Q: How can franchisors and franchisees work together to forge good franchise relationships and avoid litigation?
A: This is a simple question that demands a fairly detailed answer. One key principle to keep in mind is it is up to both parties—i.e. the franchisor and the franchisee—to work together to establish and maintain a good, friendly working relationship. That said, the franchisor must take the lead, by setting up system-wide programs to help further such relationships.
Another key principle is good communication, which is fundamental to maintaining good franchise relationships.
Enabling positive communications
Successful franchise systems are built on trust and solid relationships. There will always be variations in terms of individual franchisees’ performance and expectations. Experience has shown a lack of trust between a franchisor and its franchisees will arise in times of stress or upset.
Before getting to that point, then, it is important to explore how these parties will communicate and solidify their relationships. Communications can take many forms, but they need to be initiated at the outset and then on an ongoing basis by a proactive franchisor, whether through newsletters, e-mail blasts, a password-controlled intranet, peer review boards, franchise advisory councils (FACs), ‘town hall’ meetings, conferences, franchise conventions, independent ombudsman programs, a CEO’s private hotline, controlled social media, field representative visits, performance reviews, training sessions and/or an online operations manual.
Progressive franchisors should also know how important it is to listen to their franchisees. They should encourage them to make suggestions and then, in turn, respond to those suggestions quickly and respectfully.
Franchisees, meanwhile, will appreciate learning about improvements that are being made to their franchise system as a direct result of their suggestions. Many franchisors have even established reward programs to recognize those franchisees whose suggestions are adopted as part of the franchise system. Others establish incentive programs, such as paid vacations, for franchisees who reach and exceed any performance targets that have been established by both parties.
Similarly, franchisors should also react professionally and in a timely manner to their franchisees’ complaints. Indeed, franchisees should be actively encouraged to voice their concerns and, if possible, to suggest practical and reasonable remedies to the problems they have identified.
Timely and informative communications coming from the franchisor can help to allay fears and build trust. Keeping franchisees informed early and frequently about important changes and milestones—including management appointments, succession plans, new competitors, franchise openings, market research into consumer preferences, industry regulations, updates to system standards, individual franchisees’ successes, technology enhancements, graphic standards for marketing and advertising, crisis management programs and social media initiatives—can prevent suspicion and rumours among them.