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The franchise model may be a unique business model but it has conflicts just like any other type of business, however their conflicts are slightly different as they can be seen as a conflict between two business partners. The franchisor and franchisee after all are in a partnership which shares a common goal but the conflicts can arise from their own personal goals. They both want the franchisee to succeed but the reason behind this is different, the franchisee wants to succeed as to have their own profitable business but the franchisor wants it to make the franchise grow. Start Your New Franchise will look into the common disputes between these two stakeholders and the methods used to successfully resolve them.
One of the most common conflicts that can arise, is the level of support provided by the franchisor to the franchisee. All franchise agreements provide a certain level of support, this however doesn’t always clear up exactly how much support you will receive as a franchisee will often feel that they have been overpromised, or feel like they have just been left alone. The franchisor on the other hand has an equally fair argument that they have given the franchisee the level of support as displayed in the franchise agreement and doesn’t understand why they are having issues.
Whichever scenario is correct, they all want the same outcome; a successful business with a resolution - this is the same for every conflict that will arise. For this particular conflict, as a franchisee, highlight the areas in the franchise agreement where you feel aren’t being obligated by the franchisor; do this in a meeting with the objective to bring the franchise partnership back together. It is also important to note at this point that even though franchisors do offer support, a franchise opportunity isn’t the same as a job opportunity - there is a much higher level of self-motivation and discipline required to become successful.
When a business isn’t performing at the level expected, it is common that this will cause some kind of conflict as there are issues that need resolving. This however can be for a number of reasons, and to successfully resolve them you need to understand what is causing the issue.
The franchisor will have set the targets for the franchisee but the franchisee will know their market area better than the franchisor and may have a genuine reason as to why they didn’t hit target. This requires a clear line of communication for forecasting to ensure that when they are set, they are realistic and addresses any problems the franchisee foresees.
Marketing is either done by the franchisor and paid for by the franchisee in the franchise fees or is completed by the franchisee directly. If it’s the latter then the issue could be the lack of advice given for marketing. If it’s being paid for by the franchisee, then they might feel that they aren’t receiving the ROI required from the franchisor, which can cause dissent & performance issues. Whichever party you may be, you need to reach an understanding on this, as to be clear what level the franchisee can expect so they can understand if it’s their bad performance or indeed, the franchisor isn’t undertaking the level of marketing required.
The franchisor has a tried and tested model of success for his business, this means that if followed to the letter, the franchisee shouldn’t have an excuse as to why they are failing, other than their own performance. The most common conflict around the operational processes, is that the franchisee feels that compliance to the rules set out by the franchisor is limiting their ability to sell. This results in either the franchisee purposefully not adhering to the rules or not effectively utilising them for the best results.
It would be ignorant for a franchisee to enter and assume they are better equipped than a successful franchisor who has proven his model in the market, but at the same time, if a franchisor assumes their model cannot be improved and doesn’t listen to feedback from franchisees then they could be missing out on valuable improvements to the model.
The franchise territory will often be an exclusive territory that is decided upon in the franchise agreement, this however doesn’t stop franchisees from encroaching the borders which cause conflicts amongst franchise members. This has to be sorted as soon as it occurs as to not turn into a large conflict among what are essentially business partners. Clear boundaries need to be set if you are to make boundaries, this is to prove if somebody was in the wrong then any doubt cannot be misplaced and will likely lead to occurrences becoming less frequent.
Communication - The better the level of communication you have in a partnership the better that partnership will perform, this isn’t something new or something that will shock you but, to this day, poor communication still occurs for many businesses. If you can open a dialogue to discuss any problems, whether they be from the franchisor or franchisee, an open discussion about certain problems may be able to present a quick resolution and, if not, it will at the very least start the process of identifying the resolution, if available. Communication channels are the most effective way to resolve issues that you will face, that said, if this doesn’t resolve the issue then more serious actions may have to be taken and we suggest seeking legal advice on the matter before any action is undertaken.