The franchising business model has always been an attractive business model for budding entrepreneurs or people desirous of starting their own business. After all, franchise management offers a proven business model with tangible results. However, despite all the foundational work done by the franchisor, both the franchisor and the franchisee have a lot on stake.
Franchisor and Franchisee: A Unique Relationship
With the franchisors protecting their brand and the franchisees protecting their business interests and investments, it's often the franchisors and franchisees relationship that bears the brunt. A strong franchisor and franchisee relationship require having clear communication and issues if any proactively resolved. Be it a restaurant franchise, beauty salon, fitness chain, or any franchise business there are enough occasions where things can go wrong. However, the right tools, knowledge, and a clear understanding of the roles and responsibilities of franchisors and franchisees can help resolve these conflicts and in most cases can be completely avoided.
First things first, let’s begin with understanding the roles and responsibilities of a franchisor and a franchisee.
Role of the franchisor
Setting up a successful business model is the first and foremost responsibility of a franchisor. The next is to create a system for franchising their business which involves procedures like:
- Developing a business plan, concept, brand, and standard operating procedures (SOPs).
- Registering the brand logo and other trademarks.
- Developing marketing, advertising, and PR.
- Relevant research and development.
- Building and nurturing relationships with vendors.
- Creating training manuals.
Role of the franchisee
A franchisee is responsible for the day-to-day operations of their unit or multi-units. At a franchisee level one needs to:
- Identify a site/building for setting up the unit.
- Hire, onboard, and train new staff for their particular unit or units.
- Manage finances and accounts, expenses, and clear all bills (electricity, water, building maintenance).
- Plan, order, and track inventory.
- Plan day to day scheduling.
- Apply for all local licenses and ensure all local compliances are met.
- Engage with the local community.
- Undertake marketing activities to create awareness about their presence.
Tips to maintain franchisor and franchisee relationship
The secret of any successful relationship lies in clear communication and a franchisor-franchisee relationship is no different. Though maintaining transparent communication is important, there are other things which if taken care of can go a long way in maintaining a good relationship between a franchisor and a franchisee. Let’s walk through our top tips one by one.
A franchisor and franchisee relationship is like a marriage and requires long-term commitment. Most franchising contracts are for a minimum of 10 years and more in most cases. Like in a marriage, both the franchisor and the franchisee should do a thorough research about each other. A franchisor must scrutinize the personal and financial background of every prospective franchisee. They must also evaluate prospective franchisees on whether or not they will be a good match culturally for the franchise, the business goals, work ethics, all of these need to align between a franchisor and a franchisee.
The franchisee on other hand must get in touch with other franchisees and take feedback on how good is the franchisor support, how good is a particular brand doing in a particular market, and if possible get some insight on the franchise fee aspect, profit sharing ratio etc. Also, it is good to get an idea on how frequently in-person meetings are held and how involved a franchise headquarter is in the day to day running of its various franchise locations.
Fair and transparent communication
As iterated earlier, a fair and transparent communication is the foundation of a strong and long lasting franchisor and franchisee relationship. Transparent communication is all about sharing ideas and best practices, having a method for feedback and input, paper work with all terms and conditions clearly listed, and all the bigger and finer aspects of running day to day operations. Having a tool like Delightree that enables franchisors to communicate with the franchisee and share newsletters, daily bulletins, SOPs, checklists for day to day operations etc. More so now when franchise businesses are expanding beyond geographical borders.
A tool such as Delightree also enables both the franchisor and franchisee to provide real-time feedback and maintain a seamless communication channel with each other. Franchisees work with the tools, systems, and products, and interact with customers first hand and can provide feedback on what is working and what is not working, and identify areas of improvement or new product innovations. Similarly franchisors must communicate any changes or improvements that need to be implemented well in time.
Some ways to improve and ensure seamless communication between franchisors and franchisees are:
- Both franchisor and franchisee take the responsibility to communicate any important message that has a direct impact on the business.
- Being calm and non-defensive when addressing each other’s concerns.
- Conducting regional and headquarter meetings regularly in the presence of a competent facilitator.
- Communicate with each other through a single channel.
- Resolve any disputes as and when they arise or in quarterly review meetings.
- Less lecturing and more support in training and guiding.
Sharing resources and information for success
As a franchisor you developed a successful business model, however the same needs to be replicated by a franchisee to ensure success. To make this possible you as a franchisor must share the resources and tools that help you create a successful brand so that the association takes-off on a smooth ride. Resources that you will need to share are:
- A detailed training program, training manuals, and other support materials
- Any software and systems (like POS) that you are using and you expect your franchisees to use.
- Access to preferred vendors and suppliers.
- Support and guidance on staff training and hiring
- Support on advertising and marketing programs and materials
Both the franchisor and the franchisee need to take complete ownership of their role and responsibilities.
Franchisors need to take ownership of:
- Making the necessary systems, materials, and training available to each and every franchisee.
- Stay informed and updated with the latest technology, systems, customers, trends, and preferences.
- Conduct planned and unplanned site visits to ensure standards are being met and maintained.
Franchisees need to take ownership of:
- Hiring the appropriate staff and training them as per guidelines shared by the franchisor.
- Adhere to the operational standards as defined by the franchisor and maintain product/service quality standards.
- Make efforts to align franchisor advertising with local marketing.
- Share the sales, employees, pay reports with the franchisor on a regular basis.
- Provide feedback on what is working and what is not.
- Provide inputs on the pricing structure keeping your local market in mind.
- Participate in the product or service promotions and discounts initiated by the franchisor.
Lastly, franchising is a commitment from both the parties involved. The zeal to maintain and nurture the relationship is perhaps the most important factor of a successful franchisor and franchisee relationship.