, if your franchisor ignores your concerns or requests, you’ll need to go a few steps further. Seek advice from as many people as you can to gain some perspective on the situation, from friends and family to legal professionals. You may want to raise a formal complaint or concern with your franchisor or start proceedings with a lawyer. 

Running a franchise unit can be tough, and when you feel disappointed or frustrated with the franchisor, it’s easy to let emotions take over. But remember, this is a business, so you should act professionally and follow the necessary steps to reach a positive outcome. Act with dignity and respect now, and you’ll protect your reputation for years to come. 

Help for franchisors - how to deal with an unruly franchisee

It can be incredibly frustrating when a franchisee fails to live up to their obligations and risks tarnishing the reputation and profitability of the brand you’ve nurtured since day one. But it’s important to remember the franchise agreement is weighted in your favour and you have a say in how the issue is resolved. 

Firstly, make contact and be clear in your approach. Take an objective view as you explain the problem to the franchisee and tell them exactly why you’re concerned. They may not even realise anything is wrong, so don’t go in with guns blazing. 

It’s often a good idea to organise a face-to-face meeting to discuss the challenges you’re facing and try to find a resolution. Whether you come to a satisfactory conclusion or not, send the franchisee an email at the end of the session to confirm in writing everything you discussed. It may be useful to have a record of your journey later on. 

If necessary, refer to the franchise agreement and the BFA’s Code of Ethical Conduct to find unbiased guidance on resolving the problem. The session may be more constructive if you have these documents to hand.

Finally, try to work together. It’s in both parties’ interests to get the franchisor-franchisee relationship back on track, and if you can agree which steps to take, you can make a start. If, on the other hand, you can’t reach a resolution, you may need to explore the possibility of terminating the franchise contract

Finding more advice on how to maintain a strong franchisor-franchisee relationship

You can learn more about the importance of a great franchisor-franchisee relationship in our article on the subject, or by finding other relevant guides through the search box. 

Alternatively, take a look at Franchising 101: Can You Terminate A Franchise Agreement Early? if you’re considering ending your contract.

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