Page 131 - Entrepreneur - USA (January - February 2020)

I n the world of business, the relationship between a franchi- will need from franchisors in terms of support (which reduces cor-
sor and a franchisee is indisputably unique.
porate costs), and the more they will pay in royalties. They will
interact with the brand and contribute ideas. Happy franchisees
Some liken it to a partnership, but in fact, it’s nothing of
the sort. In a partnership, interests of both parties are directly rarely sue.
aligned. And while the best franchise systems work to actively And, of course, they buy additional franchises.
align franchisor and franchisee goals, at the end of the day, the So, how does this relationship get off on the right foot? The
franchisor’s financial interests are met by increasing franchi- answer begins at the very beginning—by defining the relation-
see revenues, while a franchisee’s interests are met by increasing ship on both sides. Think of it, again, like a parent-child relation-
profits. ship: Sometimes being a great parent means you cannot be a good
Others liken the relationship to a marriage. But still, it is unlike friend. And the franchisor needs to be a good parent first.
(most) marriages in that the franchisor has almost all the power— One of the most important things a new franchisor can do is
at least when it comes to brand standards. establish the boundaries of the relationship. The franchisee needs
It’s also nothing like a traditional employer-employee relation- to understand that a franchisor’s role is to guard the system and the
ship. Franchisors govern by contract; they cannot hire, fire, or dis- brand so all franchisees can continue to thrive. As such, the parent
cipline franchisees the way they would with an employee. company needs to communicate and enforce brand standards, and
So perhaps the closest analogy is in fact that of a parent-child be willing to discipline those who do not follow them. Franchisees
relationship: A franchisee starts out dependent on the franchisor also need to realize that not every decision a brand makes will
for everything, then gradually becomes more independent (and benefit all franchisees equally. Sometimes the greater good of the
perhaps even grows rebellious), but is ultimately required to follow system needs to supersede the desires of a few. It’s not possible to
the rules that the franchisor sets. please everyone all the time.
Franchisors have both the right and the obli- At the same time, discipline cannot be meted
gation to enforce system standards, but their out to franchisees as if they’re employees in a
franchisees are independent business owners corporation. They’re not. If a franchisor tries to
who can call their own shots on day-to-day oper- The closest analogy give a franchisee the “it’s my way or the high-
ational decisions that do not impact brand stan- is that of a parent- way” speech, only trouble will follow. If they try
dards. Franchisors have to remember that. child relationship: to dictate certain employment practices, it may
This is why both sides need to come together, A franchisee starts create legal complications.
at the very start, to make sure their relationship out dependent Franchisees are proud business owners, and
gets off on the right foot and stays strong. In the on the franchisor as such, all communication with them should
end, the franchisor is creating a community in for everything. happen in a professional manner. While fran-
which franchisees and the franchisor team have chisors will want to be firm on issues involving
many shared interests and needs. The commu- brand standards, they will also need to be sure
nity thrives if the franchisor can maintain trust, franchisees understand the nature of the stan-
sound leadership, and transparency—and if franchisees actively dards and have an opportunity to give feedback. No major decisions
engage with the franchisor and one another to make the system should happen in a vacuum.
stronger over time. In many of the highest- performing franchise If a franchisee isn’t complying with the brand’s requirements,
systems, the franchisor’s principal role is as much about accumu- franchisors should explain why their actions are to the detriment of
lating and sharing best practices from franchisees as it is about the business and perhaps other franchisees as well. They can show
anything else. the franchisee how following standards can increase revenues,
Sound simple? It’s not. But with the right work and attention to reduce operating costs, maximize profits, and enhance the resale
detail, this relationship can truly thrive. value of the business. And rather than having all the information
come from corporate headquarters, a franchisor should point to
LET’S START WITH this basic fact: Everybody loses when the rela- examples of best practices that have been put in place by other
tionship goes sour. franchisees within the system.
A failing franchisee will cost more to support, and they’ll pro- The point is, even when tensions run high, both sides should
vide less (sometimes nothing) in royalties. They’ll often stray from focus on their shared goal: They want to be successful. And that
the franchise’s system in an attempt to save money—by, say, buying means they need each other to succeed.
substandard products to cut corners. As a result, their customers
will be unhappy and they’ll degrade the overall brand. ESTABLISHING BOUNDARIES between franchisors and franchisees—
Happy and successful franchisees will do the opposite. They while a necessary first step—will only carry you so far. Clear
will tell their friends and family about their success, generating communication is the keystone of a productive franchisor and
more franchise leads. They will spread the word on social media franchisee relationship. And it can be the toughest, most nuanced
and elsewhere, increasing lead flow. They will usually follow the aspect to get right.
system— and presumably, that will make them more successful. The ancient Greek philosopher Zeno said that we are given two
And generally speaking, the more successful they are, the less they ears and one mouth for a reason. The best communicators (and the

January-February 2020 / ENTREPRENEUR.COM / 129