Franchisor and Franchisee: The Importance of a Strong Relationship

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Franchisor and franchisee difference

Originally posted on 24/12/2017. Updated on 16/03/2019.

Forging an effective franchisor-franchisee relationship is the key to most successful franchises, but theres so much more to it than just the franchise agreement.

The franchisee and franchisor need to be able to work well together throughout their business life. Franchisees must adhere to all the standards set out in the franchise agreement in order to be able to use the franchisors carefully created business model. However, the franchisee must not forget that they are extremely valuable to the franchisor, as they can expand the business to new territories and increase brand recognition as well as revenue potential.

This relationship, then, is a mutually beneficial and highly cooperative one. It is imperative to set out the exact expectations of each party early on in order to avoid conflict further down the line.

The Franchise Agreement

The franchise agreement is a legally binding document that details the requirements of the franchisor and franchisee throughout their business partnership. The agreement gives the franchisee the legal right to establish their franchise under the brand name and model and specifies that they are obligated to align the franchise with the business values and pay ongoing royalties.

Before signing along the dotted line, prospective franchisees should carry out adequate research to ensure that this business venture is right for them. Once the document is signed, the franchisee is legally required to adhere to the standards set out in the agreement and may face strict penalties if they do not.

Whats the nature of the relationship?

The franchisor-franchisee relationship is one of the most unique business liaisons out there and is often compared to that between a parent and child. Like a child, the franchisee will depend on their parent or franchisor for guidance and the franchisor will offer education and training as well as support with many other things. Over time, the franchisee will probably become more independent and rely less on the support of the franchisor. The franchisor does not manage the franchisees business and, like a parent, cannot fully protect them from any mistakes they may make in the real world.

What makes a good mentor and good student?

It is important that the franchisor establishes clear boundaries for the franchised business. Franchisees should understand that it is in the best interest of the business as a whole for the franchisor to take measures to protect the brand and ensure that it remains consistent throughout all of its franchised units. This way, customers are more likely to recognise the brand as a stable and high-performing business and become customers or clients.

While it can feel demeaning for some franchisees to relinquish control to the franchisor and follow strict rules, the franchisee should be open to advice and constructive feedback, and the franchisor should remain professional and considerate at all times.

Encouraging Effective Communication

While franchisees benefit from email communication and the odd visit from a franchise representative, most successful franchises build business relationships with face-to-face meetings, conferences and telephone calls, which allow for honest, constructive discussion.

A successful franchisor-franchisee relationship is built on mutual trust and respect, so open, two-way conversation is a must to create a valuable and long-lasting relationship. Poor communication can cause major issues franchisors could fail to properly explain business strategies or mislead franchisees when discussing the responsibilities of each party. If the franchisee does not feel respected by the franchisor, they might start to consider them as a competitor and work against them instead of alongside them, with catastrophic effects on the business.

It is also important that the franchisee feels that they are being listened to by the franchisor in return. If a franchisor listens, offers support and is able to resolve any concerns or difficulties raised early on, they can avoid larger issues further down the line. Listening to franchisees also helps the franchisor to understand the business from another perspective and gives them an insight into areas of the business model that might need adjusting. Therefore, a good franchisor-franchisee relationship is mutually beneficial, allowing the business to grow for the good of both parties.

Good Leadership Creates Focus

It is important that a franchisor demonstrates their commitment to the success of the franchise, as any viewed lack of commitment will ultimately damage the business by creating mistrust in the franchisee. On the other hand, franchisees who are given noticeable support and encouragement are destined to prosper.

A franchisor must utilise their leadership skills to create and maintain a productive relationship between them and the franchisee. Great leadership will avoid disengagement and cement the franchisor-franchisee relationship, enabling the business to grow. With mutual goals shared and a plan in place to help achieve them, franchisees will remain focused and are more likely to succeed.

Establishing a Common Culture

Successfully conveying the business brand culture and values to the franchisee and franchise staff will shape the companys identity, helping to generate a larger customer base. Customers who have already had a good experience with the brand are more likely to visit the franchise if it is consistent with the branch they have already visited. Consistency is key and, as a result, the franchisor should communicate their strategies clearly to ensure franchisee compliance. A common culture across all franchised outlets will boost business in the long term, as loyal customers return.

The franchisor-franchisee relationship is a unique and complex one and will only work well if both parties are invested. A positive and productive relationship is vital if a business is to run at maximum efficiency. A strong brand identity and consistent business strategies will lay the foundations for success, while good leadership and effective communication ensures that both parties are engaged. If both the franchisor and the franchisee work to achieve these factors, a balanced and productive relationship will make success easier to achieve.

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