How to create a strong franchisor and franchisee relationship

GOOD FRANCHISING IS BUILT ON THE FOUNDATIONS OF A STRONG AND SUCCESSFUL MARRIAGE BETWEEN FRANCHISOR AND FRANCHISEE, NIGEL TOPLIS SAYS

Is there one all-encompassing definition of the franchise relationship? Can you sum up the interwoven nature of different parties with different skill sets in a single sentence? Can anyone truly quantify the true mutuality of a relationship?

In short, I don’t think you can. What I can say is that the relationship between the franchisor and franchisee is fundamental to the success of the business.

COMMON OBJECTIVES

Where the relationship is strong and founded on mutual respect, openness of thought, common objectives and a high level of energy, dedication and drive, the individual business of the franchisee will thrive and, if replicated throughout the system, the network as a whole will flourish.

On the other hand, if the relationship is bordering on the verge of bitterness, where objectives are different, energy is absent and trust has evaporated, then for the benefit of both parties and the network as a whole, it’s best to instigate divorce proceedings.

Naturally, because we are dealing with humans, both situations exist. Happily though, in my experience there is more of the lustful marriage and less of divorce and recriminations. That doesn’t mean a good franchisor and a good franchisee will agree on everything - they won’t and they shouldn’t. But what neither party should do is try to run the other’s business.

I am a strong believer that it is not the job of the franchisor to run the franchisee’s business Similarly, it is not the role of the franchisee to tell the franchisor how to manage and develop its network. Ideally, the franchisor should adopt a ‘non-executive director’ role, providing the franchisee with an intellectual and support hub they can tap into at will.

Good franchising is built on the foundations of a strong and successful marriage between franchisor and franchisee. The phrase ‘In business for yourself, not by yourself’ captures the essence of franchising.

If you open your own business, you are responsible for everything. However, with a franchise the franchisor offers experience, know-how, proven methods of operation, marketing tools, sales training and technical guidance, as well as a corporate identity, trademarks and the all-important brand. Franchising is, though, very much a two-way street, where the franchisor can achieve faster expansion and gain a higher return on capital employed, while the franchisee gets a proven business system.

With franchising, you get all the benefits of corporate head office support and you’re part of a network of people who can share best practice, advice and insights. The franchisor is there to provide guidance and advice, but also training, marketing tools, programmes, collateral, procurement (if relevant), plus technical and sales support throughout the period of the franchise agreement.

RANGE OF BACKGROUNDS

Because of the extensive support structure available, franchisees come from a wide range of backgrounds and previous experience. Running a franchise is conducive to a variety of transferable skills, including project management, marketing, operations and sales, and the franchisor is there to help if you need to boost any skill sets.

Franchisees can often choose where their franchise is based and many can be run from home, meaning more time to spend with the family and no daily commute. This is a huge benefit for many franchisees, especially parents. For young people too, franchising is an excellent way to launch their careers. Franchisee Alex Newman was in his twenties when he invested in his franchise. He explains: “Buying a Recognition Express franchise has given me a unique opportunity to become a business owner at a young age. The market potential is massive, our product range extensive and the range of companies we access is huge.”

A quote from a book called Growing Pains accurately differentiates between running your own independent business and a franchise, stating that running your own business is about as easy as navigating uncharted waters in a leaking rowing boat with an inexperienced crew, while surrounded by a school of sharks. The crew might be glad to know others before them have made the voyage successfully and to hear and learn of the lessons other voyagers learned in the process.

What makes a good franchisee? There is no single definition, but my own is that a successful franchisee is likely to have all the attributes not of an entrepreneur, but rather of an enterpriser, who is a person who sets out on the path of selfemployment and thereby demonstrates his desire for the rewards of enterprise and the willingness to take risk, but who is not planning to specifically develop and exploit new technology, create new markets or expand and build the proposed activity into a large-scale business - all targets that are the domain of the entrepreneur.

BIG DECISION

Taking on a franchise is a big decision - right up there with marriage and moving house - so it requires careful and due examination. My first piece of advice is don’t rush or be rushed into making your choice.

Secondly, when you think you have found the right business, stand back and ask yourself these 10 questions:

* Does it have a solid trading history?

* Is it financially sound?

* Does it have a history of success?

* Is there a head office support structure in place?

* What does the franchise provide by way of support?

* If the franchisor supplies product, what are the terms and conditions?

* What is its position in the market?

* Are projected cash flows realistic?

* Does the company have a finance facility with the banks?

* How tough is its interview process?

Thirdly, take the franchise agreement to a British Franchise Association accredited lawyer and get feedback on its contents and meaning. Then if you can find a decent accountant, work with them to create a business plan. Finally, make your decision.